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Assessment
OECD 1999
Real Progress: Fifty Years of USAID in Costa Rica
Just as in the other periods, USAID programmes yielded benefits to Costa Rica.
They paid for study abroad by Costa Ricans, provided advisers in a variety of technical
specialities, and financially supported numerous beneficial activities, such as
family planning and agricultural research. Nevertheless, this period, 1972-81, was
USAID’s least successful in Costa Rica. Most major projects failed to achieve their
objectives. Most involved expanding some government agency and required significant
amounts of counterpart funding from the Costa Rican Government. With
severe budgetary constraints during 1980-82, counterpart funding was often not
forthcoming, and the programmes were implemented with substantial delays. In
addition, projects were usually built with the expectation that government agencies
carrying out activities would be restructured into more dynamic “change agents”.
Such optimism usually led to disappointment, as projects added responsibilities
to government agencies already unable to carry out their mandates.
Although the USAID activities during this period were harmonious with Costa
Rican government priorities, they suffered from two strategic shortcomings. First,
the diagnosis of which activities deserved support was ill suited to Costa Rican realities.
The Costa Rican development path had been inclusive and broad-based, and
already a plethora of government institutions aimed to reduce poverty. The country’s
principal development challenge was to ensure rapid and sustained economic
growth. 8 Second, by the end of the decade, USAID failed to understand the implications
of the country’s rapidly deteriorating finances. Emerging fiscal shortfalls
were sure to compromise new social investments.
USAID and US Embassy officials who worked in Costa Rica during this period
have argued that USAID resource levels were too low to make the Agency a player
in economic policy, and the Mission accordingly took little interest in such matters. 9
Moreover, the conventional view of development experts was that major changes in
economic policy were not essential. Nevertheless, the USAID Mission could have
undertaken steps to protect USAID programmes from the impending financial collapse.
More ambitiously, the Mission might have either actively promoted changes
in government policy or stopped providing financial support to Costa Rica.
Macro-economic restructuring/reactivation (1982-92)
Despite usually favourable coffee prices in the late 1970s, the country was borrowing
heavily from abroad to finance its deficits, induced by oil prices. This unsustainable
policy became unmanageable in 1979, when Eurodollar interest rates (on
which a significant amount of Costa Rican borrowing was based) rose rapidly from 6%
to 19 per cent. World prices of Costa Rica’s major exports also fell sharply after 1980
and did not recover for more than a decade. By 1981, severe external payment imbalances
were evident, and Costa Rica suspended payments of its international debts.
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