Al Jazeera English, BBC News, OECD, CATO Institute, The World Bank
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Note in English
Costa Rica has been one of the most stable countries in Latin America without military organizations. This system with the "big government", however, is having some troubles.
The country has long recognized worker's and minorities' rights and put much efforts on public services, and moreover many economic sectors were under a state control.
The big role of state in economic sectors, however, put the high burden on public spending, and its external debt was increased when foreign direct investment decreased.
The government first tried to solve this situation by printing money to devalue the national currency and attract foreign countries for business, which increased inflation and poverty rate in the 1980s.
The inflation affected more severely on poor people who typically do not have a lot of savings. This financial downturn made the government consider the introduction of the new economic system.
State-owned enterprises were privatized while the government maintaining ownership in many areas, and the import-substitution system was shifted to an export-oriented model. Although this liberation and reform increased economic freedom and growth, the government's influence on economic sectors remained, and export-oriented sectors were favored. The governmental influence on agricultural sectors was prominent, and the protectionist policy reduced income for the poor while it was beneficial for large producers, such as ones that were backed by the government.
Since those who could not go to school at the period of economic downturn in the 1980s due to the poverty was suffering the lack of skill and opportunities, income inequality in the country, and the necessity of fiscal reform were seen widely.
Without reforming its fiscal policy, Costa Rica has compensated its inequality by putting more money on public services, like education, healthcare, and this is why the country has faced serious debt crisis.
Although the government has attempted to reform its tax system, protests have occurred. Costa Rican government first used police authority against the protesters, but it switched to a strategy to include some of them to hold a dialogue.
Although this strategy failed at first, the consensus system that allows them to design their own ground rules for the discussion by diverse groups, such as labors, churches and women's rights groups.
With this system, Costa Rica has addressed its debt crisis and reform of its fiscal policy.
Now it should be easier to understand the recent news.
