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Hello. It is my understanding that many of the beach areas have priced themselves out of their mind and have now experienced a dramatic slowdown in sales. In the Central Valley, on the other hand, and particularly in Santa Ana/Ciudad Colon/Escazu, construction continues relentlessly and optimism is in the air. At our project, we have experienced no major slowdown in sales. In fact, out of the 115 residential units, we have sold approx. 65% in 6 months. We now have enough sales to build it out (once we get all of the remaining permits) and sell the rest at higher prices. In terms of rentals at our first project Residencias Los Jardines, we are experiencing very high demand in our area (many multinational corporations have moved here or are about to move their headquarters to our area thus bringing thousands of new employment opportunities to Santa Ana) and have noted that supply is too low. This in turn pushes rental rates upwards. This is why we are also optimistic about our new project Hacienda El Dorado and the prospect of rental income there. As Scott Oliver notes elsewhere on this website, people in the Central Valley are becoming tired of long commute rides and prefer looking for rental options close to their work. Let me know if this answers your question.
I do not know where you obtain your news from, but… See below an article published in La Nacion confirming that according to the international monitors, the referendum has been carried out in order and its results are to be considered legitimate without any question. According to the OAS, “transcurre en completo orden y con gran espíritu cívico”.
OEA asegura que referendo transcurre en completo orden
San José (AFP). La Organización de Estados Americanos (OEA) aseguró hoy al mediodía de que el referendo en Costa Rica para decidir el destino del TLC con Estados Unidos “transcurre en completo orden y con gran espíritu cívico”.
El jefe de la misión de la OEA, el canadiense Paul Duran, dijo que sus más de 80 observadores pudieron constatar que “el proceso se está desarrollando ordenadamente, de acuerdo con lo previsto, y con un gran espíritu cívico”.
“Nosotros instamos a los ciudadanos a que sigan votando, con ese civismo que siempre ha caracterizado a los costarricenses”, declaró en rueda de prensa.
Duran dijo que la OEA tomará en cuenta “en su informe final” las denuncias que se presentaron en las últimas horas de que hubo presiones del gobierno estadounidense para que los costarricenses voten a favor del TLC.
No obstante, es a los costarricenses “a los que corresponde decir si se trata de una injerencia o no”, agregó.
Más de 2,6 millones de costarricenses están habilitados a participar en el primer referendo de su historia para decidir sobre el TLC.
According to the preliminary results that came out today after 8 pm it seems like Costa Rica is voting YES! Congratulations!
Jan
One more thing… The motives behind CAFTA are not merely economic. Free trade which spurs economic growth and boosts tax revenues fosters transparency, good governance and the capacity of governments to act in the interest of its citizens. It is in the interest of the US to ensure that in its backyard — Central America and Latin America — things are stable and peaceful. Besides aid, trade is an excellent tool to promote such objectives.
Nobody can figure out precisely how Costa Rica will benefit from CAFTA but reasonable estimates and projections can be made taking into consideration Costa Rica’s comparative advantages that is (1) paradise-like nature, beaches, volcanoes, mountains, (2) educated, skilled labor force, (3) tropical climate favorable for the production of a wide range of agricultural products that cannot be grown in the US. Other Central American countries may consider rejecting CAFTA in the near future precisely because of the lack of one or several of the above… the lack of which would put them into similar situation as many regions of Mexico, which suffered from the adverse effects of NAFTA which the government was unable to address effectively. I still argue that Costa Rica is in an advantageous situation relative to other Central American countries and as such can exploit its inherent advantages to its benefit.
I know the state of the US educational system but doubt that Costa Rica is bound to follow the same path precisely because of the cultural differences you mentioned… Most Costa Ricans are politically-minded and civically conscious, read newspapers, listen to the radio, watch news on TV and try to seek answers to critical questions pertaining to politics.
I am not sure what makes you think that Costa Rica will benefit from CAFTA in the short term. If anything, the short term benefits are the most difficult to ascertain… In fact, normally, the short term is often marked by an adjustment period in which the market distortions created by long-term barriers to trade which become removed due to the trade treaty implementation… This adjustment is often characterized by short-term adverse effects such as job losses in industries unable to compete with the new competitors. In the medium and long term, however, positive effects of free trade can be more easily identified.
Inflation in the case of Costa Rica is driven principally by rising import prices. CAFTA will reverse this trend as free trade is likely to lower prices on all fronts.
Again, lack of natural resources does not make sense to me. Costa Rica’s natural resources are national parks, rainforests, beaches, volcanoes all of which are being exported for tourism. I do not foresee that those will become scarce in the near future… well, in the future period.
Intel, IBM and the likes are all paying wages that are well above the national average so if as you argue they will continue to “control” wages, that to me is nothing but a good news for Costa Rica. CAFTA is likely to bring more companies that fall into this category creating more jobs that pay good salaries in Costa Rica.
US will lose jobs to Costa Rica? That sounds a little bit farfetched to me. Although the US economy continues to slow down, it is my understanding that it continues to create about 100,000 new jobs per month. Costa Rica’s labor force of 1.86 million could only with great difficulties be a cause of US unemployment or removal of US jobs… If it is, the impact on US economy would be minimal.
I would like to see an analysis of which local Costa Rican companies will be put out of business by multinational mammoths such as Intel, IBM and the expected new arrivals. Most of the high tech/electronics industry in Costa Rica has been founded on foreign capital.
Those who are skilled enough cannot find jobs in their field because there are none at present. CAFTA will contribute to job creation. But, there is also the flip side. According to a recent government report, many companies planning on expanding production in Costa Rica are finding it difficult to find bilingual employees. What does this mean? Although CAFTA will create new jobs, Costa Ricans must work harder on their English skills and foreign language skills in general.
CAFTA will not take over government. CAFTA will attract more Foreign Direct Investment which will create more jobs, which will increase national production, which will have a multiplying effect on consumption and ultimately will boost government tax revenue that can be used to tackle problems which currently cannot be resolved due to government budget constraints.
Talking about US debt and Costa Rican debt is talking about two entirely different issues. Foreign reserves, credit etc. put the two countries into completely different categories.
You seem to be conflating CAFTA and US. CAFTA is not the US. The US will not and should not resolved Costa Rica’s problems. CAFTA is a means to helping both countries get better off.
When you say Costa Rican’s have a true democracy, I am not sure what you mean by that. They do have long democratic tradition, stable political institutions, etc. but I am not sure if that constitutes a true democracy.
Slaves to their lifestyle, rat-race, etc. these are some strong words. I have noticed however first hand that many Ticos my age who are young professionals like to work hard not because they are forced to do so but because they like working, they like accomplishing important things in their life, they like to compete with others and they like to prove to themselves that they can make it. Increasingly more young Ticos are moving out of their homes to be able to live their independent lifestyles. There may be a cultural shift occurring as we speak, which you may be ignoring or overseeing. The laid-back attitude may hold true for the older generation but at the bottom of the population pyramid, things are beginning to shake up.
I do understand and recognize that the U.S. is likely to benefit from CAFTA more than Costa Rica, but that does not mean Costa Rica will not benefit at all. In fact, this is the case of any trade deal… The larger economy is always bound to benefit more than the smaller one…
Also, I hope you are not trying to compare Costa Rican employees at Intel to those working in Mexican maquiladoras. In fact, Costa Rican labor is a lot more expensive than labor in other Central American countries. Costa Ricans are a lot more educated and qualified than their CA fellow neighbors. However, it should not be assumed that this is how it is always going to be. If Costa Rica stays out of CAFTA and its CA neighbors do the homework in this area, all of a sudden Costa Rica may no longer look as attractive a place to put capital to a good use as in El Salvador or elsewhere… Yes, Costa Rica has done well for itself but it could do a lot better.
STATUS QUO
1. Costa Rica’s poverty level has remained at 20% for the past 20 years
2. The government is no longer able to maintain the strong social safety nets in place due to increasing constraints on government expenditure
3. Foreign investors continue to be attracted by the country’s democratic stability and highly educated and qualified labor… but that may not hold forever…
4. The government continues to experience difficulties dealing with its internal and external deficits
5. Because of rising import prices and labor market rigidities, combating inflation continues to prove problematic
6. Tax reform is badly neededAt last, what identity are we talking about here? What laid back people are you referring to?
I have no business/personal reasons for defending CAFTA in CR. I have an interest in seeing Costa Rica move ahead. I have an interest in seeing improvements in Costa Rica’s education and health care. I have an interest in seeing infrastructure improvements. I have an interest in seeing more Ticos obtaining meaningful employment. I have an interest in seeing the country advance. In order for this to happen, the government needs to generate more tax revenue… This is not going to happen by increasing taxes but rather but creating more favorable conditions for economic activity. Isolating Costa Rica from other Central American countries and other business/trade partners is not the way to go. Many developing countries are begging for more trade rather than aid. While Costa Rica does not need aid, it would certainly benefit from more trade. Cheers, Jan
I love Costa Rica which is also one of the reasons why I registered on this website. I have lived here for many years and have many Costa Rican friends here that I consider to be my family. I love this country, its nature, its culture, its people. On the contrary, I do not seem to be willing to return back to the Czech Republic precisely because I find elements of Czech and European cultures in general not to be compatible with the kind of a life that I wish to live here in Costa Rica. You saying that I should leave if I don’t like Costa Rica reminds me of my times in the United States when I criticized the Bush administration while in college when my fellow classmates from the Republican camp ran out of arguments… “Go home if you don’t like it here” always seemed to be their favorite escape route from any discussion that they could not complete with a well reasoned through argument. I am not advocating for a culture change… All I am saying is that under CAFTA there will be more competition, which will likely require all of us here (not just Ticos) to move faster, work more to deliver more and better results than our competition. Note, work more does not imply work longer hours. Work more can also mean finding more efficient ways of doing things. In the end, all of us should benefit from better and cheaper products and services and ultimately more time to be able to enjoy Costa Rica and all it has to offer. After all that is what competition is all about.
simondg – You are right in pointing out the differences between the way EU has treated its new members and the lack of that element under the CAFTA arrangement. But you have also rightly recognized the importance of the emerging economies in Asia and their growing demand for agricultural and other goods. Why do you think the Arias administration has invested so much of its resources into courting Beijing not only to be able to position Costa Rican products there but also to promote cheaper Chinese imports… It is also my understanding that great efforts are being made to promote Costa Rica as a tourism destination for the increasingly thirsty affluent Chinese… So why should Costa Rica be so concerned about exporting its agricultural products to the United States? Under CAFTA, manufacturing companies in Costa Rica will be in a more advantageous situation to export to the U.S. On the contrary, manufacturers in other CA countries may find themselves in a better position to export to the U.S. which could ultimately lead to forcing multinational corporations currently established in Costa Rica to relocate elsewhere. I am not saying the NO camp is a communist camp… I am just failing to see a coherent argument against CAFTA. At least, the YES camps highlights the advantages CAFTA will bring in terms of creating more favorable conditions for FDI, increasing competitiveness and gradually removing inefficient government monopolies.
– I believe I was not disrespectful in my last comment posted on this website. I do not drive around in a BMW and I agree with you that there is much more to life than $$$. I do believe also that through hard work, anyone can succeed particularly in a business environment free of politically inspired barriers whether it be unnecessary taxes, tariffs or subsidies.
– I have been in Costa Rica long enough to know business customs and work ethic of this culture and am surprised that many businesses continue to operate… At many occasions, I have been in the “client” position having to literally beg for the supplier to supply me with price quotes and the service or product itself and this despite the fact of expressly stating that I could become a potentially important account for the company.
– I am strongly against monopoly that creates inefficiency particularly in the telecommunications and insurance industries. I would be inclined to continue protecting the energy monopoly for some time still as energy is a delicate issue particularly in this part of the world that does not produce much of its energy and needs to import. Costa Rica is doing a great job in seeking energy independence through investing in water and wind energy.
– Environmental protection is the job of the government only to a degree. The principal responsibility lies with the people and the businesses themselves. I would hope that the tourism industry would do all it can to ensure the environment remains protected whether by the government or by a general consent throughout the private sector.
– I agree with you that in order for sustainable development to take place it needs to be informed by local decisions, local customs, local values, local knowledge. I am afraid however that the vast majority of Ticos/Ticas do not necessarily understand the implications of CAFTA (approval or rejection). The politicians here have done a very poor job at explaining this matter to the population at large and I feel in fact that they have contributed to a greater confusion actually. So how can this referendum ensure that the real interests of Costa Rica are taken into consideration?
I am not Costa Rican. I am not from the United States either. I happen to be from a small Central European country, which has been lifted from (excuse my words) s*** to prosperity. I am from the Czech Republic. My country has been in much worse situation than is Costa Rica today in the early 90s, with infrastructure, agriculture and industry essentially decimated by four decades of communist rule. I still remember having to wait in lines every Thursday outside of the local grocery store in late 1989 to be able to buy two loaves of bread that would serve our family of four for the upcoming week. similarly like Costa Rica today, the politicians in my country put to a popular vote (referendum) the critical decision of whether or not we should join the European Union. Although many claim that the EU is about a lot more than economic integration, it is principally about that. The populists in my country at that time were rallying around similar arguments like those in the NO crowd here in Costa Rica today — they claimed Czech farmers would be unable to compete with subsidized EU farmers, they claimed we would lose our national sovereignty, they claimed that mass unemployment would occur in the north as coal mines would be shut down etc. etc. etc. You can take a look at the Czech economy now some three years later. A booming modernized highly diversified economy bolstered by stable political institutions, strong civil society. Had the Czechs decided to say NO to the European Union at the critical decision making time, they would have become an island in Europe similar to that of Switzerland… with some minor differences… the Czechs did not have the economic resources to afford not joining the EU. Similarly, Costa Rica cannot afford not joining CAFTA. If it decides not to say yes to CAFTA, there will be dire consequences — perhaps not immediately visible, but in the short run, we will see FDI dropping, potentially even large MNCs moving to other CA countries offering more favorable conditions. Whether you like it or not, MNCs drive global economy today and without them, Costa Rica will be left behind.
I did not really get to my main message as I got carried away a little. The Czechs did not get to where they are today simply because they said YES to the EU. We had to tie our belts, work hard and adjust to a new way of life.
I feel that those in the NO crowd are principally those individuals and groups that are unwilling to change the status quo. They are individuals and groups who are unable to envision a better future not only for themselves but for the country as a whole. But I should clarify something. Simply saying YES to CAFTA will not make Costa Rica better off. The YES is a mere prerequisite. Once Costa Rica says YES, then the hard part will come… Ticos will need to slowly but surely start changing their ways, improve their work ethic, start showing up for business meetings on time, and in general, simply put themselves to work. Free trade and capitalism is not for lazy people… On the other hand, those who work hard will find themselves better off!
simondg – My response has two parts: I do not believe Costa Rica should continue investing much time into increasing efficiency in agricultural production. I firmly believe it should progressively modernize its economy and move as far away from agricultural exports as possible and move to high tech exports where potential for revenue and profits is much higher and global markets and demand are expanding. If the US government continues to subsidize US farmers, then the Costa Rican government has two options – Option A – Subsidize Costa Rican farmers that focus on producing for the domestic market consumption (this to ensure the country does not become overwhelmingly dependent on food imports from the US)(i believe subsidizing agricultural products for export would be big waste of money) or – Option B – Provide incentives programs for Costa Rican agricultural producers to move to a different sector. Again, the tax revenue generated by new investments in the services and manufacturing sectors should be enough to take care of this minority population.
It was a nicely prepared speech drawing on a range of sources against free trade, but it has failed to take into consideration some important distinguishing factors.
1. Free trade is a market model in which trade in goods and services between or within countries flow unhindered by government-imposed restrictions. Restrictions to trade include taxes and other legislation, such as tariff and non-tariff trade barriers. The theory is that any voluntary trade must benefit both parties, otherwise it would not be made. More precisely, for a trade to occur both parties must expect a benefit (ex ante.). In short, as long as both parties know that there is demand for their products and services in the trading partner’s country, trade should occur naturally.
2. Sen. Sherrod Brown, similarly as most other opponents of free trade seem to be consistently failing to provide a reasoned argument against trade that would be based on relevant facts. It is unreasonable to compare NAFTA to CAFTA. Why? NAFTA sought to integrate three mammoth economies (United States with a GDP of $13.06 trillion (GDP 2006 est.), Canada with a GDP of $1.181 trillion (GDP 2006 est.) and Mexico with a GDP of $1.149 trillion (2006 est.). Prior to the enlargement of the European Union, NAFTA helped create the single largest free trade market in the world integrating economies with a total aggregated GDP of over $15.39 trillion. The actual effects of NAFTA on all three economies should not be evaluated without taking into consideration the policies (economic, social and environmental) that each of the signatory countries implemented following the implementation of the treaty.
3. The removal of barriers to trade naturally has effects on economies by correcting market distortions created by tariffs and subsidies in place prior to the implementation of the free trade agreement. While some jobs may be eliminated, others are created. It is the job of the government to facilitate the transition by providing training and other incentives programs for people to move from one sector to another normally following the principle of comparative advantage. Jobs are eliminated in sectors where the country’s comparative advantage is less than in the trading partner’s country. Similarly, jobs are created in sectors where the country has a comparative advantage. Lower taxes further incentivize economic activity. As economic activity grows and expands in both countries, government tax revenue increases supplying the funds necessary to further correct market distortions incl. training, environmental programs, etc.
4. In short, if there is evidence of growing poverty in certain geographic areas of Mexico, it should not be attributed to NAFTA but rather to inadequate government policies to ensure that free trade benefits all. Overall, the progress on work in Mexico towards the achievement of the Millennium Development Goals has been positive and generally government, World Bank and UN reports on the effectiveness of poverty reduction strategies seem to indicate Mexico is on the right track.
5. On the other hand, in Central America, where there are vast disparities between both the CA countries and the US but also vast disparities throughout the region, the effects of a free trade treaty may be much more unpredictable. While in CA there are countries that are already strongly integrated commercially with the US such as the case of say Costa Rica or Panama, others are lagging behind and might in fact find themselves in a position where they may not necessarily be able to benefit from free trade equally as adjustment policies in those countries may be simply too costly and too radical.
6. Costa Rica is an economy that is already highly diversified, focused principally on the services and technology sectors, with most external trade taking place with North America and Europe. CAFTA will only strengthen these trade relationships and will further assure current and future investors that in addition to long term political stability and a highly educated and qualified population, Costa Rica also belongs to one of the reasonable countries that understand the importance of trade for economic growth and investment.
7. If Costa Rica decides against CAFTA, the consequences may be grave with trade slowly but surely starting to divert towards the other Central American countries that are making important advances in areas where Costa Rica is strong — education, good governance, judicial security, public security, environmental issues, economic incentives to attract foreign investment and a lot more. Costa Rica may consider itself the Switzerland of Central America but this may not hold for much longer…
