Editorial: Jaguar Economy | Nation

In the Bank of America's latest economic report, Costa Rica is compared to one of the four Asian tigers (Taiwan, Hong Kong, South Korea and Singapore) due to strong economic growth resulting from export success and the attraction of foreign investment. Increase in direct and tourism. All these factors, in turn, are linked to the trend exchange rate In recent months.

If one lowers macroeconomic indicators, it is tempting to reach that conclusion. In the past two years, gross domestic product (GDP) growth has exceeded 4.5% annually (a rate at odds with pre-pandemic values), the unemployment rate has been reduced to 7.3% and the fiscal deficit has remained relatively stable. However, like averages, aggregate economic information often masks reality. The country's growth, though high, leaves a bitter taste for many sectors as it has not been reflected in an increase in general well-being.

Our export success hides elements that should not be ignored. On the one hand, exports from the solid regime grow slightly and lose relative importance in the aggregate, while those from the special regime grow by double digits, and given their weight in the aggregate they reflect good growth in the aggregate.

According to data from Procomer, about 692,500 people work in the sales of goods and services sector, but, according to Cinde, only 187,000 people work in free zones. As a result, more than two-thirds of those working in this area belong to the firm regime, where they experience difficulties. In the past two years, manufacturing has not been easy, as fiscal and exchange rate policy has dealt strong blows to competitiveness and, consequently, to the sustainability of long-term growth. Officials are blindsided by the fact that overall product sales continue to rise. However, they ignore the fact that the labor market continues to drive out low-skilled workers in areas where new job opportunities are hard to come by.

On the other hand, foreign direct investment (FDI) has been pointed out as one of the reasons for the fall in the exchange rate. This number can also have some miracles. About 80% of FDI in the last two years has been reinvestment of profits, i.e., existing dollars, and therefore, not creating new capital inflows.

What the above statement doesn't mention is that much of what we see in the exchange rate is a response to the way Costa Rica has decided to finance itself over the past two years (almost 80% in foreign currency). When the exchange rate rises again, we can realize that the financial results are not good or the debt is not being reduced quickly because there are reasons.

In tourism, reality also requires careful scrutiny. “How cheap is Costa Rica!” You'll never hear a tourist exclaim, but with competition from other destinations, we have to worry about increasing insecurity. If we don't act to address these issues, we don't know how much longer we will remain an attractive destination.

If we compare it to the Asian Tigers, this rapid economic growth creates greater inequality and social polarization. The Four Tigers, despite strong growth, experienced problems and challenges including economic inequality, pressures on the labor market, aging populations, high housing prices and challenges to the sustainability of long-term growth. Familiar?