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The Student Becomes Master, Some Saying Costa Rica Should Model Panama’s Growth Plan

Article Summary:

The Costa Rican economy during 2011 was characterized by economic stability, moderate growth and greater inequality. Some say this growth has been insufficient to achieve significant reductions in the country’s poverty. Meanwhile the country continues to suffer from the dismantling of social policies in a wide range of bureaucratic entities which have been losing its direction with time.

Continued criticism within Costa Rica has some saying this country should model the behavior of its neighbor Panama, who embarked upon an extensive public works plan, and has continued to grow its economy by 10% during a world economic down turn.

Original Article Text From El Financiero via Google Translate :

2011: A Shy Goodbye

The Costa Rican economy during 2011 was characterized by economic stability, moderate growth and greater inequality. Those who see the “glass half empty” will say that growth has been insufficient to achieve significant reductions in poverty. Those who see the “glass half full” performance will be an important achievement given the difficulties of the international economic landscape. Both views are right. However, concerned about the loss of dynamism in the economy in recent months.

The results of a small economy such as Costa Rica, are subject to strong influence of external conditions. The economic performance of developed countries during 2011, especially in the second half has been disappointing. The economic recovery of 2010 was not sustained.

In this international context, the Costa Rican economy achieved an economic growth close to 4%: modest and that has been slowing at the end of the year. Similarly, wage employment generation by the private sector was slowing. This growth was insufficient to achieve significant reductions in poverty. Besides slow growth, there was a greater inequality in income distribution, leading to a reduction in per capita income of the two lowest income quintiles. Low growth with more inequality is a bad recipe for economic development.

It should be noted that in 2011 the entry of foreign direct investment was vital to sustain economic growth and to finance the growing trade gap, which could bolster economic stability.

Given this performance, one wonders whether the authorities could do more to address the international crisis. In this regard, it should be noted that the scope for a small country is modest compared to international events. However, there is to see the experience of Panama, with growth rates greater than 10% by implementing an ambitious public investment plan whose effect is to boost the economy in the short term and lay the groundwork for long-term competitiveness. Panama has had the ability to make decisions and execute them. In our case, the authorities, past and present, have failed to propose and implement an ambitious plan of infrastructure.

Second, the reduction in inflation has been a major achievement, the result of lower international inflation, a dollar that has allowed relatively inexpensive channel excess domestic demand towards imports and the Central Bank’s monetary policy.

Third, the greatest inequality in income distribution in 2011 comes from several years ago. The country continues to suffer from the dismantling of social policies in a wide range of bureaucratic entities which have been losing its north with time.

In conclusion, during 2011 the country managed to navigate through the world economic difficulties with stability and moderate growth in production. But we must not forget that 40% of poor households reduced their real income. That is, overall performance was not good enough to improve the conditions of the poor. We hope that before the economic downturn of recent months, the authorities can react and minimize costs, especially for lower income people.

Link to Original Article:

From El Financiero

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