The successes and shortcoming of Costa Rica exports diversification policies
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Costa Rica is often cited as an example of a small and open economy that is lauded for its relative economic stability and a long democratic tradition. In the wake of a severe economic crisis in the 1980s, Costa Rica abandoned a development model based on import substitution industrialization, and started implementing new policies fomenting export growth, export diversification and the attraction of foreign direct investment. The results of this economic transformation were quite visible in the industrial sector, with major international investments from capital–intensive firms (e.g. Intel), and the significant increase of the share of the manufactured goods exports to total exports. There were also very visible changes in the agricultural sector, namely the loss of economic importance of traditional export commodities (e.g. coffee and bananas), and the emergence of the pineapple and food processing industries. This new export–oriented economic development model has resulted in economic development and increases in the average income of the overall population; however, while there was a reduction in poverty for the past decades, income inequality has persisted. The latter fact may be an indicator that future export fomenting policies need to be more inclusive and take into account the distribution of future economic prosperity.