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Synthesis produced by, Lic. Liza Fendt
Costa Rica, Economic History
Synthesis produced by, Lic. Liza Fendt
Synthesis produced by, Lic. Liza Fendt
The beginnings...
Costa Rica was discovered by Christopher Columbus on
his fourth and last trip in 1502. He arrived to the small
island of Uvita in front of today’s Port of Limon which
was populated by small Indian villages.
Synthesis produced by, Lic. Liza Fendt
The Republic of Costa Rica today
Has an extension of 19,730 square miles.
A population of 4.4 million people.
A work force of 2 million people, 65% in the Great Metropolitan area.
According to “The Economist” Life standard survey, San Jose is the fourth most livable city in Latin America
Our extension is .03% of the planet but holds 6% of the world biodiversity.
25.6% of the territory is under some manner of environmental protection.
Synthesis produced by, Lic. Liza Fendt
By the time of the Spanish Conquest, Costa Rica was a
commercial meeting place of bigger groups from North and
South America. It had never been under the political control
of any of them, but the surplus of these societies converged
here. The national clans were commercial specialists, as
Guayabo demonstrates.
Synthesis produced by, Lic. Liza Fendt
Economic development during
Colonial Times
There were at least 13 organized human groups in our territory with
political and social organization.
The population planted corn, yucca, sweet potato, chayote, and
beans and complemented their diet with fishing and hunting. They
also captured wild pigs and other animals and domesticated them,
gathered fruit and produced honey.
There were specialists in charge of weaving, producing artistic
artifacts, clothes and working with clay, jade, gold and stone.
The political organization was strong and authority was due to family
ties to the caciques.
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Economic development
Job specialization, political and religious positions, and land rights were
transferred from the mother to her children.
The clans would exchange their surplus and trade with travelers maintaining
strong economic and political ties.
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Commerce
During the colonial years, the Spaniards promoted commerce amongst the region and
the creation of markets for their products. From the beginning, exports and imports
where correlated with economic development.
The colonies were not allowed to have commercial ties to any region other than other
colonies and Spain.
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Economic development
Small farms where established early on in Costa Rica. The surplus of these small farms was used to
trade with nearby regions like Nicaragua. Costa Rica was considered far and unproductive by
Spaniards, therefore the population was undeveloped and self-sustained for many years.
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Tobacco
To promote a stronger production at the colonies, Spain established a mechanism in 1780 through
which Tobacco production would benefit from capital investment, land development, working capital
financing, improved communications and elopment of entrepreneurial capacities. Costa Rica held
the Tobacco production monopoly for several years.
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Economic development
Independence was declared in 1821 allowing for commerce with all nations. Costa Rica
continued to export tobacco. Other products seemed attractive to foreign markets, for
example gold and other agricultural materials. Even though these products did not
become important exports, they brought attention to the country as a destiny for
adventure capitalists, and developed entrepreneurial capacities.
By 1880 The Central Valley had become a specialized region producing coffee for the
European market. Other areas where added to agricultural use and the production of
bananas was introduced to the Costa Rican supply to the world.
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Impact of the coffee production
Coffee production began small, but the pressures of a growing demand promoted
capitalists to invest at a larger scale. Some small producers were forced to relocate to
unexploited areas. Coffee producers also required better roads and ports, which lead to
invest at the port in the Atlantic (Limon) which made exports to Europe easier. The
penetration of the Caribbean region lead to the investment on the railroad in 1870 and
the development of new products from this region like wood, bananas, cocoa, and
metals such as gold and silver. By 1880, Costa Rican producers had completely oriented
their market to the United States, which would become it’s most important commercial
associate.
Synthesis produced by, Lic. Liza Fendt
Economic development
Costa Rican exports and imports grew steadily for a period of time, while the country
developed new and strong ties to the U.S. market. World War I put the national
economy in trouble since commercial ties with Germany were damaged and the U.S.
reduced imports.
Costa Rica recovered it’s income after the war was over, but failed to diversify it’s
exports or invest in it’s productivity. Therefore when the depression arrived in 1930,
Costa Rican exports were affected again.
The depression affected exports and as they were slowly recovering, World War II hit
the national economy again. Coffee exports to the U.S. continued but banana exports
decreased to Europe and the U.S. The workers lived in precarious conditions and were
recruited by the communist party.
Internal instability turned into a revolution in Costa Rica in 1948.
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The 1948 Civil War
The revolution affected the way the country was organized. Energy, communications and
financial services had been traditionally in the hands of capitalists that limited their
investment to the profitable areas of the market.
After the revolution, the government established monopolistic suppliers of services that
would deliver them to poor and rich. Hence, government expenditure financed
state/operated institutions for medical services, education, energy production,
communications, and banking and insurance services. This was financed by eliminating the
army and taxing not only exports and imports, but individual consumption as well.
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Product diversification
The increasing prices of coffee during the 1950’s allowed producers and the state to organize the
sector and increase productivity and technology. Other productions grew as well. For instance, cocoa
and meat which was not traditional in the country. Sugar grew as an important production when the
U.S. ruptured commercial relations with Cuba and Costa Rica received a quota of sugar production.
During World War II, the Inter - American road had been built by the U.S. for political interest. This
improved trade among Central American countries. Costa Rica also invested in industrial
development as it was supposed to foster economic development faster than agriculture.
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Common Central American Market.
Central America initiated an integration process to enhance
development. This was inspired by economists which had integrated
the European market after the war. Costa Rica joined this market during
the 1960’s.
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Development Model
To integrate, Central America had to diversify production, since all countries
produced the same. So Costa Rica promoted industrial development to export
industrial goods to Central America.
The country adopted the “import substitution development model”. This meant
industrialization was aimed at reducing imports and adding value to exports.
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Industry Growth
Years
Agro
export
Industrial export
1960-62
87%
3%
1963-76
77%
23%
1977-85
78%
32%
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Import substitution
Economic Development Model
Costa Rica had established a manufacturers industry that supplied Central America
with fertilizers, food products, and electrical appliances.
Nevertheless, Central America would not be a good buyer for long. It was involved
in internal power struggles.
Synthesis produced by, Lic. Liza Fendt
Causes of the 1980’s economic crisis
Elevated prices of oil between 74-85.
The most important commercial destiny for Costa Rican exports, the U.S., fell
into an economic crisis.
The Costa Rican government was huge and in-debt so it was unable to service
the debt accumulated with international creditors.
War in Nicaragua and El Salvador reduced the Common Market to nothing.
Synthesis produced by, Lic. Liza Fendt
Non-Traditional exports
Economic Development Model
As soon as it was possible for Costa Rica to re/negotiate it’s debt and re/start the payments a new
development model was pushed forth. The intention was to promote exports of goods with
greater added value than agricultural products.
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The New Production
The government actively promoted production of non traditional agricultural
goods, ensambling of a wide variety of products at protected regimes (Free
Zones).
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Percentage of exports by origin
years
Traditional
Agricultural
Nontraditional
Agricultural
Common
Industrials
Special
Industrials
80-83
61%
4%
35%
n.a.
84-90
47%
11%
27%
16%
91-00
27%
11%
23%
38%
01-03
14%
11%
19%
57%
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A Summary
The economic policy of exporting higher valueadded goods and services, has been successful
in promoting growth. Costa Rica has associated
it’s economy to the U.S. Economy tightly.
Exports have nearly tripled in real terms and
real growth in the 90’s was a 6.6% average
per year.
Synthesis produced by, Lic. Liza Fendt
Destiny of exports
Dates
Great Britain
U.S.A.
Germany
Rest Europe
Central
America
Rest
America
1880-1900
47%
37%
8%
3%
---
1%
1902-1914
43%
50%
4%
2%
---
1%
1920-1929
40%
49%
6%
2%
0.5%
3%
1930-1940
37%
38%
15%
5%
0.4%
3%
1941-1948
0.3%
79%
0%
5%
0.6%
11%
1949-1963
0.6%
62%
16%
9%
2%
3%
3%
1964-1983
0.5%
39%
10%
12%
19%
5%
13%
1%
1984-2003
2%
29%*
7%
8%
10%
5%
10%
34%
Asia others
Zona
Franca
Synthesis produced by, Lic. Liza Fendt
Our situation today
Exports and imports
In millions of dollars
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What is today’s strategy
Costa Rica signed the Cafta and promotes exports of higher valued added
products and services through foreign investment.
The government promotes foreign investment actively and offers incentives
such as tax exemptions and others.
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Promoting growth
Higher quality public education is aiming at a qualified work
force for new productive ventures such as Intel, Sykes,
Amazon,Bank of America, and so on...
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Basic statistics of our economy
Real growth GNP
and NI per capita
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Employment
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Real Growth rate of Gross National Product .
Síntesis elaborada por, Lic. Liza Fendt
References
El comercio exterior en Costa Rica. Jorge Leon.
Estadisticas del Estado de la Nacion y BCCR.
Icafé. Historia del café en Costa Rica