Poverty in Costa Rica

What is the reality of poverty in Costa Rica, a country celebrated for its stunning landscapes and biodiversity? Despite its beauty and tourist appeal, over 20% of Costa Ricans experience poverty, a situation that raises critical social and economic questions. This article confronts the stark contrasts within the nation, unpacking the current state of poverty, the factors driving it, and the initiatives in place to forge a path to alleviation.

What to Know About Poverty in Costa Rica

  • Costa Rica’s overall poverty rate is approximately 20% with fluctuations over the past decade, and there’s a significant disparity between urban and rural poverty which impacts the effectiveness of government initiatives and programs.
  • The Costa Rican government has implemented social programs like Avancemos, a conditional cash transfer initiative, and has emphasized education and skill development as key approaches to reduce poverty rates and address income inequality.
  • Challenges such as fiscal sustainability and access to healthcare and social services persist despite government efforts, and the COVID-19 pandemic has exacerbated poverty and inequality, creating additional obstacles for economic recovery.

Poverty Rates and Trends in Costa Rica

Aerial view of rural areas in Costa Rica

In the realm of Costa Rica’s socio-economic landscape, approximately 20% of its population grapple with poverty. This Central American country, celebrated for its tranquil beaches and lush rainforests, has seen its poverty rate fluctuate over the last decade. In 2019, the poverty rate hovered at 13.70%, a slight decrease from the previous year. The proportion of the population living on less than 3.20 U.S. dollars per day oscillated between 2.8% and 4.3% from 2010 to 2020.

However, behind these statistics lies the often overlooked disparity between urban and rural poverty.

Urban vs. Rural Poverty

The disparity between urban and rural poverty presents a stark contrast in Costa Rica’s narrative of poverty. Rural areas, despite their bucolic charm, bear the brunt of poverty more than their urban counterparts. Here, the lack of basic services and infrastructure exacerbates the poverty levels. Government initiatives such as the implementation of multidisciplinary primary healthcare teams like EBAIS have made strides towards achieving near-universal health coverage and providing robust primary healthcare services in rural areas.

However, urban poverty, although less prevalent, is not without its challenges. It often lurks in certain neighborhoods, shackled to crime and social exclusion. One such example is Guararí in Heredia, where poverty clings to the fabric of the community. The Costa Rican government, under the leadership of Finance Minister Rodrigo Chaves Robles, has implemented various initiatives to combat urban poverty, such as enhancing the skills of the population and providing adult education in employability and entrepreneurship.

Income Inequality

Income inequality graph in Costa Rica

Income inequality, which fuels poverty, has been steadily increasing in Costa Rica. Despite having relatively low income inequality compared to other Central American countries, and being among the countries with the lowest inequality in Latin America, the gap between the rich and the poor continues to widen. This inequality primarily stems from the contribution of labor to household income and its impact on poverty rates.

Regrettably, the poorest social groups bear the brunt of income inequality, with the income disparity between the richest 20 percent and the poorest 20 percent being a staggering 19-fold. This growing disparity is a looming concern, threatening to undermine Costa Rica’s progress in poverty reduction.

Government Initiatives and Social Programs

Students participating in educational program in Costa Rica

Despite these challenges, the Costa Rican government remains proactive. Various social programs have been implemented to combat poverty. The Avancemos program, for instance, has proven to be a significant conditional cash transfer initiative, designed to assist families facing extreme poverty and vulnerability. This program offers cash transfers linked to conditions such as school attendance and health check-ups, striving to enhance human capital and disrupt the cycle of poverty.

The recipients for this program are determined through the use of the Target Population Information System (SIPO), which assesses families according to specific criteria to identify those who are experiencing extreme poverty and social vulnerability. The government has also implemented various initiatives in education and skill development, such as:

  • policies aimed at enhancing the skills of the entire population
  • providing adult education in employability and entrepreneurship
  • nurturing highly skilled professionals
  • extending preschool education in low-income areas
  • offering training to youth in entrepreneurship and fundamental business skills.

Conditional Cash Transfer Programs

Delving into Costa Rica’s social programs, the Avancemos program is particularly noteworthy. This program was developed by the Government to combat school drop-out and support families living in extreme poverty. It provides monetary subsidies to adolescents and youth between the ages of 12 and 21, with the condition that they attend school regularly, thereby addressing the issue of school dropouts.

Selection for the program is rigorous, with eligibility criteria including social exclusion and having young children. Additionally, students must undergo comprehensive health assessments by the Costa Rican Social Security Fund. Since its implementation, the program has resulted in substantial improvements in the welfare of Costa Ricans, with projected enhancements of approximately 27% in their overall outcomes.

Through its emphasis on enhancing the human capital of children, the program plays a pivotal role in poverty reduction, human development, and inclusive growth.

Education and Skill Development

Education and skill development serve as potent weapons in the battle against poverty. Recognizing this, the Costa Rican government has enacted policies to address educational marginalization and enhance academic achievements. Some of these policies include:

  • Focusing on alternative, community, and family-centered educational strategies
  • Making efforts to complete secondary education to lower poverty levels
  • Implementing financial literacy programs to enhance financial management abilities

These initiatives aim to improve educational opportunities and empower individuals to break the cycle of poverty.

The government has also emphasized skill development for poverty reduction and economic growth. By examining and enhancing business regulations, social security taxes, and training services, the government intends to consolidate benefits into the ‘Unique System of Beneficiaries’, signaling a strategic shift towards more effective welfare services.

Challenges to Poverty Reduction

However, despite these commendable efforts, poverty reduction in Costa Rica still faces significant hurdles. Fiscal sustainability is one such challenge. Achieved through fiscal consolidation efforts and reforms, fiscal sustainability positively impacts poverty reduction by enabling a decrease in public debt and promoting economic recovery, which, in turn, leads to a decrease in the poverty rate.

Access to healthcare and social services presents a significant challenge, as it hampers individuals’ capacity to uphold good health and perpetuates persistent poverty. Some of the key issues include:

  • Absence of access to specialized treatment
  • Insufficient access to healthcare, including mental health services
  • Impact on individuals’ capacity to work and generate a steady income
  • Extra healthcare costs and unattended mental health issues that impact overall well-being and economic prospects

These challenges drive individuals deeper into poverty and hinder their ability to improve their circumstances.

Fiscal Sustainability

Fiscal sustainability plays an essential role in the pursuit of poverty reduction. Costa Rica’s public debt reached a substantial level of 82.36 percent of GDP in 2022, potentially limiting the government’s capacity to allocate resources to social programs. The country’s fiscal deficit has shown signs of improvement, with the headline deficit decreasing to 5% of GDP in 2021, marking a significant reduction from previous years.

However, the fiscal deficit has resulted in decreased financial resources for infrastructure, affecting the ability to make investments in this sector. Measures to enhance fiscal sustainability, such as improving spending efficiency and raising tax revenues, are being implemented to alleviate these adverse impacts.

The combination of high public debt and fiscal deficit constrains Costa Rica’s fiscal sustainability, limiting the government’s ability to allocate resources to crucial poverty reduction areas such as social programs and infrastructure.

Access to Healthcare and Social Services

Rural healthcare clinic in Costa Rica

Another formidable challenge, especially in rural areas, is access to healthcare and social services. The primary obstacles to accessing healthcare in rural areas encompass meeting the high demand for specialized treatments, the lack of qualified personnel, and limited resources. To address these issues, the Costa Rican Government provides support for healthcare and social services in rural areas by implementing multidisciplinary primary healthcare teams such as the EBAIS.

However, the insufficiency of these services has significantly impeded efforts to reduce poverty in Costa Rica. The correlation between inadequate healthcare and social services and poverty has perpetuated a cycle of adversity, notably affecting mental health and overall welfare.

The Role of the Private Sector and International Organizations

Not only the government but also the private sector and international organizations play pivotal roles in poverty reduction. The private sector in Costa Rica contributes to poverty reduction through initiatives such as the Business Multidimensional Poverty Index (bMPI) and recognizes companies that show progress in reducing poverty among their stakeholders.

Private companies support the social welfare of their employees by providing a range of comprehensive benefits, such as retirement and death benefits, medical coverage, and disability benefits. Companies have effectively implemented several corporate social responsibility initiatives, including Tico Electronics’ environmental sustainability programs, the Monge Foundation’s support for education, and Dole’s dedication to environmental sustainability and employee wellness.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has surfaced as a significant player in reducing poverty in Costa Rica. Companies are involved in CSR initiatives through:

  • partnerships with CSR associations
  • organizing sustainable events
  • enhancing relationships with public institutions
  • embracing social, economic, and environmental responsibilities.

An exemplary instance is Dole, which has been acknowledged for its exceptional CSR endeavors, such as implementing business MPI and receiving accolades for advancements in poverty reduction.

CSR in San Jose, Costa Rica has also contributed to job creation by promoting employee teamwork, supporting the workforce, and addressing community needs to combat food shortage.

International Cooperation

International organizations too, hold considerable sway in poverty reduction efforts. The United Nations (UN), The Borgen Project, and the International Organization for Migration (IOM) are among the primary international organizations engaged in poverty reduction efforts in Costa Rica.

The World Bank and Inter-American Development Bank contribute to Costa Rica’s poverty reduction efforts through initiatives like the Costa Rica Fiscal Management Improvement Project and backing inclusive and sustainable economic recovery. GlobalGiving is currently supporting more than 34 non-profits in Costa Rica, focusing on projects aimed at combating poverty.

Additionally, the World Bank and the International Monetary Fund have played significant roles in providing financial assistance, with the World Bank approving a loan for Costa Rica’s post-pandemic recovery program, and the International Monetary Fund approving a $1.7 billion arrangement to support the country’s recovery and stabilization.

Impact of COVID-19 on Poverty in Costa Rica

Impact of COVID-19 on poverty in Costa Rica

The COVID-19 pandemic has profoundly affected the global socio-economic landscape, with Costa Rica equally impacted. The pandemic has significantly impacted:

  • Poverty rates, with approximately 26% of households falling into poverty since the onset of the pandemic
  • The economic repercussions, with a -4.1% contraction of Costa Rica’s GDP
  • Heightened unemployment
  • An escalation in poverty rates

The pandemic has exacerbated income inequality in Costa Rica through the reduction of household income, resulting in increased disparities and poverty. In response to the crisis, the government has acknowledged the significance of economic stability in poverty reduction and has garnered assistance from the International Monetary Fund to facilitate the country’s economic recovery and poverty reduction endeavors.

Government Response to the Pandemic

In reaction to the pandemic, the Costa Rican government put into action various economic relief measures, including cash transfers for vulnerable populations and a moratorium on certain tax payments. These measures played a crucial role in addressing the crisis by safeguarding vulnerable households, workers, and enterprises.

Roughly 700,000 individuals in Costa Rica, many Costa Ricans, were recipients of the Bono Proteger program, demonstrating the extensive coverage of the government’s economic relief measures amidst the pandemic. This swift response underscores the government’s commitment to safeguarding the well-being of its citizens in the face of adversity.

Long-term Implications

The enduring effects of the COVID-19 pandemic on poverty in Costa Rica remain uncertain, though they are likely to worsen existing inequalities and hinder the country’s socio-economic development. The pandemic may have the following effects:

  • Worsen income inequality
  • Have long-term effects on public finances and macroeconomic stability
  • Lead to a slow and uneven recovery
  • Result in a decline in social progress.

The pandemic has led to significant changes in employment and poverty rates, with unemployment reaching 24% in 2020 and gradually decreasing to 11.6% by 2023. Concurrently, poverty rates have risen to approximately 23% since 2020. This economic downturn has had a profound effect on livelihoods and food insecurity, resulting in an increase in the number of households living in poverty.

In my travels, the most poverty stricken area I’ve seen in Costa Rica is the La Carpio ghetto, which resides in Alajuela and is largely of Nicaraguan immigrants who fled in their country in the 1980’s.

Summary

In conclusion, while Costa Rica has made significant strides in reducing poverty, the journey ahead is fraught with challenges. The disparity between urban and rural poverty, increased income inequality, and the impacts of the COVID-19 pandemic pose significant hurdles. However, the government’s initiatives, combined with the efforts of the private sector and international organizations, provide a beacon of hope. As Costa Rica continues to tackle these challenges, it is essential to remember that the journey to poverty reduction is not a sprint but a marathon. With resilience, commitment, and collective effort, Costa Rica can continue to make significant strides towards poverty reduction.

Frequently Asked Questions

What is the poverty level in Costa Rica?

The poverty level in Costa Rica is almost 11 percent of the population living with less than $5.50 per day per capita in 2019. This places Costa Rica among the least poor countries in the Latin American and Caribbean region.

Is Costa Rica a rich or poor country?

Costa Rica is considered an upper middle-income country with a steady economic growth and relatively low poverty rates, making it generally a more prosperous nation in comparison.

Is there income inequality in Costa Rica?

Yes, there is income inequality in Costa Rica, as indicated by a recent report from the World Bank showing an increase in poverty and inequality.

How does the Avancemos program aid in poverty reduction?

The Avancemos program aids in poverty reduction by providing cash transfers to families in extreme poverty based on conditions like school attendance and health check-ups. This helps empower families to improve their situation.

What role does the private sector play in poverty reduction in Costa Rica?

The private sector in Costa Rica plays a significant role in poverty reduction by implementing initiatives like the Business Multidimensional Poverty Index and acknowledging companies that make strides in reducing poverty among their stakeholders.