Nearshore Americas

LatAm Economic Growth: Is Costa Rica Being Left Behind?

Source: CentralAmericaData

Weak growth and high fiscal deficits caused Costa Rica not to share the good times experienced by other South American countries such as Panama and Mexico.

International analysts believe that the Costa Rican economy has moved away, unfortunately, from the Latin American emerging economies.

Aldesa analysis says that the growth pace in emerging and developed economies seen since the last global crisis will continue in 2011 to become a new balance of power which will benefit the economies of China, Brazil and India.

According to analysts of U.S. banking giant JP Morgan, by 2017, emerging markets constitute 50% of global GDP, while China, India and U.S. will be the three largest economies in the world. In 2030 Brazil will be the fifth largest economy in the world, ahead of Japan and the European Union.

The U.S. has escaped the fate of developed countries which have had anemic growth, and today it showed, with an increase in production of 3.2% during the last quarter of 2010, that shares part of the reality of emerging countries in production, consumption and also some of the serious reality of developed economies, a huge fiscal deficit.

U.S. growth has recovered due to domestic consumption and strong exports. Multinational corporations in this country have benefited from growing demand from emerging economies and as a result, they have injected dynamism into the economy.

However, a fiscal deficit equivalent to 10% of GDP, public debt at 60% of GDP and unemployment, which represents 9.4% of the population, continues to pose threats to growth and long-term stability and are characteristics shared with developed countries. This is the main difference between the current economic scenario and a few decades ago, when third world countries were growing and needed little help from the government to move forward.

And Costa Rica?

International analysts believe that our reality has distanced itself, unfortunately, from the Latin American emerging economies. Weak growth and high fiscal deficits caused Costa Rica not to share the good results being experienced by South American countries, such as Panama and Mexico.

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Reasons include the low participation in our exports of emerging economies such as China and Brazil. Our net importers, a flexible exchange rate and a low level of unproductive government spending are other reasons for Costa Rica to show a lag in economic growth. Fortunately, many of these negative factors can be improved, and in general terms, Costa Rica still has a good reputation in the international markets.

Tarun George

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