Economic Growth and Restructuring Through Trade and FDI - Costa Rican Experiences of Interest to Cuba

Economic Growth and Restructuring Through Trade and FDI: Costa Rican
Experiences of Interest to Cuba
By: Alberto Trejos

In Economic Growth and Restructuring Through Trade and FDI: Costa Rican
Experiences of Interest to Cuba, Alberto Trejos examines the Costa Rican
development experience over the last 30 years and offers the most
salient elements of its success for consideration in forming Cuban
economic policy.

Despite years of effort and the implementation of a myriad of
development strategies, no country in Latin America is developed or even
close to it, a stark reminder that the job is hard and largely pending.
However, Costa Rica presents an example of important progress,
particularly through the internationalization of its economy after
economic reform beginning in the mid-1980s.

Over the last three decades, Costa Rica has fairly consistently
implemented significant reform in its trade and foreign investment
policies, among other related policy areas. This yielded some valuable
results in terms of the volume and composition of its exports, the
sectorial composition of its economy, and the volume and nature of the
foreign direct investment (FDI) it attracts. As a result of these
policies, it ranks second in Latin America in terms of cumulative output
growth (PPP) in the three decades after 1980, and first in the
proportional fall of its extreme poverty rates. Costa Rican progress can
be largely attributed to this trade and investment performance.

Costa Rica's experience is an interesting case study in and of itself,
but more importantly serves as a useful comparison in discussing
policies aimed at the growth prospects of one of its Caribbean
neighbors: Cuba.

Key similarities between Costa Rica and Cuba:

Both nations place a high value on the role of the state in promoting
more equity in income distribution.
While Costa Rica has moved away from its past leanings toward central
planning, the country has not shared the privatization impetus of the
rest of the region and still holds a very large fraction of its economy
in the form of state-owned enterprises.
Minerals and fossil energy resources play a small role in Cuba's
resource endowment, as in Costa Rica but unlike most of the region.
Therefore both countries must confront their growth challenges while
facing deteriorating terms of trade; both growth and significant change
in the industrial composition of output and exports are necessary in
order to further their development objectives.
Human capital is at the forefront of each country's development
strategy. Employment must improve in quantity and quality, along with
the creation of economic conditions that reduce incentives to emigrate.
These are parallel challenges on which Costa Rica has performed well,
largely due to its export performance and ability to attract the right
kind of FDI.

This paper was prepared for a series of expert workshops on Cuban
economic change in comparative perspective organized by the Foreign
Policy Latin America Initiative at the Brookings Institution and the
University of Havana's Center for the Study of the Cuban Economy and the
Center for the Study of the International Economy. It was presented at
an experts' seminar in Washington, D.C., on May 28, 2013 and
subsequently revised.

Link:
http://www.brookings.edu/~/media/research/files/papers/2013/10/economic-growth-trade-fdi-costa-rica-cuba-trejos/economic-growth-trade-fdi-costa-rica-cuba-trejos.pdf

Source: "Economic Growth Through Trade and FDI: Costa Rica to Cuba |
Brookings Institution" -
http://www.brookings.edu/research/papers/2013/10/economic-growth-trade-fdi-costa-rica-cuba-trejos