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Costa Rica: a centennial democracy.


It is for me a high honor to be able to participate in this important International Conference organized by The University of South Dakota. If we take advantage of this experience, we may be able to improve international understanding and may scare away the ghosts of war.

There is much we can say about Costa Rica's geographical, social, political, educational, and economic characteristics and its relations with Central America and the rest of the world. Communication channels, such as those that exist between the University of South Dakota and the University of Costa Rica, make friendly exchanges possible.

Geographically, Costa Rica is south of Nicaragua, north of Panama. To the east is the Atlantic Ocean and to the west, the Pacific. It is possible to drive from one coast to the other in less than five hours at a normal highway speed of fifty to sixty miles per hour. Our nineteen thousand square miles of territory make Costa Rica one-fourth the size of South Dakota. Costa Rica has nearly three million inhabitants; half living in cities and half in rural areas.

Costa Rica was discovered by Christopher Columbus in 1502, during his fourth and last discovery trip. COSTA RICA, ("RICH COAST" in English) was, ironically, one of the poorest possessions of the Spanish Colonial Empire. Being poor meant that Costa Rica did not have the wide social divisions which still characterize other Latin American countries. According to historians and sociologists, the relative economic and social equality of the Costa Rican people explains our exemplary democratic system.

During colonial times Costa Rica was under the Captain General of The Guatemalan Provinces, along with Nicaragua, El Salvador, Honduras and present day Guatemala. On September 15, 1821 these peoples decided to declare their independence from Spain. One month later Costa Rica supported the decision. Costa Rica organized politically in 1821. Even though it nominally remained a part of the Central American Confederacy, Costa Rica stayed away from the internal conflicts that took place in the other Central American States. In 1848 Costa Rica seceded from the Union and elected its first President. Since then, the country has tried to use democracy and education as its two main instruments for development.

At present Costa Rica is one of the most advanced nations in Latin America. The rate of illiteracy is only seven percent; infant mortality is eighteen per thousand; life expectancy is seventy-three years; ninety-five percent of the population is covered by social security; the rate of unemployment is five and a half percent; and only ten percent of the voters abstain from voting in presidential elections. Costa Ricans are also environmentally concerned as evidenced by the fact that twenty-seven percent of our territory has been set aside for protected biological reserves - the highest percentage in the world.

In 1889, exactly one hundred years ago, the citizens of Costa Rica organized for the first time to make sure that the victory of the then elected presidential candidate was respected. Prior to this important event, elections were manipulated; but starting in that year every single president has been popularly elected. This year of 1989 Costa Rica celebrates one century of democracy, the oldest in Latin America.

Costa Ricans work hard to preserve that tradition. It is said that the Electoral College is the Fourth Power of the Republic, the others being the Executive, the Legislative, and the Judiciary. In days before elections, all Costa Rican police forces are brought under the authority of the Electoral College. A Constitutional mandate prevents the President of the Republic from participating in any partisan activities; thus the political influence of the people in power is minimized.

Costa Ricans attribute their democratic stability to the lack of a standing army. A small police force and a small group of rural guards keep order, but these people do not enjoy any special privileges, and their compensation is relatively low. We Costa Ricans frequently say that "we have more teachers than soldiers."

The basis of our development has been education. Elementary school has been "free, compulsory and sponsored by the State" since 1869. Twenty-three percent of the Central Government's budget is directed towards education, while only three and a half percent is spent for Public Security.

This dedication to education has resulted in the establishment of four State sponsored universities with a total of sixty-four thousand students. A scholarship program establishes a percentage of the tuition that each student will pay depending on family income.

At the beginning of the past century, after the colonial period when the economy was basically domestic-oriented, Costa Ricans started planting substantial amounts of coffee trees. Exports of coffee to England helped decrease poverty and isolation and increased government resources. Education improved, infrastructure developed and the first considerable fortunes began to appear. The growth of coffee plantations caused important changes, not only in the economy but also in the social structure of the country, For many decades coffee was Costa Rica's "Golden Grain." However, reliance on one export crop brought economic ups and downs because of the wild fluctuations of international coffee prices.

Starting in 1880, North American-owned banana plantations began to flourish on the Atlantic Coast of Costa Rica. The banana companies controlled production, transportation, and the export marketing of that product. At the beginning of this century, sugar and beef cattle were added to the list of exports. Thus, coffee, bananas, sugar, and cattle, in that order, became Costa Rica's major exports. But these so-called "desserts" are not essential since their consumption could be eliminated or substituted in times of crisis. So starting a few years ago, the country began stimulating (through the use of incentives) the export of "non-traditional products," preferably to non-traditional markets. The incentives have succeeded in raising the level of non-traditional exports to about one-half of the total; close to seventy percent are of industrial origin.

The Gross Domestic Product (GDP) grew three percent in 1988, but the growth of that per capita product was only four-tenths of one percent that year. Even so these rates were much higher than those for Latin America in general. At present, the GDP per person is around two thousands dollars. Industry and Commerce were the most productive, each with twenty percent; agriculture follows with eighteen percent, and government services with fourteen percent. Since 1983, inflation has been held at an average of fourteen percent per year.

In the area of international trade, exports increased at a satisfactory pace. Imports grew too, especially in raw materials. In 1987 we had a deficit of one hundred and thirty million dollars in the balance of trade. Almost forty percent of Costa Rica's exports go to the United States, close to twenty-five percent go to Europe and only ten percent to Central America. Close to thirty-six percent of Costa Rica's imports come from the United States, fourteen percent from Europe and nine percent from Central America.

Like most Third World countries, Costa Rica has a problem with foreign debt. At present, our foreign debt is four billion dollars, which is almost three times the total of our country's annual exports. Debt servicing requires twenty-two percent of all exports. Fortunately, some international aid in this area makes us optimistic of at least a partial solution. For example, international conservation institutions have bought up about seventy-five million dollars in titles of our debt and donated them to the country for reforestation and conservation activities.

As a result of the economic crisis that began ten years ago, every country of the region has had to adapt to the new world conditions. A regional Structural Adjustment Program flourished. It is based on substitution of imports. The Program encourages countries to produce and export goods for which they have a comparative advantage. Additionally, the Program recommends that protective tariff barriers be lifted to promote competition. Finally, it recommends that countries should strive to find new markets and new products for export. The gradual application of these measures is recommended to avoid violent change and the collapse of some activities. Teh re-focusing of industrialization is one of the policies that should be supported more, so that enterprises can target their activities toward businesses with a bright future. In all of this process, education is of great importance, and Costa Rica has the advantage of already having a solid scientific and technological basis in the productive sector.

An interest in using the development of an alternative solution to production problems, employment and democratization of the economy has recently gained ground. Because the University of South Dakota has also given great importance to the study of small firms, my visit to this University is motivated in part by our interest in carrying out joint research programs in this important field.

Now I wish to speak a bit about the relations Costa Rica shares with the rest of Central America. Since the middle of the past century, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua have been independent republics. A Central American Common Market (CACM) has been operating since 1960, significantly increasing the commercial relations of the republics. In 1980, thirty-one percent of Costa Rica's exports went to the CACM, and sixteen percent of our imports originated there. Starting in 1980, political conflicts between the countries of the region had a negative impact on commercial relations. Now only ten percent of our exports and nine percent of our imports are attributed to the CACM.

Although the economic deterioration is important, war, with its consequent death and destruction, is even more deplorable. With Somoza's 1979 overthrow in Nicaragua, the new Sandinista government became the protagonist of a great number of conflicts in the region. In El Salvador and Guatemala guerrilla movements hope to overthrow their governments, and at the border between Honduras and Nicaragua a great part of the "contra" movement is located. To make the problem worse, in 1988 the political position of Panama was complicated when General Noriega and his army decided to attack civil rights.

Costa Rica tried to carry out a reconciliatory role, in search of peace in Central America. Our President, Dr. Oscar Arias, received the Nobel Peace Prize in 1987 for his participation in the signing of the Pact of Esquipulas. Thanks to this Peace Plan agreements to reduce the danger of war were reached. Furthermore, the Plan gives the different political groups of each country the opportunity to participate in the democratic process. It is hoped that the Esquipulas Pact will bring tranquility to the region.

Because Costa Rica is politically stable, massive numbers of refugees, estimated to be over 300,000 (about ten percent of our population), have arrived in our country in the past ten years. That rapid influx of immigrants has severely strained Costa Rica's limited budget for health, education and other services adding to our already deteriorating economic situation.

Despite its geographic smallness, Costa Rica keeps diplomatic and commercial relations with many countries in the world, and it can be said that no country is our enemy. However, our main trading partner is the United States with whom we also have excellent cultural relations. Many North Americans come to study in my country. Also, many United States companies have made important investments in Costa Rica not only in agriculture, but also in agroindustry and in the manufacturing fields.

The countries of the European Economic Community are our second most important trading partners. It is interesting that we do not have any commercial contact with South America, a situation that should improve in the future.

To finish this presentation, I wish to explain the reason for my visit to this important International Conference at the University of South Dakota. In August of 1988 the VIII Conference of the Econometric Society was held in Costa Rica. Two professors from the University of South Dakota, Dr. Diego Salazar and Dr. Allen Vargas, came to present a paper on the Caribbean Basin Initiative. They told me that they liked Costa Rica a great deal. At the beginning of March of 1989, Dr. Vargas and Dr. Dale Clement, Dean of the School of Business, came to Costa Rica, and I prepared for them a series of interviews and visits with the President and other authorities of the University of Costa Rica. At that time we signed a Letter of Intent, through which we expressed our willingness to start cooperation activities in the areas of research, education and economic development. Some contacts with the School of Foreign Languages of both Universities were made, which opened the opportunity for the exchange of teachers and students. Dr. Clement and Dr. Vargas enjoyed that visit, and gave me a letter signed by Dr. Philip Fisher, inviting me to participate in the present meeting.

I hope that what I have said has helped you to know my country a bit better. You all are cordially invited to visit it. That way you will know why it is called "The Central American Switzerland." I am absolutely sure that the agreements signed between the University of South Dakota and the University of Costa Rica will make our countries know each other better. Thank you very much

Dr. Manuel Baldares, a native of Costa Rica, is Director of the Economic Science Research Institute, Associate Dean of the College of Economic Sciences, and Professor of Econometrics at the University of Costa Rica.
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Author:Baldares, Manuel; Vargas, Pattie L.; Vargas, Allen H.
Publication:South Dakota Business Review
Date:Mar 1, 1990
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