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