June 7, 2024. Social inequalities in Costa Rica must be reduced and the country has the possibility to move forward with appropriate policies, facing the opportunities and challenges that arise in the region, said Francisco Javier Urra, IDB representative in Costa Rica.

The Inter-American Development Bank (IDB) considers Costa Rica as a model to follow in the region, highlighting its potential to become a global solutions provider. Francisco Javier Urra, IDB representative in Costa Rica, emphasizes that the country must overcome certain challenges and take advantage of its strengths to achieve this goal.

Francisco Javier Urra provided a vision of the country’s needs to maintain its growth and development trajectory. According to the IDB, Costa Rica is an outstanding example in the region. Urra stated: “Costa Rica stands out for its solid economic growth, its stable democratic and institutional system, and its environmental strength. It is a country with an open economy that has managed to combine a solid welfare state with integration into international value chains.

Compared to other Latin American countries, Costa Rica outperforms the regional average with economic growth exceeding three percentage points. Free trade zones are one of the main drivers of this growth. Urra pointed out that, despite the current fiscal situation, what is relevant is the speed with which Costa Rica was able to reverse a complicated situation even before the pandemic.

However, Urra identified several “two rich coasts” that highlight inequalities in the country. These include territorial differences between the coast and the central valley, gender disparities, generational gaps with youth facing fewer opportunities due to lower education, and divisions in the private sector between exporting companies and small and medium enterprises (MSMEs) with limited access to opportunities.

The Costa Rican social contract is an intangible but real element that has been fundamental to the country’s development since the early 20th century. Urra stressed that this social contract has not disappeared, but faces great threats. “Education and citizen security are two of the most complex elements that need to be addressed,” he said.

Urra also highlighted that Latin America, and Costa Rica in particular, is at a moment of significant opportunity due to both its own advantages and global disadvantages. “We think of Latin America as a region in need of investment, but if we look at it from a distance, we have a world with conflict in Europe and geopolitical tensions in the Middle East. In contrast, Latin America and the Caribbean are regions of peace, which presents an opportunity with the reorientation of value chains and nearshoring,” he explained.

From the IDB, the objective is to unlock the paradoxes that limit Costa Rica’s potential, fighting against the gaps and promoting the country’s full potential. “Our vision is that Latin America in general and Costa Rica in particular can be providers of global solutions. Costa Rica has already demonstrated this in value chains and climate action,” said Urra.

Roberto Artavia, president of VIVA Idea and of the Board of Directors of INCAE Business School, added a complementary perspective during the Costa Rica Meeting. “Costa Rica’s future depends on taking immediate action to take advantage of its potential and avoid a drop in social, environmental and productive indices,” Artavia said, underscoring the importance of addressing the challenges mentioned by Urra.

The IDB’s vision for Costa Rica and Latin America focuses on turning the region into a global solutions provider in a context of geopolitical realignment and value chains. Costa Rica, with its track record of success in sustainability and economic growth, is well positioned to lead this effort.

Costa Rica’s role is to be an example in the world of how to make certain changes such as carbon neutrality, but in adapting to climate change the country is lagging behind. It must adapt the economy, society, infrastructure to what is coming from climate change, explained Claus Kruse, project manager, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

“This does not mean that we can leave mitigation aside, but that we have to face mitigation and adaptation to climate change,” Kruse said. This is at the core of Costa Rica’s near future.

Kruse also said that the paradigm of bilateral relations between Germany and Costa Rica has changed and that before “Germany supported Costa Rica”, but now the vision is more “Germany and Costa Rica are allies in global issues”.

Urra explained that the Bank focuses on areas that can be improved. They see problems with infrastructure, access to the private sector for small and medium-sized companies, and a deterioration of the social contract. Costa Rica is still ahead of the region, we are in a situation that requires action but can be reversed. We see challenges and we see situations where there are opportunities, concluded the IDB representative.