Export-led growth as a determinant of social development in Costa Rica.

Abstract

Costa Rica has put considerable effort into the development of education, health care, housing and social security. In order to be sustainable, this process requires that the output of such sectors as agriculture and manufacturing expands over time. The article examines the growth of the Costa Rican economy in a long run perspective, with an emphasis on foreign trade policy. The fate of the Costa Rican economy has been highly dependent on the exports of primary products, mainly coffee and bananas, for more than a century. This, however, has created a very vulnerable economy. As a result, during the 1960s, a new development strategy emerged: production of manufactures for the Central American Common Market (CACM). At the end of the 1970s, the prices of traditional export fell and the CACM more or less collapsed. The Central American economies were thrown into an acute crisis, aggravated by faculty domestic economic policies, which also jeopardized social development. This necessitated a stabilization effort on the one hand, and the development of a new trade strategy--promotion of non-traditional exports--on the other. It would appear that both efforts have been successful, although not without difficulties.