Capital Development on Costa Rica and Comparing Economics
Assignment 1: Capital Development on Costa Rica
What is the present state of Costa Rica’s economy (e.g., GNP, per capita income, rate of economic growth, etc.)?
The Costa Rican Economy depends heavily on exports from the electronics, fisheries and farming, agriculture as well as tourism and transportation industries. Owing to the country’s political stability, a number of foreign investors have been constantly attracted, such that the country is attributed with the highest level of Foreign Direct Investment per capita in the whole of Latin America. For the past 20 years, the poverty level in Costa Rica has been maintained at 5%- 8%. With a total population of 4.25 million, the Costa Rican GDP per capita amounts to $10,900. The current real GDP of the country is $48.63 billion, with an economic growth rate of 3.6% in 2010. In terms of the GDP per sector, industry has a GDP of 25.5%, agriculture 6.5% and services 68.0% (Martin & Wasserman, 2008, pg.459). The unemployment rate stands at 7.8% with a consumer price inflation of 10%. The current inflation rate in Costa Rica amounts to 5.8%, a decrease from 8.3% in 2009. Its exports amount to $8.847 billion, while its imports are at US$ 10.87 billion. Close to 16% of its population lives below the poverty line.
How much debt does Costa Rica have?
The country’s fiscal years begins from October 1 to September 30. In 1981, the country’s foreign debt was US$4 billion, which forced International Monetary Fund and U.S to halt its massive programs of aid that were in charge of injecting $3 billion into the Costa Rican economy from 1981-1984. Since that year, the country has been trying considerably through all means at its disposal to reduce its international debt to manageable levels (Mitchell & Pentzer, 2008, pg. 94). Currently, its public debt stands at 49.3% of GDP, which amounts to US$3.5 billion. When divided among its massive population, the debt stands at $1200 per every single person in the country. Its revenue amounts to US$3.795 billion, with an expense of US$4.908 billion.
How does Costa Rica’s economy (particularly the economic growth rate) today compare to 20 or 30 years ago?
For economic growth to be enhanced in Costa Rica, the country has been depending heavily on exports from the electronics, fisheries and farming, agriculture as well as tourism and transportation industries. This practice has spilled from 30-20 years ago up to date. Though the economic growth has been on the rise since 30 years ago, there are some years it has been subjected into a decline, owing to the various global economic crises that the global market has faced. The economic growth rate experienced in the country currently cannot be easily compared to that experienced 30 or 20 years ago. This is because the country’s population has been on the rise and due to advances in technology, the level of exports in the country has increased, while imports have been decreased substantially to ensure that, the economic growth is on the rise (Martin & Wasserman, 2008, pg.467). The inflation rate has been on a consecutive decline and the current rate cannot be compared to the rate exhibited 30 years ago because as the economic growth rate increases, the inflation rate decreases substantially.
What are Costa Rica’s dominant industries and or corporations, and who controls them?
The main industries in Costa Rica encompass electronics, agriculture and tourism. This is because exports from these key industries contribute largely to the high GDP attributed to Costa Rica. Tourism contributes $1.92-billion to the GDP every year and it is regarded as the largest fastest growing industry in the Costa Rican economy. From 1995, it became the highest earner of foreign exchange for the country. This vast industry is developed and regulated by the Costa Rican Board of Tourism, which came up with Certification for Sustainable Tourism Program in 1997 with the aim of enhancing sustainable use of the natural resources under the tourism industry (Mitchell & Pentzer, 2008, pg. 96). Though agriculture’s contribution has been overtaken by the manufacturing contribution to GDP, it still forms a key industry in the economy and it is controlled by the Costa Rican government. Under the manufacturing, the electronics’ industry forms a key industry in the economy and it is controlled by the government owing to the foreign investment that has been injected into the industry.
How would you characterize the present government of Costa Rica (democratic, authoritarian, etc.)?
Costa Rica forms one of the major democratic republics in the world, which is governed through a strong constitution. The country forms one of the most stable economies in Latin America due to the 59 years of uninterrupted democracy that it has enjoyed. This clearly indicates that the Costa Rican government is a democratic government based on the democratic policies that have guided the country for the past 59 years. The government is divided into the three powers of executive power by the president, judicial power by the Supreme Court and legislative power by Legislative Assembly. Additionally, the government is therefore made up of a president, two vice presidents and 57 Legislative Assembly delegates, who serve for a four-year-term after the elections. Currently, the economy is ruled by Laura Chinchilla Miranda, the first female president to rule the country (Martin & Wasserman, 2008, pg.479). The democratic rule of the government has enabled the country to avoid the violence attributed to other Latin American countries.
What is the trade relationship between Costa Rica and the United States?
United States forms the most important trading partner of Costa Rica. Close to half of the Costa Rican tourism, imports and exports as well as 2/3 of Costa Rican foreign investment can be accounted to United States. Owing to the trade relations between the two countries they have teamed up to protect the tropical resources in Costa Rica while preventing environmental degradation, with the aim of eliminating the barriers that can compromise their trade relations. For the conservation and protection of the tropical forests in Costa Rica, United States decided to reduce the Costa Rican debt in 2007 under the Tropical Forest Conservation Act (Mitchell & Pentzer, 2008, pg. 114). This did not only improve their trade relations but also enhanced the environmental protection of natural resources in Costa Rica. USAID has been assisting the Costa Rican government in the stabilization of its economy since the 1930s with the aim of protecting the US trade interests in Costa Rica. Most of the tourism that contributes to the Costa Rican tourism industry originates from America hence strengthening their trade relations.
Though the Costa Rican economy has been on the rise for the past few years, it was subjected to a decline in 2009, from which it recovered to attain a GDP of $48.63 billion in 2010. The country’s inflation rate has been on the increase such that it should be control for economic growth to be elevated substantially in the country. The current public debt of Costa Rica stands at US$3.5 billion. The gap between the public debt and the revenue level of the country is minimal which asserts that the country should ensure that its economic growth increases to cater f for the public debt. The main earner of revenue for the country is exports, which culminate from electronics, agriculture and tourism industries. The industries are controlled by the government. For the past 59 years, the country has enjoyed democracy, which ascertains that the Costa Rican government is a democratic government. Costa Rica’s main trading partner is the United States, therefore depicting the strong trade relationship between the two nations. Costa Rica is therefore one of the strongest Latin American economies.
Assignment 2: Comparing Economics
In terms of nominal GDP, Costa Rica stands at $48.63 billion, Argentina stands at $351.015 billion, and Peru stands at $267.00 billion, Brazil stands at $1.574 trillion while Guyana stands at $4,877 billion. In this case, the largest economy out of the five countries encompasses Brazil that is followed by Argentina, Peru, Costa Rica and finally Guyana. The poorest country out of the five countries is Guyana owing to its low GDP (Books Llc, 2010, pg. 79). The GDP growth rate of Brazil amounts to 8.8%, that of Guyana at 2.3%, Peru at 9.00%, Argentina at 0.9% and Costa Rica at 3.8%. This asserts that though a country like Argentina has a high GDP, its growth rate has been on the decline over the past few years (Books, LLC, General Books LLC, 2010, pg. 103). The GDP of Brazil can be easily compared to its growth rate because the growth rate remains high even though the growth rate of Peru is very high.
All the above countries when compared to Costa Rica show that, Costa Rica in terms of GDP and Growth rate has to work hard to ensure that its GDP and growth rate increases at substantial rate so that it can compete economically with such countries as Brazil and Peru (Figueroa, Adolfo, 2009, pg. 39). Argentina has an inflation rate of 10.2%, Brazil of 4.44%, Peru of 1.8%, Guyana of 5.2% while Costa Rica has an inflation rate of 8.3%. This clearly indicates that apart from Argentina, Costa Rica has the highest inflation rate among the other four countries. This means that the country should work towards acquiring an inflation rate like that of Peru. The reason why Peru has a high economic growth rate is its low inflation rate (Miller et al, 2010, pg. 59). This clearly indicates that in terms of GDP, growth rate and inflation level Peru is the best between the five countries. Apart from Argentina, inflation in all the other countries has been on the decline for the past few years and this should be the trend that Costa Rica assumes in its economic venture to ensure a substantial growth in GDP, economic growth and reduction in inflation.
Books, LLC, General Books LLC. (2010). Economy of Argentina: Economic History of Argentina, Economy of Argentina, Argentine Currency Board, Rogelio Frigerio. New York, NY: General Books LLC.
Books Llc. (2010). Economy of Caricom: Economy of Guyana, Economy of Suriname, Economy of Belize, Eastern Caribbean Central Bank. New York, NY: General Books LLC.
Figueroa, Adolfo. (2009). Capitalist Development and the Peasant Economy in Peru. London, UK: Cambridge Univ Pr.
Martin, C. E., & Wasserman, M. (2008). Latin America and its People. New York, NY: Pearson Longman.
Miller, F., P., Vandome, A., F. & McBrewster, J. (2010). Gross Domestic Product, Purchasing Power Parity, Cairns Group, Manufacturing, Mercosur, World Economic Forum, Competitiveness, Multinational Corporation, Economic History of Brazil. Virginal-Samme, BE: Alphascript Publishing
Mitchell, M. T., & Pentzer, S. (2008). Costa Rica: A global Studies Handbook. Santa Barbara, CA: ABC-CLIO.