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OECD 1999
Real Progress: Fifty Years of USAID in Costa Rica
Social tensions in Uruguay gradually mounted through the 1960s; conflicts
became more open and hostile, leading to a significant guerrilla movement in
opposition to the government. This was followed by repression, a military coup in
1973, more political repression, political prisoners, torture, and exiles. Democratic
rule was finally restored in 1985, after 12 years of military rule. Sustained economic
growth occurred neither during the years of military rule nor in the decade since,
and economic and social conflict continues to characterise the country.
Rottenberg’s study was based on data through 1985; it predicted a poor economic
future for Costa Rica, going by “striking” similarities in the public policy
regimes in the two countries. Both offered extensive protection to their domestic
manufacturing sector, both taxed the rural sector for the benefit of urban dwellers,
and both redistributed income significantly through a variety of public means,
including public employment and redistributive (and unfunded) social security
systems. The main difference between the two countries, in Rottenberg’s view, was
when the policy sets were initiated. Uruguay’s policy set, adopted gradually in the
decades after 1918, produced stagnation from the early 1950s onward. Costa Rica
adopted the same policies gradually after 1948 and, in Rottenberg’s view, achieved
stagnation in the late 1970s. (In Rottenberg’s model, the rapid build-up of external
debt after 1975 that led to the debt crisis in the early 1980s would have been a
symptom rather than a cause of Costa Rica’s economic problems in the 1980s. The
foreign debt was acquired because the State was seeking to deliver more to the
people than the country produced.)
The Rottenberg study provides one test of the impact on Costa Rica of USAID
assistance during the 1980s: it predicted over-commitment of the State, inability to
provide growing foreign exchange earnings, and an incapacity to adapt to its economic
circumstances. Thus, Rottenberg would have expected the decline in USAID
funding from about USD200 million per year around 1985 to near zero ten years later
to lead to intensified economic stagnation. An overall improvement would have to be
associated with a change in the basic economic model followed by Costa Rica.
Costa Rican history after 1985 did not follow this inevitability, at least until
1996. Perhaps Costa Rican policy makers were wiser than their Uruguayan counterparts,
or Costa Rican citizens more far sighted. Costa Rica is different today because
of the presence of US government economic assistance programmes, among a lot
of other factors. How much different depends on judgements about what happened
and why.
While Costa Rican economic development can be considered a success relative
to other Latin American countries, it is also true that Latin America has
gradually been falling behind countries in East Asia. Figure 11.2 shows a comparison
of GDP growth from 1982 to 1994 for Costa Rica and the four Asian tigers (South
Korea, Taiwan, Hong Kong and Singapore). As noted earlier, Costa Rica’s GDP
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