My Two Colones

OECD and Costa Rica post COVID

Recently, Costa Rica was invited to join the Organization for Economic Cooperation and Development or OECD. The Costa Rican population celebrated this milestone, but what does it really mean? What advantages are there for CR to join the organization? And how will this affect the economic opportunities for the country after COVID?

 

What is the OECD?

They describe themselves as “an international organization that works to build better policies and better lives”.  Originally, it was founded in 1948 under the name of Organization for European Economic Cooperation (OEEC) to help with the administration of the Marshall Plan after World Ward II, which aimed its efforts to reconstruct Europe with financial aid of the United States.

In 1961, the OEEC was reformed to what we currently know as the Organization for Economic Cooperation and Development (OECD) and membership was extended to non-European countries.

Generally, the members of the OECD are countries with developed economies and a high Human Development Index. By 2017, the OECD members comprised 62.2% of the global economy.

 

What does the OECD do?

Mainly, the organization is dedicated to developing policy. It is not a trade block, and there are not any benefits to the member countries. It conducts research and issues publications in matters such as the economy, tax, governance, social justice, and development.

While membership in the organization does not grant any direct benefits to the member states, it allows recognition of certain standards of development. It is possible to be a member of the organization only if the country has achieved certain standards in various areas. The main benefit of membership is recognition. It is a status symbol.

 

Costa Rica and the OECD

On April 9th 2015, Costa Rica officially initiated the process for OECD recognition when the organization agreed to open membership discussions, not only with Costa Rica but with Lithuania as well.

The process of accession to the OECD requires an extensive revision by 22 committees of the organization. These committees review the status of the country and its policies in numerous areas including governance, financial markets, education, environment, healthcare, employment, science and technology, agriculture and many more. For over eight years, the country has been in a process to update the regulations and practices to be able to meet the standards of the organization and achieve membership.

On March 31st, after the evaluation of the 22 committees, the organization invited Costa Rica to join the group to become the 38th member. The next steps involve having President Carlos Alvarado and the Secretary General of the OECD Ángel Gurría, sign the treaty which subsequently must be approved by the CR Congress.

As noted, membership in the organization does not generate a direct benefit to Costa Rica. The value of being part of the organization is to acknowledge the necessity to adhere to some standards to assure continued development for the country. Now, the question is, will the country follow the path of development?

 

What is next?

Let’s put the OECD in perspective. While member states include countries such as New Zealand, Finland and Norway, which rank very high in the Human Development index, other member states include Mexico and Colombia, which unfortunately do not rank that high. Income inequality also shows in high disparity between these two Latin American countries and the rest of OECD members. Membership in the organization does not mean that your country is doing great, or that it will do great.

Mexico joined the OECD in 1994 and Colombia in April 2020. These two countries over the past decades have had high unemployment rates, particularly in Colombia, and the GINI coefficient has also been very high, more so than other member states of the organization.

 

 

Crime and poverty have been issues in both Colombia and Mexico. To be fair, it is not an exclusive problem to those two countries. In the region, both Honduras and Venezuela rank very high in the murder statistics worldwide. Crime is an issue in Latin America. The point here is that membership in the OECD does not bring direct results for the improvement of the member country. While both Mexico and Colombia have a lot of work ahead of them when it comes to development, security, education and equality, so does Costa Rica. What does it mean to Costa Rica to join the OECD?

 

 

Costa Rica post COVID

Some people refer to the OECD as the club of rich nations. Certainly, Austria and Norway can bring that to the table, but Costa Rica is not wealthy by any stretch of the imagination. Costa Rica in the OECD is like going to the country club in a beat-up Ford Pinto.

While Costa Rica has a lot of potential and opportunities, the question is: what is the country going to do about it?

Doing business in Costa Rica is not easy. While New Zealand and Singapore rank first and second in the Ease of Doing Business Index, Costa Rica ranks 74.  The ability to do business easily is necessary to generate employment and tax revenue. Over the past few years, we have been able to witness how there is an increased burden on business owners to comply with documentation just to keep businesses open.

Infrastructure has also been a big challenge for Costa Rica. According to the World Economic Forum, Costa Rica ranks below the world median when it comes to the development and quality of infrastructure.

 

Route 39 North. Photo by www.elmundo.cr

Considering that the world is entering a recession like no other, and the motivation that Costa Rica has to enter the OECD and adhere to some standards, it is required for the leadership of the country to develop and implement a policy to secure the growth and wellbeing in the population for the next 30 years.

Locally, the country has been able to tackle the health crisis of the pandemic very reasonably. The question is whether the country has a similar ability to deal with the economic aftermath.

Considering the current civil unrest and the economic implications generated by the coronavirus, many people are looking to find greener grass in other latitudes. In addition, there has been an increased interest in Costa Rica due to the handling of the virus and the socialized healthcare system. Perhaps the government can capitalize the opportunities for the economic growth of the country by strengthening an immigration policy to allow foreign families to relocate to Costa Rica.

Traditionally, Costa Rica has focused on foreign investment with an eye on big cap companies such as Intel, HP, Amazon, so on and so forth, but it has ignored the tremendous contribution that small business owners bring to the economy, both in spending power as well as job generation.

The population of foreign nationals living in Costa Rica has been growing over the past years. Along with the standards that the OECD prompts the member countries to implement, Costa Rica can also develop a progressive immigration policy as part of the projects to secure the growth post COVID 19.

I hope for Costa Rica to take the lead in Latin America and take a progressive approach towards immigration as it can be game changer for the growth of the country in the years to come.

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