Costa Rica stands out in Latin America for its solid institutional stability and robust welfare economy.
Sustained GDP growth in the last 25 years, high indicators of human development and life expectancy, universal health coverage endorse the model of the Central American country, which also stands out in the region for having maintained a fully functional democracy for decades.
But although in the political aspect Costa Rica continues to be a paradigm in the region, in the economic model of the country cracks are observed, more present than ever in the pandemic, especially hard for young people and the lower classes.
Thus, unemployment and the economy are the biggest concerns of Costa Ricans (29.1% and 17.8% according to a recent survey by the state University of Costa Rica, UCR) before the presidential elections this Sunday, well above corruption (10.6%), which affected the current leader Charles Alvarado to reduce its popularity to a minimum.
This Sunday, 3.5 million Costa Ricans are called to the polls to elect the president and the 57 deputies of the Legislative Assembly for the period 2022-2026.
The elections are marked by the explosion of candidacies (25 candidates present themselves), the high rate of undecided voters (more than 1 in 3, according to the polls) and the absence of a clear favorite, so -except for a major surprise- neither will reach 40% support and there will be a second round between the first two on April 3.
The candidates with the greatest support in the polls (all with less than 20% voting intention) are the one who was president between 1994 and 1998, Jose Maria Figueres, center-left; the former vice president between 2002 and 2006 Lineth Flavorior, center-right; the evangelical preacher Fabrizio Alvarado, who lost in the second round of 2018 against the current president of the same surname, the deputy and lawyer Jose Maria Villalta (left) and liberal economists Rodrigo Chavez Y Eliecer Feinzaig.
In this environment of electoral uncertainty, the economic panorama of Costa Rica emerges as a key issue: a country known for leading the happiness indices in the region now sees how discontent is taking hold in more and more sectors.
But, what are the problems of the Costa Rican economy, that for some even question the efficiency of its applauded welfare model?
Costa Rica has overcome the pandemic well, at least if one only looks at the evolution of the GDP (Gross Domestic Product): it only fell 4.5% in 2020, it went back amply in 2021 with 7.6% and for this year another increase of 3.9% is estimated.
“The problem is that it is a dual economy,” says Laura Blanco, professor at the UCR School of Economics.
The gap between the richest and the middle and lower classes has been deepening in the last decade, to the point that today Costa Rica is the 19th most unequal economy in the world, according to data from the World Bank (WB).
The Gini index -which measures the difference in income- of the Central American country is 48.2 points, the fifth highest in Latin America after Brazil, Colombia, Panama and Guatemala.
Already in 2017 an OECD report warned that inequality in Costa Rica had increased “to high levels” since the mid-1990s and highlighted the “clear contrast with many other Latin American economies”, where the trend is to reduce inequality and poverty.
“The majority of the population does not have the skills or educational level to access new jobs. Meanwhile, around 15% have access to a good university education and therefore to jobs with very high productivity and high salaries”, explains the academician Blanco to BBC Mundo.
And although Costa Rica was already a very unequal country before 2020, the pandemic has exacerbated this problem.
The 2021 State of the Nation Report confirms that covid-19 did not hit equally to everybody: In 2020 and the first half of 2021 there were strong setbacks in social equity.
Costa Rican Mariano Rojas, PhD in Economics from the Ohio State University (USA), points out that “the deterioration in access opportunities for children born in marginalized households” has increased worryingly.
Unemployment and informal jobs
In the midst of the pandemic, in mid-2020, unemployment in Costa Rica reached a record figure of 24%.
Although at the end of 2021 the rate was reduced to 14.4%, remains one of the highest in Latin America. This leaves single-digit measurements, common until 2018, far behind.
“There is a long-term trend caused by automation, which we see in most countries. Certain occupations are disappearing”, affirms the economist Mariano Rojas when asked about the root of the problem.
For her part, the academic Laura Blanco points out that “people with less education are the ones who suffer the most from unemployment, and especially the young population, which has reached unemployment rates that can even reach 30%”.
Added to this is the exceptionally high informality in the Costa Rican labor market: more of 4out of 10 people work outside the system, a figure similar to that before the pandemic and which, according to Blanco, is a significant drag on the economy and society of Costa Rica.
“These are precarious jobs that do not pay contributions and do not contribute to the pension and health systems, which is why there is also a weakening in these institutions,” he indicates.
More than 2 out of 10 Costa Rican households are below the poverty line, according to the 2021 National Household Survey (Enaho).
And it is not a thing of now. this indicator has remained practically constant in the last two decades, and even worsened during the pandemic.
“It is a serious and structural problem. Thanks to the social welfare institutions, it has been possible to contain this level (without the institutions and programs to combat poverty, it would be much higher), but it has not been possible to reduce it,” says Blanco.
The level of poverty was around 21% in 2019, reached 26.2% in the midst of the pandemic and now stands at 23%, which is equivalent to 383,500 families, the second highest figure recorded in Enaho since 2010 .
Within this segment, extreme poverty is 6.3%, a figure that has remained almost unchanged since 2010, indicating that the economic growth of the Central American country has not left benefits in the scale lowest of his society.
BBC Mundo verified in situ last October the depressed situation of some of the most marginalized areas of Costa Rica.
“We are not for radical changes”
The 25 presidential candidates have addressed these issues in their speeches in recent weeks.
“There are some signs of setbacks and erosion of the country’s development model and, in part, the discussion has focused on redefining that development model,” political scientist Ronald Alfaro, a researcher at the University’s Center for Sociopolitical Research, tells BBC Mundo. from Costa Rica.
But nevertheless, none of the main candidates bets on a radical change in the system, but by introducing specific reforms that try to correct the deficiencies that have worsened in recent years.
“It is not from the Costa Rican culture to make radical changes. It is not that the person who arrives on Sunday is going to change the economic model,” says economist Laura Blanco.
For example, in one of the pre-election debates, seven candidates addressed the recently granted loan of US$1,778 million from the International Monetary Fund (IMF) to stabilize public finances, which has led to adjustments, a controversial issue that in 2020 sparked unusual demonstrations in the country.
None of the candidates promised extreme measures, such as revoking the agreement with the IMF; instead, they made specific proposals on the management of the loan.
They maintain the same trend in the rest of the economic proposals.
“The positions of most of the candidates focus on managing public affairs and not thinking like statesmen, with a long-term vision and proposing a country project,” says economist Mariano Rojas.
His colleague Laura Blanco believes that, whoever wins, “probably there will be no radical changes in the institutions that fight poverty, although the economic recovery can alleviate it a little by reactivating employment.”
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