NATURAL, POLITICAL AND SOCIAL HISTORY
By Gerardo Jimenez Zuniga
From a geological perspective, Costa Rica is a young territory and the most recently formed in the neo-tropical region. It emerged in the Mesozoic era during the Cretaceous period around 100 to 120 millions years ago.
Prior to this period, the Northern region of Central America and part of what we know today as Panama (joined to the South American land mass) were separated by a broad canal in whose depths several islands of volcanic origins were formed, but which later eroded away until they disappeared. Afterwards in the Cretaceous period a large island called Guanarivas was formed, along with other smaller islands.
In the Upper Tertiary, the sediments that had accumulated and solidified at the bottom of the ocean folded and raised until they formed the Central American Andes, with intense volcanic activity that has continued until the present.
The volcanic materials have not always emerged onto the surface; rather at times they have cooled and solidified inside the earth’s crusts forming mountainous massifs such as the Talamanca range, where the highest points in the country are found and which has a geological age of some 50 million years. An intense period of volcanic activity ended in the Pliocene two to three million years ago, which gave rise to the current Guanacaste and Central Volcanic mountain ranges.
The slow, constant erosion caused by rain and wind over millions of years worn down the mountainous features, accumulating sediment on plains that opened on the Pacific and, most of all, on the Caribbean. These comprise the largest plains in the territory and the main valleys: the Central, the Tempisque, and the General.
Volcanic and tectonic activity has not finished; today surface transformations occur with relative frequency, although some are more visible that others in the short term.
THE FIRST SETTLERS
In archeological terms, Costa Rica is considered to be the Southern boundary of Mesoamerica. Its first inhabitants, isolated and distributed among various groups, left no testimony of grand civilizations as happened in Honduras, Guatemala, or Mexico, but their artifacts show characteristics of the cultures that inhabited both the South and North of the continents.
The main archeological site that has been discovered so far is Guayabo, which was declared a National Monument in August of 1973. Located between the city of Turrialba and the volcano of the same name, it is a site where petroglyphs, remains of footwear, dwelling foundations, and sophisticated aqueducts have been found. It may have been inhabited from 1000 b.C. to 1400 a.d. when it was abandoned for reasons still unknown.
The location of stone spheres of various sizes and weights in the South and Northeast of the country has intrigued archeologists because of their perfection. Frequently, these spheres were found in formations that seem to have a relationship with astronomy and there is still discussion about whether they are a product of nature or of human efforts.
As far as exchange between cultures, it is believed that different points on the Pacific coast were ports for the first marine voyagers coming from, perhaps, Ecuador and Perú, who traded in metals, precious stones, jewels, and ceramics between Mexico and South America. The presence of pieces of jade may be evidence of this exchange, since this mineral is not found in Costa Rica in its natural state. In addition, pieces of worked gold and gold ornaments of great artistic talent have been found.
The territory that Costa Rica currently occupies was inhabited by diverse autochthonous groups which the Spaniards called by the name of the region or the chief who was governing at the time; thus the inhabitants of the central and Northern Pacific were called Chorotegas, those in the central and Northern region were Huetares, the inhabitants of the Southern Pacific were Borucas and Diquís, and the inhabitants of the Caribbean coast were Bribris and Kekoldis.
It appears that all these groups were made up of semi-nomadic hunters and fishers who cultivated yucca, squash, palm nuts, and tubers.
DISCOVERY AND CONQUEST
On September 8, 1502, on his fourth voyage to the New World, Christopher Columbus arrived at Cariari, today the port of Limón, where his ships, damaged by storms, remained at anchor for 18 days. Impressed by the amount of gold and jewels that the men who came out to meet them wore, Columbus’ sailors carried out excursions into the interior of the territory, but the riches they found and described were in the form of abundant fauna and rich soil. Therefore, they baptized the place with the name of La Huerta (The Orchard). Even so, Columbus spoke of the discoveries, convinced of having found a land full of treasures that would generously increase the riches of the Spanish Crown.
In 1506, King Ferdinand sent a group of colonists under the command of Diego de Nicuesa, to found a city in La Huerta but they ran aground in Panama and were decimated by the tropical diseases, resistance by the indigenous peoples, and lack of food.
Later expeditions had equally frustrating results; however, the Spaniards did not stop searching for the source of the gold that the Indian people decorated themselves with. Therefore, they went toward the South, where they only found gold in riverbeds and not in mines nor in the enormous amounts that they had imagined. They had to make do with what they had taken from the indigenous people, which was insignificant in comparison with the efforts made to reach that point.
Attempts to conquer this part of Central America continued despite the lack of existence of great treasures or fortified cities as in Mexico and Guatemala; nor were there thousands of potential slaves. On the contrary, the indigenous groups were small, they were not impressed by the conquistadors and they resisted subjugation; in addition, they were protected by endless mountain ranges, impenetrable jungles, heat, and tropical diseases.
In 1522, a new expedition of soldiers under the command of Gil González Dávila, crossed the Pacific coast on foot, baptizing the indigenous people they found along the way and gathered all the gold that could be carried, but the Indian people were not interested in submitting to him. They rebelled and their ranks were reduced by both the battles and the diseases carried by the conquistadors. The survivors hid in inaccessible areas.
The Spaniards with the most luck founded settlements in Panama and Nicaragua and in 1539 decided that the area bounded by both territories would be called Costa Rica.
At the insistence of King Felipe II, beginning in 1561 the conquest and colonization of Costa Rica’s interior was undertaken, headed by Juan de Cavallón, Juan de Estrada Ravago and Juan Vázquez de Coronado. From that moment on and over the following two and one-half centuries, the province of Costa Rica was part of the General Captaincy of Guatemala, belonging to the Vice-Royalty of New Spain (Mexico).
A well-equipped expedition lead by Juan de Cavallón found the city of Garcimuñoz. The following year, Juan Vázquez de Coronado arrived and transferred the city of Garcimuñoz to where the city of Cartago is currently located and re-baptized it with the name of El Guarco.
Coronado was the real first leader of Costa Rica. He traveled all over the country and visited the Spanish colonies that were barely holding on, as well as the Indian chiefs who resisted being conquered. Peacefully and in a friendly fashion, Coronado contributed to resolving the problems between the colonists and the Indian residents without producing the overwhelming bloodshed that was so common in other conquered territories.
Without any slaves as aides, the Spaniards considered Costa Rica to be practically uninhabitable. However, they continued penetrating toward the more fertile volcanic soils, cultivating their own land with the few Indian people that were available to them. Thus, Costa Rica became a province of Spanish and Creole (children of Spaniards born in the New World) colonists who desired to form a new country.
In 1573 Cartago was a small city made up of 50 families. In the Central Valley and on the Nicoya Peninsula smaller towns had appeared whose inhabitants cultivated corn, cacao, and tobacco, remaining at a marginal level of subsistence, without major conflicts or class distinctions.
Throughout the 17th Century, the province developed slowly, with little influence from the happenings outside the province and with a system of peaceful trading, democracy, and independence.
The Central Valley continued growing with the founding of Cubujuquí (currently Heredia), the Villa Nueva de la Boca del Monte (currently San José), and Villa Hermosa (currently Alajuela).
At the beginning of the 19th Century, Central America joined the independence movements that appeared on the American continent; however, Costa Rica did not participate in those struggles. On September 15, 1821, the proclamation of Central American independence took place in Guatemala City as the result of a meeting of notable figures called together by the General Captain himself, Gabino Gainza. It was ordered that posts be circulated throughout the provinces, in order for them to send delegates or representatives to the Congress. This Congress had to decide whether independence would be absolute and, if so, had to define the terms of the new government and legislation.
The echoes of the independence movement reached the government of Costa Rica late and weakly. The posting arrived on October 13, 1821, in Cartago and the directors of the main Costa Rican towns: Cartago, Alajuela, Heredia, and San José, were confused since they had never felt the Spanish influence and they did not identify with their Central American neighbors.
The governor at the time, Juan Manuel de Cañas stayed at the head of the province of Costa Rica and on December 1, 1821, promulgated the first political constitution called “Fundamental Interim Social Pact of Costa Rica,” better known as the “Harmony Pact.” This document, based on the Cadiz Constitution of 1812, established the sovereign right of Costa Rica to decide its political future, and guaranteed the citizens civil liberty, property rights, and other natural and legitimate rights for each person or any town or nation.
Opinions were divided. Some citizens even thought that the territory was too small and its population too few to declare independence. Therefore, in 1822 they urged unification with Guatemala or annexation to the ill-fated Mexican empire founded by Agustín de Iturbide arising from the Iguala Plan that declared the old New Spain as a constitutional monarchy.
In 1823, Costa Rica decided to join the Central American Federation, but seceded from it in 1848 when it became an independent republic, a movement headed by the then head of state, Jose María Castro Madriz, who became the first President of the Republic. In 1853, under the command of President Juan Rafael Mora Porras, Spain recognized Costa Rica as an independent nation.
ANNEXATION OF NICOYA
Years before the date of independence, the Cadiz Courts were the parliament that resolved problems in the colonies. In 1812, each of the provinces in the Guatemalan Captaincy sent a representative to the Courts, but the population in Costa Rica was smaller than required to have representation. However, faced with this fact, the authorities came up with the idea of joining with the territory of Nicoya to reach the necessary population level, to which the Nicoyans agreed.
In 1820, Costa Rica and Nicoya once again joined together for the same purposes, which tightened the relationship between them. In 1823, the idea of permanently joining the two territories had gained strength. The National Constitutional Assembly, made up of representatives of all Central American provinces, agreed that the Nicoyans could only make that decision. Finally, through an open council meeting in which all Nicoyans participated, on July 25, 1824, they decided to be annexed voluntarily to the state of Costa Rica.
FOUNDATION OF THE REPUBLIC
With the breakdown of the colonial pact in 1821, the process of forming national states began throughout Latin America. In Costa Rica, the first attempts to push for its own administrative structure were made by the federalist initiatives, but the deficient organizational structure of the Central American Federation caused the formation of fragmented states.
In 1843 Costa Rica directly entered the international market thanks to coffee. Favorable conditions caused the beginning of a cycle wherein impressive economic, political, and judicial growth was experienced. This, in conjunction with the expanding wave of liberal positivism, set the state on the road to autonomy.
In 1847 a Political Constitution was promulgated that had a very short life, since on August 30, 1848, the Congress approved the transformation of the State of Costa Rica into a republic, which forced reforms to be introduced to the Magna Carta. Thus, on November 30 of the same year, a new constitutional text known as the “Reformed” Constitution was approved.
The national territory was organized with the current administrative territorial divisions of provinces, counties, and districts (previously, the state was divided into five departments). The then head of state, José María Castro Madriz, became the first president of the new republic, recognized as such by the Spanish Crown in 1853. The nascent socio-economic development led to the establishment of institutions and the consolidation of a national conscience.
In 1856, William Walker, a U.S. fortune hunter, had taken over a large part of Central America and had advanced as far as Nicaragua. He established himself in the government with the help of a group of mercenary adventurers and slavery supporters from the South of the United States and threatened to spread his dominion to other nations in the isthmus. One of his motives was the search for a route that would allow inter-ocean sailing so that ships would not have to go all the way to the Straights of Magellan in order to sail from the Pacific Coast to the Atlantic Coast of the United States.
In his advances, Walker entered the Costa Rican territory where he encountered unusual resistance. His expansionist dream ended at the Santa Rosa hacienda, where he was repelled by troops from this country under the command of President Juan Rafael Mora Porras, in the celebrated Battle of Santa Rosa on March 20th of that year. The Costa Rican troops chased the fortune hunters to Rivas in Nicaragua where the most celebrated confrontation happened: the Battle of Rivas where the national hero, Juan Santamaría, leaped into immortality when he burned the building where the fortune hunters were ensconced, forcing them to come out and flee.
Walker’s withdrawal was temporary and he soon returned but his ambitions ended with his surrender and execution by firing squad in Honduras in 1860.
After the campaign, there was even more tragedy because an uncontrollable cholera epidemic took more lives than the war itself. Costa Rica was grief stricken by the pain, but even so, the conflict was important for the consolidation of a national identity, since it was the first time the population came together in a collective effort.
POLITICAL STABILITY AND ECONOMIC GROWTH
During the last years of the colonial era, Costa Rica was the most isolated and poorest province in the Guatemalan Captaincy. Its population, made up mostly of laborers, barely reached 65 thousand inhabitants, of which 90% lived in the Central Valley in small, widespread settlements where small properties dedicated basically to subsistence agriculture predominated.
From the moment when it became independent from the Spanish Crown in 1821, Costa Rica began a new economic stage oriented toward the international market. It needed, however, to find a product that had comparative advantages, so it promoted the exportation of products such as tobacco, sugar, woods, gold, and Brazil wood.
Mining was the most appropriate activity at that time thanks to the discovery of gold and silver in the Aguacate Mountains. In 1844 this activity generated seven million pesos each year, a very large sum for the era; it also brought about the first changes in the country’s economic structure:
1. It attracted foreign investment, mostly by the British.
2. It broadened the labor market.
3. It favored business expansion, both internally and externally.
4. It caused the monetization of the country. In 1828 the Mint was founded and between 1829 and 1842, 400,000 pesos were coined in gold and silver.
5. It increased financial activity by encouraging the incipient Costa Rican capital on the international stock market, especially in Britain.
6. It favored agriculture since monetization allowed for the import of instruments that improved growing techniques.
7. The accumulation of capital consolidated Costa Rica’s presence in the world market.
All these transformations occurred in a peaceful environment, where a homogeneous social structure, lacking excessive class differences, avoided the social tensions and confrontations that were common in the other countries in the area.
The first products that Costa Rica used to enter the international market only resulted in temporary connections. Meanwhile, slowly but over an extended period of time, an agricultural product was growing that during the middle of the 19th Century would become the primary export which opened the doors on an era of economic growth based on mono-cultivation: coffee. The fruit of the coffee plant (Rubiaceae) that was brought from Jamaica, but is originally from Ethiopia.
The relative abundance of land with very fertile volcanic soils, as well as a series of official measures and fiscal benefits, offered notorious advantages for coffee production, which was primarily concentrated in the areas around San José and Heredia. It later spread to the west, to the region between Alajuela and San Ramón. Coffee’s early success allowed a consolidation of an economic model that provided for education and a peaceful lifestyle, which, with the exception of two or three interruptions, has prevailed until the present.
THE MODERN COSTA RICAN STATE AND EXPORT OF COFFEE
Juan Mora Fernández, the first head of state (1824-1829), founded the Mint and reorganized the Santo Tomás House of Education, founded in 1814. Afterward, Braulio Carrillo (1835-1838-1842) carried out changes that would convert Costa Rica into a modern, progressive, and liberal state. He encouraged agriculture with an emphasis on coffee cultivation, organized the Public Administration, paid off the external debt, and competently managed public funds.
In 1832 the first shipment of coffee destined for Valparaiso (Chile) was made. From there it was re-exported to Europe; this began the foreign trade in coffee beans. Toward the end of the 19th Century, its influence was overwhelming, reaching 95% of total exports to England where it was distributed throughout the rest of Europe. Germany alone consumed around 20 percent of Costa Rica’s annual harvest.
Both agro-export activities and the appearance of important mercantile houses linked to imports and exports, gave rise to the first banks, among which the Banco Nacional de Costa Rica, founded in 1867, prevails.
The boom in coffee encouraged the expansion of human settlements. Satisfying new needs diversified the economy and gave rise to an ever more specialized division of labor which in turn favored immigration and population processes. Alongside the large haciendas, small farms subsisted that a large middle class depended on. The less well off classes enjoyed a level of living that was better than the other countries in the region, with relatively high salaries, abundant work, and a progressive educational and cultural policy that favored opportunities for mobility and social ascent.
The economic growth at the end of the 19th Century attracted foreign investment in activities such as: railways, port facilities, import and export businesses, and financial services. Costa Rica, until then exclusively linked to British capital, experienced investment by North American capital, and to a lesser degree by Germans.
COMMUNICATION, PUBLIC WORKS, AND BANANA PRODUCTION
A coffee-based society linked to the international market began to demand solutions to other basic necessities, such as a roadway infrastructure suitable for better transportation from the producing zones to the shipping ports. Thus, the first efforts were centered on fortifying the route to the Pacific. This facilitated transportation and brought costs down considerably since it allowed for replacement of mules instead of carts pulled by oxen.
In 1866 telephone service was begun and at the beginning of the 20th Century, Costa Rica already had more than 70 kilometers (45 miles) of telephone lines. In addition, the country’s main cities began to benefit from a series of public works such as: paved streets, construction of sewage systems, and establishment of electrical service. It is important to point out that Costa Rica was the third city in the world with public lighting, after New York and Paris.
BANANAS AND CACAO
Development brought with it new problems: exporting coffee to Europe along the Pacific route implied a long voyage to Cape Horn or through California, a limitation that persisted until the opening of the Panama Canal. The solution was to construct a railway between the producing areas and the port at Limón on the Caribbean. This in turn gave rise to new areas for colonization and had two very significant consequences: a- penetration of North American capital which achieved an unprecedented weight in the Costa Rican economy and, b- the end of the coffee monopoly with the introduction of a new product: the banana.
In 1884 a U.S. entrepreneur named Minor Cooper Keith took charge of the construction of a railway line to Limón, in exchange for which the Costa Rican government, headed by Bernardo Soto Alfaro (1886-1889), handed him 300,000 hectares of land and other benefits.
Keith began a true economic empire based on exploitation of the banana. In 1890 he owned three production and export companies, merged into the Tropical Trading and Transport Company. In 1899, the merger with the Boston Fruit Company firm, formed the United Fruit Company (UFCO), whose activities extended throughout Central America.
The banana company not only covered wide territories; it also exercised absolute control over the social organization of production; it monopolized all related activities such as transport and marketing, setting up true enclaves where worker conditions were unfavorable, with low salaries and exhausting work schedules. Thus, the benefits from banana activities did not contribute much to national development.
This situation, however, been new to the Costa Rican idiosyncrasy, would not last many years. Beginning in 1920 the workers began to organize and in 1934, on the UFCO farms, the first banana strike in Central America broke out. More than 10,000 workers demanded a reduction in work shifts, an increase in salaries, suppression of batch work, regulation of prices in the commissaries, installation of medical dispensaries, etc.
On the positive side, the introduction of the banana activities which required the employment of a salaried work force favored a double process that enriched cultural activity: on the one hand, there was the entry of a large number of Afro-Caribbean immigrants (coming from Jamaica) who came to work on the plantations and rapidly populated the Caribbean region. On the other hand, there was the immigration of Chinese laborers who came to work on the railway line and who rapidly became part of the Costa Rican society.
Beginning in 1938, the banana plantations expanded to the southern Pacific, opening a new area for colonization, resulting in communities such as Parrita, Quepos, Palmar Sur, and Golfito, with positive consequences since that region was rehabilitated economically.
Strictly linked to banana production, the UFCO also developed cacao cultivation on abandoned banana farms or on lands acquired to that end. The cacao farms extended to the Caribbean, generating production primarily destined for the United States, but also for the European markets.
Between 1884 and 1925, cacao became the country’s third export product, competing with precious metals extracted from the mines at Abangares and, despite strong competition by bananas, coffee continued being the most important product in the national economy.
THE REFORM ERA
In the middle of the 20th Century, Costa Rica already possessed a complex society. The population averaged around 800,000 inhabitants and the economic process had consolidated certain class differences. However, the social situation was still much less explosive than in the other countries in the region.
The economic policy obeyed the canons of liberal doctrine (non-intervention) and foreign investment was decisive in matters relating to transport and communications. The railway to the Atlantic, the trolley cars, the air service (developed beginning in 1930), telephones, and the supply of electric energy, were all controlled by foreign companies. The railway to the Pacific and the construction of the Interamerican Highway (begun in 1935), were done with capital originating in the United States.
The huge international crises of the first half of the 20th Century also affected Costa Rica since development based on the agricultural export model ended. A new phase began where new economic activities had to be found, at the same time that attempts were made to provide better protection for the workers and while the state began to exercise control over finances and over human rights, among others.
In 1943 the then President of the Republic, Rafael Angel Calderón Guardia, encouraged a reform in the Political Constitution in effect since 1871. It incorporated a chapter on Social Guarantees that ensured minimum salaries, a workday of eight hours (six for night shifts), a weekly work schedule of 48 hours, and annual paid vacations.
These guarantees consecrated the right to free association of workers and backed by law the collective contracts between employers and legally organized unions. They favored the formation of cooperatives and created labor courts for the resolution of labor conflicts.
One of the most significant measures in this constitutional reform was the creation of the Costa Rican Social Security Administration, which established mandatory social security for cases of illness, pregnancy, disability, and involuntary unemployment.
During this same year (1943) the Labor Code was promulgated which institutionalized a series of benefits for salaried employees: it guaranteed the right to work, nullified free-will employment termination, forced employers to adopt hygiene and security measures in their facilities and to pay for overtime, passed legislation on women and minors under 15 working, and established the right to holidays and one day a week for rest.
All these social reforms represent an important milestone in Costa Rica’s social and labor history and they converted it into the leading nation in defense of human rights and in particular, worker rights.
Also, within the traditional environment of respect for private property, free commerce, maintenance of the market system, and attraction of foreign capital, economic reforms were produced that tended toward more state intervention, in contrast to the indifference that characterized the previous phase. Thus, in 1940 the National Council on Agriculture and the Board for Protection of Sugarcane, with the goal of coordinating and regulating the activities in those sectors, were created. Measures were decreed to stimulate exports and the Office of Quotas was established to take charge of regulating, controlling, and authorizing the different export items.
At the same time, and with the goal of providing incentives for industrial development, the government declared that the development of new industries was in the public’s interest and proffered advantages for their establishment.
Elsewhere, the need to train new and numerous professionals led to the foundation of the University of Costa Rica in 1940.
THE DEVELOPMENT REFORM PROJECT
The year 1948 marked a milestone in Costa Rican history by ending the hegemony of an elite group and of a socio-economic model in order to give supremacy to other social groups whose projects would encourage a new development model.
In that year, a short civil war shook the country. The winners of the conflict, called the Social Democrats, comprising a Provisional Government Council, transformed the reformist models of the so-called “First Republic” into a reformist-development oriented project. The country would become involved in this project based on what the Government Council, headed by José Figueres, called the “Second Republic.”
In its 18 months at the helm, the Government Council applied a series of economic measures that established the bases for a more acute capitalist style development in the future. This development intended to increase and diversify national production through the sheltering and encouragement of small- and medium-sized companies and through the encouragement of cooperatives in search of a more even distribution of the social product.
The primary goal for the new project was the industrialization of the country; however, in order to do so, it was necessary that the financial mechanisms were not exclusively in private hands. Therefore, banking was nationalized and foreign industrial companies were provided benefits so they would contribute to impelling the economy. Measures were dictated for protection of the small producer and the problem of landless "campesinos" was attended to.
The new Political Constitution (1949) emanating from the 1948 Revolution not only respected the Social Guarantees chapter introduced by Calderón Guardia, it also strengthened those guarantees and made them universal. However, probably the most significant act after the civil war was the abolition of the army as a permanent institution.
DEMILITARIZATION AND SOCIAL INVESTMENTS
In contrast to the other republics in Central America, during the second half of the 20th Century, Costa Rica was able to overcome its economic, political, and military difficulties. The Costa Rican devotion to democracy, peaceful cooperation, and respect for the law and personal liberties, has contributed to it boasting an enviable prosperity.
In 1949 the Government Council, headed by José Figueres Ferrer, made the historic decision to proscribe the army as a permanent institution. This significant happening marked a sensitive difference between Costa Rica and the rest of Latin America, since from then on, it has been recognized nationally and internationally as a nation where “there are more teachers than soldiers”, although the truth is that there are no soldiers.
For more than half a century, Costa Rica has demonstrated that it is not necessary to have armed forces, since in the neighboring countries the armies have never served the mission of defending the homeland. Instead they defend the government officials and the powerful economic elite groups. They have controlled the election processes and have appointed presidents.
Meanwhile, in Costa Rica the citizens have controlled and supervised the electoral processes for more than 50 years. Since the promulgation of the current Political Constitution (1949), thirteen presidents have been elected, without threats and with absolutely no shadow of a doubt about the legitimacy of the results, making this country an example for the world.
The elimination of the army also had a positive impact on the Costa Rican society since the financial resources that normally would be absorbed for maintaining the military institution and all that it represents, were used to strengthen the education system, health and social security; for the construction of highways and public infrastructure such as elementary schools, high schools, hospitals, clinics, and communication, telecommunication, and electrification systems.
Likewise, with tax money four universities and three symphonic orchestras are maintained. Cost Rica has, on an average, one doctor for every 700 inhabitants.
During the second half of the 20th Century, life in Costa Rica has occurred in an environment of peace and cordiality. The hatreds of the past were definitively erased when the offspring of the leaders involved in the 1948 conflict hugged each other in a transfer of power: Rafael Ángel Calderón Fournier, president from 1990 to 1994, turned over the Presidential Banner to José María Figueres Olsen, who would govern the country during the period 1994 – 1998.
As was been previously stated, the Costa Rican economy had traditionally depended on a small group of products in the primary sector, basically coffee, bananas, and cacao. However, the transformation of the international market during the last 20 years leads to the modification of the foreign trade structure, both in the broadening of export destinations and in the variety of products.
An interest arose in analyzing and promoting the export of new products called “non-traditional”, such as fruit (pineapple, melons, mangos), heart of palm, ornamental plants, flowers and foliage, all of which have gained importance. Likewise, interest in the international market has been manifested by the livestock production (meat and milk products) and fishing (shrimp and fresh and frozen fish) sectors, and those sectors whose products are derived from agro-industry such as fruit pulps and preserves.
In 1985 a drop in sales of “traditional products” was precipitated but, in contrast, the “non-traditional product” trade began to grow, reaching equilibrium in 1989. Beginning in 1991, the trend reversed, such that exports of “non-traditional products” continued their downward trend, although they maintained their importance in the total business balance, especially the export of bananas and other fruits to third markets.
In the face of this situation, during the last decade the governments have stimulated industrial production through the establishment of fiscal benefits for investment, such as free trade zone regulations and regulations for active product finishing (“maquiladoras”). Likewise, tourist activities were intensified and promoted. In particular, during the last several years the development of the high technology industry (Tecapro, Intel. Abbot Laboratories) have been outstanding.
Beginning in 1990, the composition of exports shows an advantage for non-traditional production, prominent among which are products such as textiles, medical equipment and materials, pharmaceutical products, paper and cardboard, plastics, metals, and agro-chemicals, among others. The companies in the foreign trade zone system have become very important since their exports represent more than 30% of the total sales to the exterior.
In other areas, even though the United States remains the main destination for Costa Rican products, markets have also been diversifying over the last several years. The European Union is the second most important destination, primarily for exports of coffee, bananas, flowers, and other fruits. The Central American region occupies the third position but it is the second market for non-traditional products, after the United States. This is because the Caribbean region has maintained an important position as a destination, and sales in Asia and South America have shown a notable growth in the last few years.
ECONOMIC REALITY AND
THE INVESTMENT CLIMATE
The year 1997 was encouraging for Costa Rican exports because there was a rebound in terms of trade. The value of sales recovered, reaching a figure of almost 4112 billion dollars, surpassing by more than 11% the value of exports in 1996. This is consistent with other national economic results that, at the end of the year, saw a reduction in the inflation and unemployment rates. There was also a higher level of economic growth, which is also reflected in the inflow of economic resources generated by tourism. This sector recovered its dynamism from the beginning of the decade, reaching a value of 714 million dollars, for a total of 4826 billion dollars and a growth of more than 10% in the value of exports of goods and services.
In 1998 the economy showed a satisfactory and stable performance. Inflation at 12%, although slightly higher than 1997 (11.2%), was still less than the average for the decade (18%). The average real monthly income in 1998 grew 6.3% with relation to the previous year.
The dynamism of exports could not compensate for the rebound in imports associated with the growth in production. Even so, the business deficit balance stayed below the average for the last decade (4.4%). The deficit for the Central Government was reduced slightly to 3.3% of the GNP, despite a considerable increase in public spending, primarily in the area of transfers. (State of the Nation 1998).
The trend that began in 1997 was able to hold steady until the close of the year 1999. The change in government on May 8, 1998, for the first time in recent Costa Rican history, was carried out in a climate of prosperity and continuity of efforts for promoting, facilitating, and consolidating the entry of the country into the international economy. This revolves around six fundamental central points of economic policy:
· Promotion of the internal changes necessary to develop a more efficient economy.
· Improvement in and securing of the conditions for access to new markets.
· Effective defense of commercial interests.
· Rules and procedures for proper handling of commercial relationships.
· Active promotion of exports.
· Attraction of direct foreign investment (DFI).
0n just ten years, Costa Rica was able to quadruple its exports to the world. In 1999 it reached the unprecedented level of 6719 billion dollars, demonstrating a growth of more than 22% over 1998. Imports only represented 6346 billion dollars, which reflects a surplus in the trade balance of more than 370 million dollars for the first time in the last 30 years, converting the country into the primary exporter per capita in Latin America.
One of the activities associated with foreign trade that has increased in the past years is tourism. Tourism began expanding and generated major income for the national economy in the decade of the 80s, favorably influencing the Gross National Product, economic growth, and the development of both public and private infrastructure. At some point it was called “the industry without chimneys.”
Factors that placed Costa in the international arena are those such as quality of life, the democratic system, the leadership it assumed in resolving the armed conflicts in the rest of the Central American region, the awarding of the Nobel Peace Price to President Oscar Arias in 1987, the silver medal won by Silvia Poll in the Olympic Games in Seoul in 1988, the outstanding participation of the national soccer team in the world championship in Italy in 1990, the gold medal for Claudia Poll in the Olympics in Atlanta (1996), the active participation of the Costa Rican astronaut Franklin Chang Diaz in NASA’s space shuttle program. Very specially, the natural wonders and the definite Costa Rican attitude about conservation of natural resources have made the country one of the preferred destinations for travelers from around the world.
In 1998 tourist activity showed an increase of 16% in the arrival of international passengers. Currently, the improvements made in the port maritime facilities have increased the number of cruise ship arrivals, and the modernization of the Juan Santamaría International Airport places Costa Rica on the list of countries that offer first-rate tourist services. The construction of a bridge over the Tempisque River has begun, a very important work being carried out thanks to a donation from the government of Taiwan.
Foreign investments reached a figure of 628.4 billion dollars in 1999, coming primarily from the United States (59%), Mexico (12%), Panama (11%), and to a lesser degree from Canada, Europe, and the rest of Central America. The primary investment sectors were industry (53%), services (16%), tourism (12%), and agriculture (7%)
In order to provide continuity to the advances that Costa Rica has made in the international market, the government of Costa Rica, through the auspices of the Ministry of Foreign Trade (COMEX), has led a series of concrete actions such as:
· Free trade agreement Costa Rica - Mexico.
· Free trade agreement Central America - Chile.
· Free trade agreement Central America – the Dominican Republic.
· Free trade agreement Costa Rica - Canada.
· Free trade agreement Central America - Panama.
· Negotiation and legislative processing of bilateral investment agreements.
· Promotion and improvement in the Caribbean Basin Initiative.
· Accomplishment of the second business forum Central America – European Union.
It should be pointed out that currently only the free trade agreement with Mexico is in effect.
Costa Rica actively participated in the negotiations for the Free Trade Area of the Americas (FTAA), occupying the presidency of the Negotiations Committee until the end of October 1999. It insisted upon the need to work constantly on the implementation of specific measures with relation to customs and duties that would facilitate the commercial integration of the countries in the hemisphere.
Specifically, there has been much activity in the process of Central American integration through the negotiation of regulations on technical standards and sanitation measures, as well as a Central American agreement about trade of services and investments. The central issue for Costa Rica in the Central American plan is the urgent need to have a legal mechanism that would allow for expeditiously and effectively solving trade controversies that may arise among the countries. This agreement has not been completely finalized, but has been subscribed to by four countries in the area.
With regard to duties, in January 2000 Costa Rica achieved the goal agreed to several years ago with the other Central American countries of maintaining a duty ceiling of 15% with some exceptions, particularly for livestock products.
When commemorating the second anniversary of his command on May 8, 2000, the President of the Republic, Miguel Ángel Rodríguez received the praise of the leaders of the largest international financial organizations due to the good circumstances that the Costa Rican economy finds itself in.
According to David de Ferranti, Vice-President of the World Bank on Latin American affairs, the organization he represents is very impressed with Costa Rica’s economic performance during 1999, reaching a rate higher than 8%, one of the highest in the Latin American region that, all together, barely passed 0. This opinion coincided with the opinion of Lawrence Summers, Secretary of the Treasury of the United States, who recognized that Costa Rica has created the appropriate conditions for direct foreign investment (DFI) in key sectors of the economy.
The managing sub-director of the International Monetary Fund (IMF), Eduardo Aninat, declared that the Fund highlights national advances in the strategy to diversify exports and open to investment. As an example of his satisfaction, he announced the negotiation of a loan for 33 million dollars to pay financial incentives to small- and medium-size landholders so they may participate in better forest management.
On their part, company executives for foreign capital such as Abbott Laboratories, Procter and Gamble, and Western Union, manifested their decision to invest in Costa Rica due to the stable political climate and the professional and technical education of the Costa Ricans (La Nación, 05/09/2000, El País section).
At the same time, a study published by the Economic Commission for Latin America and the Caribbean (CEPTAL) denominated “Social Outlook for Latin America 1999-2000” highlights the social achievements made by Costa Rica in fields such as distribution of income among the employed population, where a distribution structure uncommon in the rest of Latin America is applied.
EDUCATION, AN ADDITIONAL
In Costa Rica illiteracy is a malady that has been practically eradicated, thanks to the investments historically made in this area. Basic education has been, by constitution, free and mandatory since 1869. Each community has an elementary school and each county has, at least, a high school and nighttime education centers.
The government has also stimulated development of “at a distance” or “sufficiency” education systems for people who, for economic or residency reasons, have not had access to this benefit. There is an elementary and secondary education program called “the teacher at home” where lessons are broadcast by radio with support in the form of printed materials put together by the Costa Rican Radio-phonic Education Institute (ICER). This program is sponsored by the Principality of Liechtenstein and Radio Netherlands.
More recently, the Government of the Republic, through the Ministry of Education, has begun programs called “Tele-high school” and “Virtual High Schools” that use video techniques, computer technology, and the Internet, thanks to the broad coverage that our country has with regard to electricity and telephony.
There is also a considerable offer of private education, but any degrees imparted upon termination of studies must be awarded by the Ministry of Public Education.
With regard to technical and higher education, the country has a wide array of possibilities. The National Training Institute (INA) is the official institute par excellence for free training of technicians in diverse service areas, among which are: electronics, refrigeration, computers, hotels and tourism, all sorts of mechanics, civil construction, etc. Other technical needs are filled by institutions such as university colleges and by different private firms.
With regard to university education, Costa Rica provides an unprecedented opportunity since in such a small territory there are at least 40 private universities and four state universities: the University of Costa Rica (UCR), the National University (UNA), the Technological Institute of Costa Rica (ITCR), and the State University at a Distance (UNED). Traditionally, the state universities have enjoyed better academic prestige; however, some private universities are gaining, thanks to investments in infrastructure and technology.
An additional alternative to strengthen informal education is the project called LINCOS “Little Intelligent Communities” conceived in Costa Rica with broad educational and social content to encourage education in the family and to facilitate equity by narrowing the gap between those who have access to technology and those who do not.
This is an alternative for progress for distant rural communities and consists of the installation of community digital centers that provide access to new information technology. On a permanent basis, LINCOS installs platforms that integrate applications such as: health and the environment, tele-medicine, tele-health, videoconferencing, community radio broadcasting, electronic commerce, and entertainment services, along with an educational information technology laboratory with tools to enhance productivity in individuals with a high level of creativity. The project is adapted to each community based on its potential.
The structural design for these digital centers is based on modified and refurbished transport containers because they are convenient, available, secure, and easy to move. They can generate their own electricity and have the ability to establish links to the rest of the world through various channels, including satellites.
The initiative belongs to the Costa Rican Foundation for Sustainable Development, directed by José María Figueres Olsen, Ex-President of the Republic. It was developed in conjunction with the Massachusetts Institute of Technology, and the Costa Rican Institute of Technology, with the support of organizations such as the Center for Future Health at the University of Rochester, the National University of Costa Rica, the State University at a Distance, the University of West Florida, the Center for International Development at Harvard University, Microsoft, Hewlett Packard, LCSI, Becton Dickinson, Agilent Technologies, Lego, Avina and the Flora Foundation.
LINCOS seeks to provide development opportunities to communities where the equipment is a new tool for democratic and educational usage of information and communications technology. It is hoped that the users will not be passive receivers of technology, but rather that they will intelligently and constructively use the tools provided by LINCOS. For each unit, 160 hours of training will be provided to the human team in charge of the educational and information services.
· Telephone services via microwave, by voice over IP or WLL with a coverage of three to five miles from the container.
· Specialized information searches (over the Internet).
· Fax services.
· Photocopy services.
· Community electronic mail office.
· Processing for citizens at government institutions.
· Banking services.
· Electronic commerce services.
The preparation of this document was in charge of Gerardo Jiménez Zúñiga. In its edition partidipated: Mónica Gamboa Poveda y Jorge Campos Montero.