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National Report Gives Good News and Bad

The new State of the Nation annual report warns of growing inequality, insecurity and political stalemate in Costa Rica.

While the economy was strong last year, the distribution of wealth became more unequal. And though President Oscar Arias had a loyal majority in the Legislative Assembly, he had trouble pushing his agenda.

The State of the Nation, an apolitical program, brings together academics and consultants to draft this nearly 500-page report released last week. An exhaustive look at the year 2006, it is a somewhat outdated indicator of the nation’s progress. Still, it charts trends and raises questions that the country grapples with today.

“The big challenge is to improve all these social indicators,” President Arias said at a State of the Nation presentation. “I think that… with a little more cooperation from the other parties, we can move forward. We can offer Costa Ricans more prosperity, more equality and a fairer society.”

Last year was one of the best for the Costa Rican economy in a decade, according to the report. The economy grew 8.2% – the highest rate since 1998 – inflation dropped to 9.4% from 14%, exports reached record highs, internal demand increased, and foreign direct investment jumped by 70% from 2005. Still, that wealth was poorly distributed.

Wealth became more unequal between 2005 and 2006, partly because incomes increased 4% for skilled workers but just 1.8% for unskilled workers. Researchers found a strong correlation between inequality and homicides and theft, which also increased from 2005 to 2006.

These numbers are less dire in light of a more recent report from the National Statistics and Census Institute (INEC), which found a significant decrease in poverty from 2006 to 2007. INEC found that 16.5% of households were poor in 2007, marking the biggest drop in poverty in 13 years (TT, Nov. 9).

The poorest fifth of the population saw their incomes grow by nearly 20% – the most of any other segment. This was due in part to the Arias administration’s cash transfer programs to poor families and individuals.

However, State of the Nation researchers found that such transfer programs would not be enough for a sizable group of Costa Ricans who are so poor and isolated that researchers concluded, “the market economy has failed them and the state has abandoned them.”

Some 14% of Costa Ricans made up this group in 2006, and State of the Nation coordinator Leda Muñoz estimates that the number has not changed much since.

The group, which largely resides in the northwestern and southeastern corners of Costa Rica, has limited education levels, shaky jobs, and little access to social services such as education, health and


State of the Nation researchers said the state could help the group by implementing programs to increase social security, job security, and access to such resources as credit, technology and land. Cash transfers may help families pass the poverty line, but they often aren’t enough, Muñoz said.

“You don’t climb out of poverty just because you have an envelope in your pocket with a few colones that help you cover your most basic and urgent needs,” said Ombudswoman Lisbeth Quesada.

INEC’s numbers confirmed at least one trend spotted by State of the Nation researchers:

Incomes became even more unequal between 2006 and 2007. Income inequality in Costa Rica is still relatively low compared to other Latin American nations, according to data from the United Nations Development Programme (UNDP).

“But the bad luck of others consoles only fools,” Arias said.

Costa Rica faces challenges in the political realm as well.

While past State of the Nation reports described President Abel Pacheco’s administration (2002-2006) as weak and politically isolated, Arias managed to consolidate his authority in 2006.

The Arias administration put together a 38-member center-right coalition in the Legislative Assembly from their own National Liberation Party (PLN), the Social Christian Unity Party (PUSC) and the Libertarian Movement Party (ML).

Researchers said Arias maintains close ties to Liberation legislators through Presidency Minister Rodrigo Arias, who is the President’s brother and right-hand man. The face of the administration, Rodrigo Arias also talks to the press and coordinates Cabinet meetings. But despite these promising conditions, the President and his coalition in the assembly failed to push through more laws in its first year than during other recent administrations, researchers found. Of the 75 laws Congress did pass between May 2006 and April 2007, only 20 were truly progressive – that is, they increased the public’s rights or the state’s obligations.

Ronald Alfaro, a political scientist who worked on the report, said Congress approved mostly noncontroversial, administrative laws.

“It was a legislative agenda full of little things that did not address the great human development needs,” such as fiscal or electoral reform, he said.

Partly to blame is the Central American Free-Trade Agreement with the United States (CAFTA), which polarized Congress and impeded debate on other major bills, researchers found. (Legislators are now discussing the 12 laws required to implement the treaty, which was approved Oct. 7 in a referendum.)

“One of the things (underlined) in the report is this country’s inability to reach political agreements, which I would frankly call a lack of governability,” President Arias said.

Costa Ricans appear to be losing faith in their political system, too. Costa Ricans’ support for the system in 2006 was the second lowest in 30 years, although it was high compared with the rest of Latin America. Just 24% of registered voters participated in mayoral elections in late 2006, although the turnout for the CAFTA referendum 10 months later was a more promising 60%.

Meanwhile, President Arias turned to foreign policy with new energy. He championed various international initiatives to crack down on the small arms trade and reward countries that increase social spending.

At the same time, the report finds, Arias did not emerge in 2006 as a regional leader, as he was some 20 years ago during his first administration (1986-90).

State of the Nation researchers are now reviewing their work and identifying strengths and weaknesses. Director Miguel Gutiérrez Saxe said the report’s conclusions are provisional – to be updated as recent data come to light.

“It’s not a period. It’s a comma,” he said.



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