|A brief history of Costa Rica V:
By Clifford Fain Dukes, Jr.
Special to Retire NOW in Costa Rica
Early commerce in Costa Rica used a crude trail extending from
Nicaragua down through Guanacaste then over to San José and
Cartago then south into Panamá. They called the trail The Camino
de Mulas that eventually became the Inter American Highway. The Spanish
prohibition of commerce with anyone other than Spain and then only via
the ports of Veracruz, Mexico and Portobello, Panamá, in
the Americas and the Cadiz and Seville in Spain caused contraband
activity to flourish in the Caribbean. Pirate ships arrived constantly
to Costa Rica’s Caribbean port of Matina where almost everything was
available for a price.
The earliest economy of Costa Rica was agrarian and dominated by cocoa
followed years later by tobacco and ultimately by coffee. Today’s
economy is built around exportation of bananas, coffee, pineapples, and
sugar. In recent years it has moved to one driven by tourism and light
industry with commodity exports retaining an
percent of that of the United States. As tourism gained momentum in the
1990s, the tourists arrived for their vacations primed with cash and
intent on spending it before leaving. Naturally, the business owners
drove up prices to extract as much as possible of the easy money. It
wasn’t long before the cost of living in Costa Rica was on par with
major First World countries. This not only sent the tourists home minus
their cash but was a major blow to the lower income classes who had
been getting by on a very low minimum wage.
in the economy. The country is very averse to heavy industry and
especially oil exploration. They not only discourage dirty industries
but clean ones as well if they represent a large labor pool with the
potential to vote against the establishment.
In the 1990s when Adidas had to abandon Indonesia, their first choice
was Costa Rica. Adidas wanted to bring 13,000 jobs to a free trade zone
in San José to produce its athletic clothing lines. They had to
cancel these plans when the country refused to make even minor upgrades
in infrastructure like water, power and street access.
As more and more Costa Ricans moved to white collar jobs, there were
insufficient farm workers to do the heavy lifting like harvesting sugar
cane, coffee, fruits, and produce. This resulted in a huge influx of
workers both agrarian and domestic, from Nicaragua that presented a
situation very akin to that of the United States with its influx of
undocumented Mexican domestic and farm workers. While the Nicaraguan
immigrants often get a bum rap, their work ethic is excellent. The
construction industry throughout the country uses Nicaraguan workers
almost exclusively now.
As recently as the 1980s the cost of living in Costa Rica was around 20
A.M. Newspapers archive photo
Costa Rica's iconic
ox carts were once the main transport method
Suddenly there was a significant separation between the working classes
that could no longer get by economically and the political classes that
thrived by extracting hidden taxes via the monopolistic utility rates.
It is reported that the Instituto Costarricense de Electricidad, the
national electric and phone company, is used by the political class as
their petty cash fund.
This political class is huge in Costa Rica. There are 151 governmental
permits required simply to build a small strip mall, and a developer
usually has to return to each agency a couple of times in order to
receive each permit. The U. S. Embassy in San José, Costa Rica,
routinely complains to the local government about this problem. Just
maintaining a bank account is no easy matter. The government and banks
insist on knowing, in advance, the source of every dollar being
deposited. This stems from recent laws that force banks to know their
customers as a way to control money laundering. A friend was
investigated by INTERPOL in Miami solely for depositing something
outside what he projected when establishing his bank account.
The political class lives in upscale areas and maintains the BMW and
Mercedes dealers viable. In many cases the working classes have been
forced to consolidate several families into individual houses, while
resorting to a barter system for survival. Within the working classes,
every social visit is accompanied by an interchange of goods and
services most common of which are intimate apparel, jewelry, and
cosmetics. Many single women are comerciantes
or door-to-door sales people buying at wholesale and selling or trading
at retail prices but extending credit for 90 days or more and returning
numerous times to collect the outstanding debts. Virtually all of these
transactions go unreported and untaxed.
Costa Rica is long on a bilingual pool of educated workers but
extremely short on infrastructure. Apart from the deteriorating
highways, streets, and bridges, the mail system doesn’t work. A large
percentage of the incoming and outgoing letters never arrive. Bags of
mail have been found water soaked on the bank of some river.
International overnight companies like UPS, FedEx, and DHL are becoming
the defacto postal system due to their ubiquitous minivans and motos, small motor scooters or
motorcycles. All monthly bills for water, power, telephone, and cable
arrive by moto since even the government knows the postal system
doesn’t work. The Costa Rican economy, such as it is, could be brought
to its knees simply by removing all the motos and the ever present time
date stamps used multiple times on every business and banking
The country has two operating international airports, one in Alajuela
near San José and the other in Liberia. It has begun land
acquisition for a third, sized for the world’s largest jumbo jets. This
one is to be located in the south western part of the country.
Without the need to support the political class, energy should be very
inexpensive since it is produced via hydroelectric 73 percent,
geothermal and wind 12 percent, and petroleum 15 percent.
The geothermal projects have the potential to convert Costa Rica
completely to this source of energy and also allow it to sell energy to
the rest of Central America. Workers drill down some 2,000 meters to
locate pockets of geothermal steam and then pipe the steam to the
surface to power turbines and generators. Surface area requirements are
reduced via a system of diagonal drilling to penetrate the steam beds.
Wind farms are in operation and growing also. With respect to the
hydroelectric system, poor preventative maintenance and shortages of
rain water often result in power outages and water rationing.
There has been a recent change in the ranking of exports. The
approximate declining order in dollar value is: bananas, coffee,
pineapple, sugar, computer chips (Intel), fresh flowers, ornamental
plants, medical tubing and devices, and melons. These cantaloupes
raised in Guancaste are the original sweet variety not the bland, long
shelf life ones popular in supermarkets around the world today.
Finally there has been an absolute stampede of North American and
European companies placing outsource facilities in Costa Rica. The
country is currently home to 25,000 bilingual call center workers, and
is number three on the world scene following India and The Philippines
for outsource placement. Even India is installing a new facility here
to put its workers on the same time zones with the United States.
The democratic style of government, lack of despots, bilingual workers
and no desire to nationalize industries makes Costa Rica very
competitive on the world scene.
NEXT: A brief history of Costa Rica VI:
Some problem areas HERE!
Text: Copyrighted 2010 Clifford Fain
Dukes, Jr. Used with permission.