Economy Dips Despite Economic Reforms

A brochurc distributed by the government of Costa Rica says theirs is "the country for investors, where democracy and peace are respected by tradition."

Costa Rica does have a history of 32 years of multi-party democracy, ever since its military was disbanded back in 1949. It also has a history of multinational corporate presence. Late in the nineteenth century the Boston-based United Fruit Company made Costa Rica into one of its "banana republics," and even though coffee is now the primary export, United Fruit's legacy remains. Its successor company, United Brands, is one of the nation's largest landowners, controlling thousands of acres of prime plantation land through its wholly-owned subsidiary, the Compania Bananera de Costa Rica.

In 1980, total U.S. investment in Costa Rica was roughly S550 million, mostly in export agriculture, but also with significant investments in fertilizers, petrochemicals and pharmaceuticals. But the economy has lately become unpredictable, and with political violence in nearby El Salvador and Guatemala, investors and traders from the U.S. are losing their enthusiasm. "The U.S. business community is keeping a very conservative view towards investment in Costa Rica," according to Keith Miceli, director of Latin American affairs for the U.S. Chamber of Commerce. One representative of a large banana company points out that large agricultural corporations are concerned about events in Costa Rica, but that they are "the only ones not in a position to pick up and move immediately," since they have fewer places to go and more capital invested locally.

Costa Rica's relatively high level of economic growth and the government's enlightened spending priorities have made the Costa Rican middle class one of the region's largest and most affluent. Multinational traders, such as Sears and Roebuck. have used aggressive marketing to take advantage of this market and have become fixtures in San Jose. Importers have been doing brisk trade in Japanese cameras and other consumer luxuries. This year, however, "the calls (about) Costa Rica are from exporters who haven't been paid." says Sarah Hokum, Costa Rican officer at the U.S. Department of Commerce. "and from people who are worried that the Costa Ricans don't have enough money for the goods."

The national balance of payments deficit has risen from 5578 million in 1979 to S6'0 million last year, and is expected to rise to close to a billion this year. Inflation is now at an annual rate of 40 percent, and 10 percent of the documented workforce is unemployed. The nation's growth rate has fallen from eight to four-and-a-half percent in three years.

Much of this decline is beyond governmental control: oil price rises have been concurrent with a sharp decline in world prices for bananas and coffee. The government has responded by limiting credit and discouraging imports, and it is currently negotiating with the International Monetary Fund (IMF) to obtain stand-by credits of up to 5100 million to finance its deficit. As is usually the case, the 1 M F is demanding austerity measures that will redistribute income and wealth away from the nation's poor majority-conditions the government is obliged to negotiate while conducting an election campaign. The momentum in Costa Rica is toward instability. El

Doug Tweedale works for the Council on Hemispheric Affairs, a Latin American research group based in Washington. D.C.