Starting from a base of subsistence agriculture in colonial times, Costa Rica moved into the world economy only in the latter half of the 19th century with exportation of coffee to Europe, followed soon by banana ex postres. A Costa Rican journalist, lamenting his country's dependence on agricultural exports, once said, "What makes it worse is that the country produces postres [desserts] -coffee, bananas, sugar, and chocolate. When importing countries are in an economic bind, demand for these things drops first."
Some of Costa Rica's economic problems occur in the crisis of 1979 to 1982, when the country went through one of the worst economic crunches in its history. World prices for its traditional crops collapsed at the some time that petroleum costs soared. Since Costa Rica imports all its oil, the dynamics were devastating. The country had borrowed heavily from eager banks, with the money used largely, as one Costa Rican put it, "to maintain our accustomed standard of living." It has been difficult to cut the social programs citizens take as their due. National spending still outstrips income earned from exports and taxation, while juggling foreign-debt payments demands enormous energy.
However, there is light on the horizon. Investment in nontraditional products for export and to cut dependence on the postres is paying off. In 1988, for the first time, nontraditional exports edged past traditional ones in dollar value. Textiles, fresh flowers, ornamental plants, pineapples, frozen fish, pharmaceutical products, and tires are among the items filling out the menu. Check the label of the next shirt or pair of pants you buy it could very well say, "Assembled in Costa Rica." The country has become one of the largest brassiere manufacturers in the world. A good percentage of the hair dryers imported by the United States come from Costa Rica, and the manufacture of microprocessors is taking off in a big way. You will probably not be aware of the fact that the person who answers your software questions via a U.S. 800 number may be sitting in Costa Rica.
The nation's stability, a large and educated middle class that provides a stable workforce, competitive labor costs, and national and international incentives have drawn foreign firms and spawned joint ventures with Costa Rican companies. Average annual per-capita income is $2,738 (in U.S., $25,000).
The U.S. Caribbean Basin Initiative, which provides preferential customs treatment to many products from the region, has been a stimulus; the United States is the country's biggest business partner, but multinational companies from Europe and the Far East have set up shop. Tourism has edged out coffee and bananas to become the country's number-one foreign exchange earner. This is a result of both increasing numbers of visitors and decreasing income from those traditional crops because of falling prices, competition, and restrictive trade agreements.
Debate continues regarding the privatization of state-owned companies that
dominate sectors of energy, telecommunications,
banks, petroleum, and insurance
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