Jeoffrey Guillemard/Haytham-REA/Redux

Letter from Costa Rica


charles castaldi, a former NPR correspondent who lives in Nicaragua, is a frequent contributor to the Milken Institute Review.

Published October 28, 2019


Costa Rica is often called the Switzerland of Central America — a cliché, perhaps, but not one to be casually dismissed. Its reputation is anchored in the reality that, unlike its near neighbors to the north, which are crushed by corruption, violence and material want, Costa Rica is a prosperous, relatively stable society with much to be proud of.

When, earlier this year, I crossed from Nicaragua into Costa Rica by car, I was reminded of crossing from Italy into Switzerland in the bad old days of the 1970s. Chaos, corruption and trash on the Nica side — you need to “oil” the bureaucracy if you’re not willing to cool your heels in line at the border — while order was taken for granted on the other. And yet Switzerland it is not.

Clouds in the Forecast

Costa Rica has a stellar public education, universal health care, a truly enlightened environmental policy — and a longer life expectancy than the United States. All of this is made possible by democratic institutions, a rarity in this part of the world.

But look closely, and you’ll note that trouble is brewing. Democracy in Costa Rica (as in much of the world) is increasingly suffering from rising populism and political fragmentation.

In the first round of voting in 2018’s presidential election, a Christian fundamentalist preacher named Fabricio Alvarado almost beat a center-left candidate confusingly named Carlos Alvarado. Even though the progressive Alvarado trounced his namesake in the second round, the election was the death knell of the traditional two-party system. Going forward, populists will likely have greater traction, since the centrist parties will be forced to form coalitions with fringe groups.

The economy also faces trouble. Policymakers are finding it ever harder to control the government budget deficit, while too many Costa Ricans have mirrored the government’s lack of willpower by miring themselves in personal debt. Unemployment, though lower than elsewhere in Latin America, has inched up to 12 percent. And a disquieting 40 percent of the labor force is working in the informal — that is, untaxed, unregulated, mostly underpaid — sector. Poverty is also moving the wrong way, now officially at 21 percent, as is the gap between rich and poor.

Last, but by no means least, is the distraction of immigration, a theme now so familiar to Americans. But unlike their benighted Latino neighbors just to the north, Costa Ricans are disinclined to emigrate — and when they do, they generally do so legally. Costa Rica is, however, the largest recipient of immigrants in Central America. They now constitute 10 percent of the population, with three-quarters of them from Nicaragua.

After a popular rebellion in Nicaragua in April 2018 was brutally put down by President Daniel Ortega (killing more than 300 protesters), some 70,000 Nicaraguans sought refuge in Costa Rica. That race for the exits is straining their southern neighbor’s traditional open-door policy.

The Creation Story

Even with these challenges, Costa Rica still stands out as a development success in a part of the world that hasn’t enjoyed much of it.

From the very beginning, Costa Rica was quite different from its regional neighbors. Start with its name — “rich coast” — bequeathed by Spanish conquistador Gil Gonzales Davila. After he encountered local Indians decorated in ornate gold jewelry (which he promptly stole), he assumed there must be more where that came from.

He was wrong. There was no gold, no silver and, worse for a conquistador, there were few heathens to use as slaves on large plantations. In Costa Rica, settlers had to work their own land, which meant the country was (benignly) neglected by the Spanish interlopers. The concept of building sweat equity was never attractive to conquistadors, who were more the get-rich-quick type.

What did develop was an agrarian society with land holdings less unevenly distributed than in much of the rest of Latin America, where coffee production tended to concentrate wealth. Then, at the end of the 19th century, an American railroad engineer created the United Fruit Company, which, by dint of its local monopoly, would have made Costa Rica yet another banana republic were it not for peasant push-back against low wages and the labor unions that subsequently gained a toehold.

In 1948, MIT-educated Jose Figueres Ferrer led a revolt against the mili-tary’s interference in a presidential election. After a 44-day civil war, he formed a government and abolished the military, making Costa Rica one of the few countries on the planet to lack a standing army.

But what really set Cost Rica apart took place in 1948, when an MIT-educated politician named Jose Figueres Ferrer led a revolt against the military’s interference in a presidential election. After a 44-day civil war, Figueres formed a government and abolished the military, making Costa Rica one of the few countries on the planet to lack a standing army. Figueres served two nonconsecutive terms as the democratically elected president, and he’s regarded as modern Costa Rica’s founding father.

Middle-Income Blues?

To get a better sense of the challenges the country faces, I braved San Jose’s traffic to drive west to the Center for High Technology, a very modern compound in a seriously challenging urban environment. Over the years, San Jose has spread east in a rather narrow valley with no hint of planning. A route of only a few miles on a map, it has become a lengthy crawl through circuitous one-way streets and bumper-to-bumper traffic.

There, I met with Jorge Vargas Cullell, an American-educated political scientist who directs a think tank that regularly produces a wide-ranging analysis of Costa Rican society called the State of the Nation. Vargas is worried that three factors put Costa Rica’s island of progress in a subcontinent of instability at risk. First, chronic public debt casts a shadow over the country’s fiscal health — this in spite of the Alvarado government’s success in imposing a value-added (sales) tax and in trimming tax breaks for business.

“Even though Costa Rica has experienced economic growth of 4 percent for many years, it hasn’t been able to extract the necessary revenue from that growth,” he laments. “Unlike many developed countries, we [still] don’t have a robust tax system on wealth and income. In the Latin American tradition, we either taxed foreign commerce or created monopolies, like electricity, communication, tobacco and liquor, to gather revenue.”

Costa Rica, for its part, is attempting to fund a social democracy on returns from state-owned monopolies. “The problem is that this creates distortions in the market,” he says. “And were we to open these markets up to [efficiency-enhancing] competition, we’d lose some of the revenue these giant entities produce.”

The other problematic element, Cullell says, is the health of the social security system. “It’s OK for the moment. But if the economy is not creating new jobs, or if more people are slipping into the informal sector, then you’ve got a problem.”

It’s a dilemma facing many countries that want and need generous social programs, yet lack the political will to pay for them. “Can our country sustain the edifice it has constructed?” he asks rhetorically. “It is an impressive edifice that includes universal health care and free education up to the university level, but it’s becoming increasingly expensive, inefficient and bogged down by a calcified bureaucracy. And if you’re going to reduce its size, what are you going to cut?”

He points out that Costa Rica has what economists call a dual economy: “One economy is a vibrant, technologically advanced sector aimed at exporting that has the capacity to adapt. In fact, over the past five years Costa Rica’s main exports have shifted from electronics components to medical devices.”

“The other is aimed at local markets and has low productivity,” he continues. “It’s heavily dependent on state subsidies and employs the majority of informal workers. We don’t have minerals or petroleum. We don’t have much territory, and over one-quarter is [environmentally] protected, so we can’t do large-scale agriculture.”

So what’s left? “We have a good location,” he says. “We have great biodiversity, which we are preserving. We have educated, productive people, so we can do biotech, which is happening. -… Intel is here, doing R&D. We can be a hub for all sorts of businesses. We can add value.”

But, he warns, the government is anything but agile — something businesses complain about endlessly. The government “also needs to address the rising homicide rate, which is tied to a drug trade that uses Costa Rica as a logistics center,” he says. “If the state is unable to respond, it becomes quite vulnerable, which I’m afraid is happening. The way I see it, we have a 30 percent chance of doing things right in the future.”

That evening, I spoke to President Alvarado at a reception for writers and journalists. Alvarado was a novelist and academic himself before entering politics. “Even with the polarization that we are experiencing, we’ve been able to undertake important fiscal reforms,” he reminds me. His take on the country’s biggest challenge (which sounds eerily familiar to the one facing higher-income countries): “Creating good jobs and making sure the economy serves all.”

The Other Side of the Tracks

The following day, I visited La Carpio, a neighborhood widely considered the poorest and most dangerous in Costa Rica. To get there, one has to brave the length of the San Jose sprawl, pass the airport and follow a ridge road to what is essentially an island of malaise abutting the city’s landfill and bounded on two sides by polluted rivers. The narrow road is the only way in and out, and often — as was the case that morning — buses and trucks choke the approach as they play an advanced version of transportation chicken.

The trash, the houses made of everything from cinder block to cardboard, the pervasive poverty, seem more like something one would find in the countries north of Costa Rica. In fact, this is a neighborhood in which a large percentage of the residents consist of immigrants from Nicaragua.

Charles Castaldi
The trash, the houses made of everything from cinder block to cardboard, the pervasive poverty, seem more like something one would find in the countries north of Costa Rica.

I went to La Carpio to meet Gail Nystrom, an American who has spent two decades running the Costa Rican Humanitarian Foundation. In her office on the second floor of a decrepit building next to a general store, she was speaking to Francisco Rios, an ex-Contra fighter (in other words, a CIA-backed rebel in the Nicaraguan civil war back in the 1980s). Rios was asking if she could get him a job, or at least money for food. She gave him some change and told him to come back the following day.

“I fought against the Sandinistas in the 80s,” he grumbled. “I was fighting for democracy. And now I’m in the same situation. Unbelievable!” He said his son went missing after taking part in the protests last year. He found him hiding out here in La Carpio a few months ago.

“I see cases like this every day,” Nystrom says. “It’s very frustrating, because there’s only so much I can do. So many people have come in the last year that it’s overloaded the system.”

In fact, there are Nicaraguans sleeping on the streets, in parks. Some are students who took over their universities and had to escape after they were dislodged by armed paramilitary forces. Those who didn’t make it out of Nicaragua were arrested and imprisoned.

Nystrom takes me to the lunch room, where some 30 refugees are chowing down on free rice and beans. They represent all three waves of Nicaraguans who have washed up in Costa Rica. A few older women came in the 1980s to escape the leftist Sandinista revolution. Then there are slightly younger men and women who came in the couple decades that followed, largely to escape poverty and drought. Finally, the latest wave, mostly men, were active in the recent rebellion against the dictatorial rule of Daniel Ortega and his wife, Rosario Murillo.

Most of the men in the group complain they can’t get jobs, that the temporary work permits they were given by the Costa Rican authorities aren’t worth the paper they’re printed on. In spite of Costa Rica’s open border policy, life for refugees is hard: to date, only 24 Nicaraguans have been granted permanent status, out of 34,000 petitioners.

Without residency cards, the men say, no one will give them jobs. Nystrom tries to explain they have to be patient and keep trying. “Also, you have to present yourself well,” she counsels. “You have to show them that you’ll be responsible, that you can be trusted.”

The political landscape has changed. We have to defend democracy, which too often we take for granted. After the last election, we’re seeing things we’ve never seen before.

Nystrom’s stance reflects the heightened tension in Costa Rica around the issue of refugees. In August of last year, protesters attacked Nicaraguan immigrants who had been camping out in La Merced Park in San Jose. Even in my brief time in Costa Rica, it wasn’t hard to find people who expressed fear that too many Nicaraguans are arriving. It’s a fear that’s being stoked by the opportunist right — much as it has been in the U.S. and Europe.

The following day I went to the Legislative Assembly, where I ran into Carmen Chan, part of a new crop of 30-something deputies, many of them women, who won seats in the last election. She’s an architect and a conservative evangelical Christian who is an active critic of the government on social media. Chan’s a member of the National Restoration Party, which got a big push after the Inter-american Court of Justice ruled that the Costa Rican law prohibiting gay marriage was unconstitutional. In conservative Costa Rica, opposition to gay marriage almost won her party the presidency.

“This president is not serving the Costa Rican people,” she tells me, referring to Alvarado. “He is putting LGBT rights above needs of the country. No one is fooled by this administration.”

The list of criticisms she launches at the president is long indeed, and includes zingers like: “It’s shameful that the PAC [the president’s party] renders homage to a pedophile.” This, in reference to feminist icon Simone de Beauvoir, who apparently did endorse a call by French leftist intellectuals to abolish statutory rape back in 1977. When I ask Chan about her criticism of feminism, she’s quick to correct me: “I’m a real feminist, a professional woman who was elected to this assembly. The so-called progressive feminists don’t represent the majority of women.”

These days, she seems to be in a daily Twitter storm with another 30-something deputy, Paola Vega, who’s on the other end of the political spectrum. In fact, one could say that Vega is the Costa Rican version of Alexandria Ocasio-Cortez, making ample use of social media to attack conservatives like Chan, promote green policies and even take on the Catholic Church on abortion and LGBT rights.

Conservatives love to hate Vega. “I don’t know if it’s good strategy or not to confront the church on these issues,” she says. “But it’s got to be done. It’s completely anachronistic that we’re the only country on the American continent that has a state religion.”

Vega agrees that the gay marriage issue empowered the conservative Christian parties. “It gave them the excuse to paint the picture of a coming moral apocalypse,” she says. “Sodom and Gomorrah in Costa Rica.”

“These are parties that not only reject gay marriage, but deny that there is man-made climate change. They appear more and more to resemble the most conservative wing of the Republican Party in the U.S.”

“I have a way of doing politics that is not typical here,” Vega adds, “where it’s all about avoiding confrontation,” repeating a theme I hear over and over again. “So for some people the fact that I’m a woman, I’m young, I’m not religious and I talk about environmental issues, gender equality, et cetera, makes me a target.”

AP photo/Arnulfo Franco

In spite of the polarization, Costa Rica’s legislature hasn’t suffered the gridlock one sees in the U.S. As President Alvarado noted, it did pass a value-added tax on some goods and services and increased capital gains taxes on real estate sales. The VAT, however, triggered a protest by truck drivers, who blocked highways.

Other protests followed, in some cases fueled by false information disseminated by opponents of the administration. Conservative students took to the streets protesting what they apparently perceived as mandatory LGBT celebrations in educational centers — a four-Pinocchio lie — and the creation of gender-neutral bathrooms. (The latter, by the way, was a suggestion made by the Education Ministry, not a law.) A video even appeared online with masked men proclaiming an armed struggle against an elected government they said had betrayed the Costa Rican people. The men were identified and arrested shortly after it appeared.

All of this is hardly the undoing of Costa Rican democracy. But it is a sign that the political landscape has changed. As Vega puts it: “Here in Costa Rica we have to defend democracy, which too often we take for granted. After the last election, we’re seeing things we’ve never seen before.”

The First Green New Deal

Any avid bird watcher will tell you that high on his or her bucket list is the resplendent quetzal, whose name does only partial justice to the iridescent blues, greens and reds that color this bird — not to mention the green of a tail that can be two feet long. Seeing a quetzal used to mean going into the Central American cloud forests and spending weeks looking, with a good chance of coming up empty. I thought I saw one fleetingly many years ago while accompanying soldiers during the so-called Contra war in Nicaragua — hardly a recommended experience for birders.

Chris Fredriksson/Alamy Stock Photo

A few months ago, however, it only took a couple hours’ car ride southeast of San Jose to see a number of these birds in the Los Quetzales National Park. It’s a good example of how Costa Rica has monetized its commitment to environmental protection. One arrives at a lodge a few miles off the main highway, where you spend money in the restaurant and on a room if you’re staying the night. Then you pay for a guide to take you to the quetzals. The guide is in touch with farmers in the area who tell them if there are quetzals around.

The quetzal network really works. After a short ride through the cloud forest, the guide stops at a small farmhouse, where the owner, Francisco Hernandez, leads our group up a hill to wait among laurel trees. (Laurel is a favorite food of these magical birds.) In a matter of minutes, the first of a series of males and females are spotted, ogled and photographed.

“I’m making way more money with the birdwatchers than I ever did with berries and vegetables,” Hernandez says. “I know which trees the quetzals like to feed in, so I’ve planted more. Many other farmers in the area are doing the same thing. Now there are few days where people don’t see quetzals.”

The lodge has installed nesting boxes on Hernandez’s land, and he gets paid when the tourists make a sighting. The local farmers have stopped cutting down the forest: they now realize it’s worth more as habitat than as cleared land for farming. It’s a good-news story, a story that repeats itself in much of the country, and serves as a welcome reminder that Costa Rica really isn’t going to hell in a hand basket.

To fully appreciate what the government has accomplished, it’s worth pointing out that a few decades ago, Costa Rica had the highest deforestation rate in Latin America, reaching a peak of 153,000 acres a year in the early 1990s. By then, one-third of the country had been converted to farming and grazing. Today, Costa Rica is a global leader in reforestation: more than half of the cleared land has been reforested, and as the political scientist Cullell notes, one-quarter of the country is now officially in environmental protection zones.

One of the architects of Costa Rica’s environmental policies is Carlos Manuel Rodriguez, vice president for conservation policy at Conservation International and the country’s former minister of environment and energy. “The success that Costa Rica has had in conservation is related to the success it’s had in human development,” Rodriguez says. “When my grandfather was born at the beginning of the 20th century, Costa Rica was poorer than Haiti, Nicaragua and Honduras. When I was born, the per capita income in Nicaragua was double that of Costa Rica’s, and half of Costa Rica’s GDP was generated by the agriculture. Today, it’s less than 7 percent.”

You can’t expect to sustain environmental quality if you have high levels of poverty. But, in the case of Costa Rica, you probably can’t reduce poverty without sustaining environmental quality. “The difference was to make conservation into an engine for economic development,” Rodriguez says. “We put the conservation agenda front and center because we saw that putting areas under conservation made economic sense. That’s where tourists go, and where the water for hydroelectric power comes from.”

Forest preservation gets a big boost from incentives to landowners, both large and small. “If we just prohibit cutting, you’re going to get it illegally,” he says. This is very much the case in most Latin American countries, where deforestation is rampant in spite of draconian laws intended to control it.

You can’t expect to sustain environmental quality if you have high levels of poverty. But, in the case of Costa Rica, you probably can’t reduce poverty without sustaining environmental quality.

“If you give people an incentive that is greater than the opportunity cost in cutting down the forest, as we’ve done here, then you’ll stop deforestation,” Rodriguez argues. “And we don’t need to be policing this. The market does that for us.” When a financial push is needed, the incentives are paid for mostly by taxes on fossil fuels used in transportation.

I ask if there is a contradiction in his former role as minister of the environment as well as energy and mining. “On the contrary,” Rodriguez says. “At the end of the day, you’re working with natural resources, some of which are renewable and some [of which] aren’t. By keeping them divided, you just create conflict among interest groups and contradictory public policy.”

In 1986, when Costa Rica integrated the energy and environmental ministries, 40 percent of electricity was generated with fossil fuels. Today, almost all power generation is with renewables. The challenge is in transportation. The government wants to mandate 40 percent electric vehicles by 2030, and it also wants to take one million cars off the road.

The government’s critics argue that the cost of ambitious decarbonization is too high for a middle-income country like Costa Rica. Rodriguez isn’t short on responses. “We look at the cost of importing fossil fuels, the gridlock that private vehicles cause, the health issues, and we estimate these costs to be over three billion dollars a year,” he says. “Decarbonizing is going to open the door to a new paradigm of development, just as getting rid of the armed forces thrust my grandparents into a new era.”

• • •

Americans chafe at the specter of refugees streaming in from Central America, but are disinclined to focus on the causes — or the perverse incentives created by cutting U.S. aid to countries battered by poverty, climate change and organized violence. It would behoove us all to take a closer look at Costa Rica.

To be sure, it isn’t Switzerland with palm trees. But Costa Rica’s ambitions to provide a good life for its own citizens without turning a cold shoulder to less fortunate neighbors is a model we might well imitate.

main topic: Region: Latin America
related topics: Development