According to World Vision, poverty is a severe lack of certain possessions which significantly reduces the quality of a person’s life. People living in poverty struggle to meet basic needs, including having limited access to food, clothing, healthcare, education, shelter and safety. People affected by poverty may also lack social, economic, political or material income and resources. In this case, Cost Rica, who have a total population of 4.85 million people, have about 1.1 million residents who are living in poverty, which is around 22% of the entire country. This is something that surprises many people, tourists especially, as those who wish to travel there, see the place as mostly a tropical getaway. Yet for Costa Rica, poverty isn’t a strange phenomenon. Back in 1982, as much as 48% of those living there had been plagued by poverty, but has since reduced by a fair amount.
Costa Rica had its worst economic crisis in many years, where at the beginning of the 80’s, their economy saw a contraction by 9.4%, with inflation reaching in incredibly high level of 90.1%. At the same time, the amount of people living below the poverty line increased dramatically by 20% to 54%. The contributing factors behind this include; replacing the industrial imports with production within their own country, which led to having the government overwhelmed by financial distress because of the inefficiencies of their businesses. It is important to focus on recent statistics of Costa Rica to get a better scope of their situation. In 2011, 15% of Costa Ricans lived in extreme poverty, while income fell by as much as 7%. The province of Guanacaste saw 22% living in extreme poverty. Even though from 2014 to 2015 their poverty rate dropped from 22.4% to 21.7%, the amount of extreme poverty rose to 7.2% from 5.8%, being the highest percentage since the early 50’s.
Carried out by the Nation Institute of Census and Statistics (NICS), the National Household Survey has stated in 2018 that poverty in Costa Rica had increased by 1.1% from the previous year, alongside this. The vice minister of Treasury Noggi Acosta has stated: “We are now seeing the consequences of not making decisions, poverty grows, unemployment grows, there’s deceleration of the economy and a raise in the interest rates. This is why the approval of the fiscal plan is crucial to fight poverty and to generate trust in the market to have economic growth, if we don’t make decisions soon the consequences will be inflation, devaluation and the loss of trust in the market, conditions that could worsen our situation”.
In their report, the NICS have outlined their reasons as to why poverty has been so prevalent in Costa Rica. One main reason why is due to the decrease in the amount of money independent workers have earnt from 2017-2018. Their poverty index, which is a way of calculating the percentage of people in poverty in a given country, had increased from 20% in 2017, to 21.1% the next year, as stated previously, which translates to 1,142,069 people in the country having poor standards of living, having to deal with the conditions of poverty, while 360,783 were living in extreme poverty. Guanacaste has and still is one of the most affected regions, where 26% of families could not cover their most basic needs, while in 2017, the figure had been 22.4%.
The minister of Treasury further added: “The situation of the country is serious and we have been warning for months of the importance of accepting the fiscal plan, not just because it generates additional income but because it also generates trust, if we don’t manage to generate trust it will be very difficult to generate employment and investment and its employment that will allow this group of families to pull through”.
Even though Costa Rica have been experiencing sustainable rates of economic growth and development as of recently, they haven’t really been able to reduce the poverty rate over the last couple of decades, where currently, the rate has been relatively stable around 21%, unable to be reduced to below 20, which is what the government has been and still is trying to achieve through various policies. These poor social indicators are apparent due to having said programs come in many numbers trying to fight it, but at a high cost. For instance, in 2010, their government spent 2.2% of the total GDP in a staggering 44 anti-poverty programs, which does not include all other hefty benefits programs including; healthcare insurance provided by the government and social security. The Economic Commission for Latin America and the Caribbean, have stated that Costa Rica’s social expenditure is sitting at one of the highest in Latin America from their GDP. This illustrates the fact that the country needs a new type of model that supports economic growth, where at the same time, does not diminish the living standards of the population.
Well know policy analyst in the Latin-American region, Juan Carlos Hidalgo, has constantly argued about how the large gap between the amount of spending power there is and the high rate of poverty in the country is mainly due to the overinvestments the government has been partaking in, in terms of their export economy. He also contended that many organizations have tried to apply tax and trade policies that would help export-based sectors, thereby increasing the inequality between both the rich and poor people. However, to begin this process, Hidalgo has stated that Costa Rica must implement a neutral exchange rate, which would encourage new entrepreneurship, stimulating the sentiment of businesses and individuals.
Aside from attempting to recover their poverty rate through economic reforms, the government is trying to make a substantial effort at reducing the rate of poverty in the country through a ‘Bridge to Development’ plan, which was released in March of 2015. This plan will try to link Costa Rica’s many spending programs for their social sector and turn it into one welfare system in which all families are able to apply for various types of aid at the same time, some of which include; pensions, food subsidies and scholarships. Although this plan may not end up increasing funding for social spending, it will definitely assist families who are less fortunate to access all the resources that they need for survive, without having to worry about never obtaining it due to the high amounts of money they’d have to pay. The program will certainly represent a positive change in the way that the government treats the issue of poverty in the country, since the problems are not caused by how much money is being spent on things, but rather how the money that’s spent is organized and which areas of interest are being focused on for those funds to go to.
The former president of Costa Rica, Luis Guillermo Solís, had his administration launch a specific poverty reduction plan launch back in 2015, where it was aimed at pulling as much as 54,600 plus families out from living in extreme poverty. As mentioned previously, this also encompasses the Bridge to Development plan, where it would try to combine all of the welfare programs, they had at the time into one system, catering to the needs of all the families who needed it most. In total, eight different public agencies and social aid programs assisted in getting this plan up and running, as well as contributing to the contents of the plan itself. The Costa Rican government targeted as much as 60% of families under this program, that have a monthly income of around U.S.D. $130. This is the level of income where families are assumed to not have the financial capability to afford their essential needs, such as a meal to eat every day or even a roof over their heads, which is something that the NISC have set standards for. The Mixed Institute for Social Aid (or IMAS), one of the eight agencies which are overseeing the plan, have assigned 160 officials, which were responsible for coming up with the target of 54,600 families. They are also the ones that will establish what the most essential needs are of each of the families, as a way of properly organizing their aid programs. On top of this, the IMAS would also be obligated to periodically check in on the progress that the plan has made, and evaluate if whether or not more or less effort would need to be made.
Additionally, the plan also aims to have all of the government benefits come together into a single welfare system, just like the social welfare system brought up beforehand, called ‘The Unique System of Beneficiaries’. With this system in place, all benefits will be set for food subsidies, pensions, health insurance and training programs, as well as a plethora of other types of aid listed in the system. At the time of plan being created, aid had been distributed to as many as 30 different programs, which have been directed by 20 other agencies. A side not to this program is that from a technological standpoint, it takes information from each family member, storing it into a new information system so that all programs for aid, are able to access this information quickly and without hassle. The added benefit is that it will help families avoid getting the same amount of funds from the same program, avoiding income disparities. The government doesn’t have a system that is able to figure out when individual members of a family are able to apply for the same program, which is a situation that has left room for substantial exploitation, which president Carlos Alvarado has spoken about.
Those families that have been chosen for the aid programs must follow the rules and all requirements that the plan has set out, with most important being to enroll in training programs, taking advantage of scholarships for the education of their children, as well as expanding upon their financial and social standpoint, as their entitled to. The government has highlighted the fact that they will also give a monthly salary of up to $140, to those families that follow along with what they have asked to do. Alvarado mentioned that the program doesn’t mean that there will be an increase in spending for social programs, since it’ll be funded using the same resources that have been used for the Social Development and Family Allowance Fund (or FODESAF). That fund was set at $1.1 billion, which accounts for 2% of their total GDP. To measure poverty levels, they have also stated that they will use the Multidimensional Poverty Index (MPI) as the main tool, making it easier for them to draw up a more accurate figure down the line, as it focuses on 20 different indicators. The main target for the Costa Rican government, was to have the level of poverty for disadvantaged families be reduced to around 40,000 by the time the former president’s time in office had been completed, that being 2018.
The government have said that their other main focus would be on public investment, private investment, personal finance and professional development. All quintessential items for their economy to grow at a sustainable rate while keeping all other things uncompromised into the future, as to not spark any future calamities. President Alvarez has given a basic overview of what the plan will include, and they are as follows:
- Public investment. Their government has high hopes that their investments of up to $3 million dollars will improve road infrastructure and resources involved in the construction of buildings. New public hospitals will be provided for the people, as well as many schools and even aqueducts across the country.
- Private investment. Their investment in this area will most certainly create jobs for those looking for work, and will be facilitated and promoted as much as possible. It also entails regulations which will bring many benefits to businesses on a smaller scale, as well as their agricultural sector also be given similar benefits. Down the line, the cost of energy will be greatly reduced.
- Personal finance. They have promised that they will support a law that’ll limit the amount of interest that credit card companies can charge its consumers, protecting all people and encouraging them to borrow more.
- Professional development. Is very important for the government, as they aim to create more jobs through a dual education legislation and through the expansion of scholarships. Almost a year ago, the current president and Costa Rica’s legislative assembly had approved of a tax reform that’s been deemed controversial to many, as their goal is to keep their ever-expanding fiscal deficit in control. A few months later, in the beginning of July, 2019, the regulations have gone into effect
Although it is difficult to estimate the amount of people currently living in poverty due to the volatility of their poverty rates, most recently, 21.1% from 20.5% indicates that around 10,000 plus people in the country have been living in poverty. On a positive note, the National Statistics and Census Institute (NSCI) have stated that their inflation rate has been steady over the past decade falling more than it has been rising, at the moment their rate has been fluctuating between 2 and 3%, indicating that growth is steady. On top of this, they are one of the few countries in their region to have poverty rates be significantly reduced. GDP per capita has been constantly increasing as well over the years, where they are situated at just below $12,000.
As of recently, the share of the population of Costa Rican’s that have been living on as much as $3.20 a day has been falling since 2005, where 7.7% of people were living in extreme poverty, but has since reduced to 2.7% as of a couple of years ago. This illustrates the fact that Costa Rica’s plans to thrive economically has been working towards reducing poverty and inequality in their country, where to this day, have become one of the most thriving Latin American countries. Still though, their needs something that’ll specifically target the continuously fluctuating rate of poverty, where in the long run, they can keep it stable at a much lower rate.
Ultimately, Costa Rica have been finding themselves in very strenuous times over the last 20-30 years, where poverty has been a constant issue within the country, where the attempts made to lower it or keep it in check have never worked out, along with some economic issues within the country that haven’t helped them achieve this issue. However, their country today has become one of the most developed in the Latin-American region, but their poverty rates have been fluctuating between 20-25% for the longest time, which is why the government have introduced plans, more notably the ‘Bridge to Development’ plan, which will not only improve their stance economically, but also socially, where hopefully, they will manage to create more jobs and reduce the rate below 20% for the first time in decades.