Posts Tagged ‘Costa Rica’

Costa Rica’s Gross National Happiness

Friday, August 7th, 2015

More good news from Latin America.

[H]ow can poor countries become more liveable? Most developing nations know they will never be Norway. But they could become Costa Rica. ….

The average Costa Rican has about one-eighth of the income of the average American (according to the World Bank) yet lives a year longer, to age 80. Costa Rica also scores high on freedom of life choices, health, tolerance and lack of corruption. Its citizens report impressive life satisfaction. ….

Every nation needs a certain level of income to afford a good life. However, income alone isn’t enough. Costa Rica is about as rich as Libya or Iraq but is much better at prioritising national quality of life. It treats economic growth as secondary. That’s why it doesn’t sell football fields to developers, and why the tourists in its gorgeous Manuel Antonio national park can hardly buy a thing inside it. The park is for squirrel monkeys, not T-shirt vendors.

Costa Rica also prioritises its environment. …. [U]niquely among tropical countries, Costa Rica reversed deforestation, chiefly through tough laws. Today, 52 per cent of the country’s surface is forest, twice as much as 30 years ago.

Simon Kuper, “Costa Rica’s good life“, Financial Times Magazine, 8 August 2015 (metered paywall).

Click on the link to read the full article (free registration required). I agree that Costa Rica is a social and environmental success story. And, Manuel Antonio is a beautiful national park. But tourists can now “hardly buy a thing inside it”? This worries me. When I last visited the park, many years ago, all commercial activity was prohibited!

happiness, satisfaction, and GDP

Wednesday, October 22nd, 2014

I would like to call everyone’s attention to a superb article written by University of Southern California economist Richard Easterlin, a scholar who, years ago, touched off the booming field of “happiness studies”. I, for one, am not convinced that happiness – even life satisfaction or subjective well being – is something we can usefully measure, aggregate and use for policy purposes. Nonetheless, Easterlin makes a spirited, impassioned case for replacing GDP (Gross Domestic Product) with SWB (Subjective Well Being). He has succeeded in convincing me that SWB, with all its faults, is at least preferable to HDI (the UNDP’s Human Development Index) as a measure of welfare.

Here are two paragraphs from the introduction, and two from the conclusion of the essay. The entire essay (4 pages) can be downloaded, copied and printed without charge, so click on the link below. You will not be disappointed. (more…)

Costa Rica: reform of pension reform

Wednesday, March 26th, 2014

Costa Rica decades ago initiated a pay-as-you-go (PAYGO), traditional social security pension scheme that is currently funded from mandated contributions equal to 7.59 per cent of payrolls (35% from employees and 65% from employers). In 1995, voluntary retirement savings accounts were added to the PAYGO pillar.

In 2005, contributions to private accounts became mandatory for new entrants into the social security system. Participation in Social Security is theoretically compulsory, but evaded by informal workers. Employers of formal labour must contribute an amount equal to 3.25% of payrolls. Employees contribute a minimum of 1% of earnings plus up to 0.7% of the account balance (2014) for administrative fees. Voluntary contributions are permitted, but are very rare. Upon retirement, contributors can access their private accounts by one of two options: programmed withdrawals or an annuity (private pension).

Administrators of private accounts from the beginning charged high fees, and gave extremely low returns on savings. In response to complaints, regulators in 2011 began to force the industry to reduce administrative fees by setting maximum fees the six authorized fund management companies (OPCs) can charge.

Effective January 1, 2014, the ceiling on administrative fees that pension fund management companies (OPCs) may charge accountholders was lowered to 0.70 percent of the account balance. … [b]eginning in January 1, 2011 [regulators] changed the method of calculating the administrative fees, from a mixed percentage of the accountholder’s salary plus the fund’s performance to a percentage of the account balance.

The ceiling was set at 1.10 percent of the account balance for the 2011–2013 period, with a gradual decrease in the ceiling on fees every 3 years until reaching 0.35 percent in January 2020. …. (Prior to the change, OPCs were permitted to charge fees of up to 4 percent of salary and 8 percent of the fund’s performance.) [Note: Fees equal to 4% of salary amounts to a charge of nearly 100% of contributions. No wonder participants complained that fees were high! Or is this a typo?]

….  Total assets under management for the six OPCs was about $US5.5 billion at the end of November 2013; most of the assets are invested in government bonds.

An individual account is mandatory for new entrants to the labor force after 2005. Employees contribute 1 percent of salary and employers contribute 3.25 percent of payroll to the individual account. Employees may choose an OPC and transfer from one OPC to another at any time; those who do not choose an OPC are automatically enrolled in the Banco Popular OPC, part of the government-run bank— Banco Popular. The individual accounts supplement the first pillar pay-as-you-go public pension program. A full retirement benefit from either program is paid at age 65 with 25 years of contributions.

US Social Security Administration, “Costa Rica“, International Update, March 2014.

pension coverage in Latin America

Tuesday, October 22nd, 2013

This chart is interesting. Bolivia stands out as the only country of the ten that has a universal pension in place.

The black bars refer to the percentage of the labor force that contributes to a social security scheme. Many contributors will never receive a pension because they move in and out of formal employment, so do not contribute long enough to qualify for a pension. The red bars refer to the percentage of the retirement-age population that receives any sort of pension (contributory or noncontributory).

The authors of the article observe “Recently, the Mexican president introduced a pension reform bill to Congress that would set up a universal noncontributory old-age benefit.” – without cautioning that the proposed pension, despite its name, is not universal.

pension coverage

Source: US Social Security Administration, “Social Pensions and Subsidized Benefits in Latin America“, International Update (September 2013).


Saturday, June 16th, 2012

Growth in Brazil, India and China might be losing steam, Europe might be mired in its sovereign debt crisis and the US might continue to limp along. But at least there’s Panama.

… Panama’s economy was in double-digit growth mode [in the first quarter of 2012], … spurred by the remarkable programme of public works being implemented by the government of Ricardo Martinelli, the president. ….

So what’s not to like? Well plenty, say many Panamanians. In a recent Central America-wide opinion poll, Martinelli was pipped only by Costa Rica’s Laura Chinchilla as the region’s least popular president.

… [A] whiff of corruption surrounds the government, and a series of conflicts rumble on involving trade unions and indigenous groups.

Ron Buchanan, “Panama: growing fast but don’t ignore the cracks“, beyondbrics (FT blog), 15 June 2012.

NB: FT blogs can be accessed without subscription or registration.

Tyler Cowen on Costa Rica

Thursday, March 10th, 2011

He wasn’t impressed.

I haven’t been to Costa Rica in a long time, but here is what lodged in my memory:

Monkeys and birds, hanging sloth is hard to see, excellent dialect on Caribbean coast, eat palmitos [hearts of palm], like it or not beans and rice for breakfast, cross the country by taxi in a day, if you mispronounce the volcano it rhymes with the last name of David Boaz, Spanish paella in the capital, “Tica,” music is mediocre, worst Chinese food anywhere, the least interesting locale in Central America but the best trip for most Americans.  Glad I went but won’t return.

Tyler Cowen, “Costa Rica bleg“, Marginal Revolution, 10 March 2011.

Costa Rica’s new president and violent crime

Tuesday, June 15th, 2010

Costa Rica has a new president – Laura Chinchilla, who took office on May 8th 2010 – so I am recycling a TdJ that reveals her thoughts when she was Justice Minister in the government of President Oscar Arias.

In recent years we have witnessed an alarming increase in levels of criminal violence. ….

[D]uring the period 1990-2006 total crimes per 100,000 inhabitants increased from 135 to 295 and increases in some components are especially troubling. Robbery, for example, increased 700%, and use of illegal drugs increased 280%. Violent crimes also experienced a sharp growth of more than 100%. The murder rate, indicator par excellence of the level of violence in a country, increased 50% in that same period. As a complement for these indicators, we looked the percentage of households in which at least one family member has been victim of a crime and found that this number increased from 20% in 1986 to 27% in 1999 and 40% in 2004. ….

Increasing violence and fear has caused us to draft over the last fifteen years abundant laws regarding law enforcement and punishment. ….

As a result of all this legislation, … in the last ten years we have doubled the rate at which we jail our citizens, which places us at the head of countries with the highest rates of incarceration on this continent. Paradoxically, after adopting all these measures, violence and criminality continue to grow and the prevalence of fear is stronger today than ever. ….

For this reason the Government of the Republic… has proposed implementation of a National Plan for Prevention of Violence and Promotion of Social Peace.

19 August 2007: It is about time action was taken, given the rapidly deteriorating public security in Costa Rica. The author of this column, Laura Chinchilla, is Minister of Justice in the current government of President Oscar Arias. Thought du jour will be monitoring developments. Translated somewhat freely by L. Willmore. The original Spanish follows.

15 June 2010: I haven’t seen the statistics, but violent crime seems to continue rising in Costa Rica. We shall see whether Laura Chinchilla is more successful as President than she was as Justice Minister. We wish her well.

En los últimos años somos testigos de una preocupante tendencia hacia el incremento de los niveles de violencia criminal. ….

Por ejemplo, durante el período 1990-2006 la tasa del total de delitos por 100.000 habitantes pasó de 135 a 295 y algunos de ellos crecieron de manera especialmente preocupante; tal es el caso del robo, cuya tasa se incrementó en un 700% y las infracciones a la ley de psicotrópicos, que crecieron en un 280%. Los delitos violentos experimentaron también un importante crecimiento; así ha ocurrido con las agresiones físicas, que crecieron en más de un 100%. La mismas tasas de homicidio doloso, indicador por excelencia del nivel de violencia en un país, se incrementaron en un 50% en ese mismo período. Como complemento a estos indicadores, al analizar el porcentaje de hogares en los que algún miembro ha sido víctima de un delito, observamos cómo dicha cifra pasó de un 20% en 1986, a un 27% en 1999, y a un 40% en el 2004. ….

La violencia y el miedo nos ha llevado ha promover en los últimos quince años una abundante legislación en materia policial y penal. ….

Como consecuencia de toda esta legislación, … en los últimos diez años se ha duplicado la tasa de prisionalización, lo que nos coloca a la cabeza de los países que más encarcelan en el continente. Paradójicamente, al tiempo que hemos adoptado todas estas medidas, la violencia y la criminalidad, lejos de reducirse o contenerse, han seguido creciendo y la sensación de temor es más fuerte hoy que antes. ….

De ahí que el Gobierno de la República … se haya propuesto impulsar un Plan Nacional para la Prevención de la Violencia y la Promoción de la Paz Social.

Laura Chinchilla Miranda (Ministra de Justicia), “Un país sin miedo” [“A Country without Fear”], La Nación, San José, Costa Rica, 19 agosto de 2007.

Nicaraguans in Costa Rica

Sunday, June 13th, 2010

Many Costa Ricans resent immigrants from neighbouring Nicaragua, much as some US residents resent immigrants from Mexico, often with little reason. It is thus worthy of note that La Nacion – the principle newspaper of Costa Rica – today praises the selfless act of a humble Nicaraguan immigrant, suggesting that he serve as an example for all Costa Ricans. For those who do not read Spanish, a rough English translation follows the Spanish text.

A sus 79 años, Francisco Prado ganó ¢70 millones [$133,257] en un sorteo de la Lotería Nacional. En adelante, vivirá de los intereses, porque renunció a su pensión del régimen no contributivo de la Caja Costarricense de Seguro Social “para que se la den a otro viejito, a alguien que esté muy necesitado”. El necesitado es el país, pero de recibir lecciones de generosidad como la dictada por este modesto agricultor nicaragüense radicado desde hace 50 años en Costa Rica.

Los ¢70.000 [$133 mensuales] de su pensión dejarán de llegar a … don Francisco, padre de ocho hijos ….

El régimen no contributivo tiene 86.936 beneficiarios de modestas pensiones que en la mayor parte de los casos recompensan años de esfuerzos desplegados al margen del sistema de seguridad social, ya sea por descuido de sus patronos o imposibilidad de incorporarse al sector formal de la economía. Un 58% de ellos son adultos mayores, muchos dedicados en su juventud a pesadas tareas, como las agrícolas, donde no tuvieron oportunidad de cotizar para la futura jubilación.


La virtud demostrada por el anciano nicaragüense … apunta a la necesidad de reconocer el aporte de los inmigrantes. Son recibidos con generosidad por Costa Rica, casi siempre saben agradecerlo y en su mayoría están dispuestos a pagar la hospitalidad con trabajo honrado y ejemplar.

“Virtud ejemplar”, Editorial, La Nación (San José, Costa Rica), 13 June 2010.

And now the English translation:

At the age of 79, Francisco Prado won a prize of ¢70 million [$133,257] in the National Lottery. From now on, he will live off interest on this money, because he gave up his non-contributory Social Security pension “to release it for another older person, someone who is very needy”. Needy is our country, but for lessons of generosity such as the one given us by this humble Nicaraguan farmer who has lived here for 50 years.

The ¢70,000 [$133] Social Security pension will no longer reach … Don Francisco, father of eight children ….

The non-contributory scheme has 86,936 beneficiaries of pensions that are typically modest, a reward for years of work outside the social security system, either because of carelessness of their employers or because of their inability to join the formal sector of the economy. 58% of these pensioners are elderly. Many of them worked very hard when young in areas such as farming, and had no opportunity to contribute to a fund for their own retirement.


The virtue displayed by this elderly Nicaraguan … illustrates the need to recognize the contributions of immigrants. Immigrants are generously received by Costa Rica, almost always return the favour, and most are willing to pay for this hospitality by providing honest and exemplary labour.

‘Quick and dirty’ translation by Larry Willmore of “Virtud ejemplar”, Editorial, La Nación (San José, Costa Rica), 13 June 2010.

What makes don Francisco’s act all the more noteworthy is the fact that numerous Costa Ricans with occupational pensions are defrauding the system by receiving a supposedly means-tested non-contributory pension.    Thanks to Ligia for the pointer.

infant mortality in Chile, Costa Rica and Cuba

Saturday, October 17th, 2009

Infant Mortality Rates

(per thousand live births)

Year Chile    Costa Rica   Cuba

1960 119.5        74.3         35.9
1965 97.3         75.0         37.8
1970 82.2          61.5         38.7
1973 65.8          44.8         28.9
1980 33.0          19.1         19.6
1990 16.0          14.8         10.7
1992 13.9           13.7         10.2
2000 10.1          10.2           7.0

If we believe that the data are reasonably accurate, it is remarkable to note that in 1960 the infant mortality rate in Cuba was less than half of the rate in Costa Rica and less than a third of the rate in Chile. … [Both] Costa Rica and Chile were able to reduce infant mortality sharply, to the point that it is very close to Cuba’s. …. We can conclude that both Costa Rica and Chile were able to achieve very significant improvements in well being without having to suffer the devastating effects of socialism.

Juan A. B. Belt, “Costa Rica in Mesa-Lago’s Market, Socialist and Mixed Economies: Chile, Cuba and Costa Rica”, Cuba in Transition, ASCE 2001, p. 225.

Juan Belt is commenting on Cuban economist Carmelo Mesa-Lago’s book Market, Socialist, and Mixed Economies (The Johns Hopkins University Press, 2000). I added infant mortality rates for the year 2000 to Juan Belt’s table.

Recycled from the Thought du Jour 2003 archive.