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Costa Rica’s rising inequality outpaces other Latin American countries

November 12, 2013

The success enjoyed by Costa Rica’s high productivity, export-driven sector isn’t likely to trickle down to the rest of the economy anytime soon, according to the 19th State of the Nation report released Tuesday.

The annual comprehensive assessment of social, economic and environmental issues in Costa Rica observed that the growing high-productivity, export-driven sectors of the economy have concentrated the country’s economic success in a few elite groups, both socially and territorially, contributing to the country’s widening inequality gap.

The report noted with concern that Costa Rica was the only country out of several Latin American countries whose GINI coefficient increased between 2001 and 2011.

According to the report, Costa Rica is entering a period of high-income inequality after reporting a 0.518 GINI coefficient, a measure of national income distribution, in 2012 – the highest since 1987.

The top 10 percent of Costa Ricans make 24.8 times as much as the poorest 10 percent.

However, the report also said that the average quality of life for Ticos has increased during the same period.

Jorge Vargas Cullell, temporary director of National Council of University Rectors’ (CONARE) State of the Nation Program, said, however, that improvements in the average Tico’s quality of life were not enough to offset the negative effects of widening inequality.

“If we only worry about the average level of quality of life for the average person then we’d be fine, no problem, but inequality generates problems of internal social cohesion and lower levels of political participation because people feel like they belong to different countries, so they’re not interested in participating in the decision making process,” Cullell told The Tico Times.

“For a small country like us, that has few other resources besides people, controlling the problem of inequality is extremely important,” added the program director. 

Cullell said that a lack of labor policy and low high school graduation rates reinforce the gap between the “new” export-oriented economy and the “old” one focused on agriculture and domestic industrial production.

“If you look at a graph of exports from free-trade zones, the story of the country is a success. But if you get rid of the free-trade zones the export history of Costa Rica is much less successful,” observed Cullell.

Only 46.3 percent of Ticos between 17 and 21 have completed high school, according to the 4th States of Education report, released earlier this year, preventing them from applying to many of the best-paid jobs.

View the full State of the Nation report from CONARE online here

 

According to data from the World Bank, Costa Rica is one of the only countries in the region that has seen a growing inequality gap during the last 20 years, despite enjoying a growing economy. The graph shows data from 1990 to 2010.

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