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gains from direct investment in social protection appear to be very considerable in Brazils experience
– much greater than simple quantitative models seem able to explain. The gains are notable in terms of human capital, productivity, a stronger sense of citizenship, social
cohesion, political stability and a good investment environment, inter alia.
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6. Costa Rica: Prioritizing fiscal space for social protection
6.1. Country profile
Costa Rica is a small country of Central America with a total surface area of 51,100 square kilometres. It borders Nicaragua to the north, the Pacific Ocean to the south and west,
Panama to the south-east and the Caribbean to the east. It is usually considered the most solid democracy of Latin America. Its army was abolished in 1948. Costa Rica is a
Republic with a four-year presidential mandate.
The total population of Costa Rica was estimated at 4.5 million inhabitants in 2010. During the last decade, the annual population growth rate averaged 1.7 per cent, with a clear
declining trend since 1982 when population increased by 2.8 per cent figure 32. In other words, the current population growth rate is almost half the 1982 rate and almost 60 per
cent lower than in 1962.
Figure 32. Costa Rica: Population growth rate, 1960-2010
Source: United Nations Population Division, 2010.
The combination of a low birth rate and increasing life expectancy has accelerated the ageing of the population. Between 1995 and 2010 the share of people over 65 years old
jumped from 4.7 per cent of the total population to 6.2 per cent, a trend that is expected to speed up over the coming years so that by 2025 one out of ten Costa Ricans will be over 65
years of age. On the other hand, children below the age of 14, who used to make up 34.7 per cent of the total population in 1995, account for 25 per cent in 2010, with a projected
share of 21 per cent in 2025 figure 33.
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Figure 33. Costa Rica: Population pyramids, 1995, 2010 and 2025 projected
Source: US Census Bureau, 2010.
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Costa Ricas GDP per capita figure 34 was estimated at US6,382 in 2009 US11,122 in terms of purchasing power parity, the second highest in the Central American region after
Panama and 4.2 times the GDP per capita of Nicaragua the Central American country with the lowest income in PPP terms.
Figure 34. Costa Rica: GDP per capita, 1960-2008
Source: World Bank, 2010.
The long-term economic growth rate between 1961 and 2010 averaged 4.8 per cent per annum. Prior to the 2008-09 crisis the country grew at 4.6 per cent during the 2000s. This,
however, was still lower than the 6.3 per cent rate experienced during the 1970s and the 5.5 per cent of the 1990s. Since the 1981-1982 economic crisis, the worst in the countrys
history, Costa Rica experienced only one episode of negative economic growth, in 2009 2.8 per cent. In per capita terms, negative growth rates were observed on five occasions,
in 1985, 1991, 1996, 2001 and 2009.
From a fiscal perspective, chronic fiscal deficits are the rule in Costa Rica. With the exception of 2007 and 2008, the fiscal balance has been negative since 1970. Public sector
fiscal deficits, on average, constituted 2.5 per cent of GDP during the 2000s figure 35.
