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Figure 38. Costa Rica: Social spending as a percentage of GDP, 1990-2009
Source: Ministerio de Hacienda, 2010; International Monetary Fund, 2010b.
By category of spending, the share of education and social protection in total expenditure on the social sector was somewhere between 92 and 94 per cent figure 39. Their share
remained much the same throughout the last two decades, rising slightly in the second half of the 2000s. Between 1990 and 2009 culture and housing lost some ground and the
growth of social protection dropped behind that of education, at least during the last five years.
Figure 39. Costa Rica: Composition of social spending, 1990-2009
Source: Ministerio de Hacienda, 2010; International Monetary Fund, 2010b.
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As mentioned earlier, expenditure on social protection in the last two decades accounted for 10 per cent of GDP. At the top of the list, two-thirds of this expenditure went on
healthcare, and social insurance accounted for a further 22 per cent figure 40. The share of social protection was roughly half of total government expenditure in 2009.
Figure 40. Costa Rica: Average participation of social protection categories, 2000-2009
Source: Ministerio de Hacienda, 2010; International Monetary Fund, 2010b.
6.3. Contributory social security programmes: The Costa Rican Social Insurance Fund CCSS
Even though various governments made a serious effort to organize Costa Ricas health sector during the 19th century, it was not until 1941 that a mandatory health insurance
MHI scheme was implemented, later to take the form of the Costa Rican Social Insurance Fund CCSS and the social security system as a whole. In addition to the creation of the
CCSS, the Government of the time approved key legislation regarding the Labour Code 1943, the Social Guarantees Constitutional Chapter and the creation of the University of
Costa Rica.
The establishment of the MHI was the outcome of a social consensus that involved the Government itself, the Communist Party and the Roman Catholic Church, an unusual
triumvirate that agreed on the importance of the project.
The MHI was originally set up to protect workers against the risk of illness, maternity and employment injuries, and to grant an old-age pension to older people when they retired. As
it evolved from basic coverage of industrial and government employees, the MHI expanded to include benefits for workers’ families, to provide voluntary health insurance
and, by means of budget transfers to the CCSS, to cover those who had previously been excluded.
To finance the contributory health insurance scheme, the regulations introduced a 15 per cent payroll contribution in the formal sector, a 10.25 per cent rate on reported income for
independent workers and a 14 per cent rate for pensioners. The State finances health
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services for poorer households and indigents and finances this expenditure with a specific tax on luxury goods, alcohol, beer, colas and other imported goods.
Contributory pensions are funded by an 8 per cent payroll contribution, but further 0.5- point increments are expected every five years until 2035. During the last decade
contributory health and pension contributions together constituted, on average, 6.7 per cent of GDP and 66 per cent of expenditure on social protection figure 41. The share of
expenditure on social protection, however, has experienced a progressive decline since 1990, for two main reasons. The first is that, of all the social protection components, social
contributions grew more slowly than expenditure on health, non-contributory pensions and poverty reduction programmes. This is explained by the second factor, which is related to a
decrease in the coverage rate of the economically active population EAP by social insurance. After peaking at 71.7 per cent of the EAP in 1994-1995, coverage declined to
66.4 per cent in 2000, the same level as in 1991. During the 2000s the rate of coverage continued to decline until 2003 52.2 per cent, when it started a period of recovery to
reach 64.8 per cent in 2009 CCSS annual reports for 1995 to 2009.
Figure 41. Costa Rica: Social contributions as a percentage of GDP and of expenditure on social
protection, 1990-2009
Source: Ministerio de Hacienda, 2010; International Monetary Fund, 2010b.
Besides the CCSS contributory pension scheme there are other special contributory schemes administered by specific government bodies. In total there are currently eight
additional pension schemes covering public employees, but most of them are in the process of extinction. The programmes for teachers and judicial employees remain as the most
important in terms of coverage and expenditure.
In terms of coverage figure 42, almost 63 per cent of the economically active population was affiliated to the health insurance scheme in 2009. Between 1990 and 2009, affiliation
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averaged 61.8 per cent of the EAP and 88 per cent of the total population. In the case of contributory pensions, they covered a total of 54.8 per cent of the EAP in 2009, up from 43
per cent in 1990. CCSS contributory pensions account for 53.4 per cent of that coverage, while the remaining 46.5 per cent are affiliated to the special schemes. More people belong
to the health insurance scheme than to the pension scheme, possibly due to the existence of a voluntary health programme within the CCSS that increases the share of the population
with access to health coverage.
Figure 42. Costa Rica: Contributory health insurance and pension coverage, as a percentage of the
economically active population EAP, 1990-2009
Source: Ministerio de Planificación Nacional y Política Económica, 2010.
6.4. Non-contributory pensions
Non-contributory pensions covered by budgetary transfers from the Ministry of Finance are also available to particular groups. To become a beneficiary of non-contributory
pension, a person must fall in one of the following categories:
• over 65 years of age;
• between 18 and 64 years of age with a handicap and unable to work;
• widow aged 55-65 years with no other income;
• orphan child;
• student aged 18-21 years not formally working;
• indigent.
Special non-contributory schemes also exist to cover special groups such as former Presidents and war victims. All in all there are 57,437 beneficiaries of non-contributory
schemes in Costa Rica, or 1.3 per cent of the population. In total 89 per cent of this group is covered by the CCSS. According to the Ministry of Planning, the average non-
contributory pension was US118 per month in 2009.
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By 2009 almost 60 per cent of people aged 65 or more received a pension, a proportion that has increased by 27 per cent in the last 20 years. The ratio of contributory to non-
contributory pensioners has also undergone major changes since 1990. In 1990 this ratio was 1.45:1, rising in 2009 to almost 2:1. In other words, non-contributory pensioners,
which accounted for 40.7 per cent of all Costa Rican pensioners in 1990, now make up 34 per cent of the total.
Figure 43. Costa Rica: old-age coverage by contributory and non-contributory old-age pensioners
people over 65 years of age, 1990-2009
Source: Ministerio de Planificación Nacional y Política Económica, 2010.
6.5. Poverty reduction initiatives
As seen in table 9, Costa Rica has a wide range of policy initiatives aimed at reducing poverty, social exclusion and social vulnerability. However, only five are critical in terms
of spending, accounting as they do for more than 80 per cent of poverty-based social spending: the housing programme Bono de vivienda, non-contributory pensions
described above, the school meals programme Comedores Escolares, the early childhood programme CEN-CINAI and the Avancemos conditional cash transfer
programme.
6.5.1. Initial efforts to reduce poverty in Costa Rica: FODESAF
In 1971 President Figueres created the Joint Social Welfare Institute IMAS as the state agency in charge of reducing extreme poverty levels. Then, in 1974, policy efforts to fight
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poverty were complemented with the establishment of the Family Allowances Fund FODESAF, a special fund created to finance poverty alleviation and poverty reduction
programmes. FODESAF is financed by a 5 per cent payroll tax and a 20 per cent sales tax, although this 20 per cent is not always paid up in full. The Fund has four specific features:
• It is a permanent fund.
• It aims at financing programmes geared towards human capital formation.
• It has relatively stable financial resources that do not compete with universal
programme funds. •
It is controlled and supervised like any other public institution.
6.5.2. The Bono de vivienda housing programme
In 1986 the Government of Dr. Oscar Arias created a housing finance scheme and, as part of it, a housing subsidy known as the Bono de vivienda. The primary objective of the Bono
de vivienda fund was to provide financial support to poor families in order to facilitate access to housing. This Fund, administered by the Housing Mortgage Bank, is financed by
resources coming from FODESAF. Under the scheme, the Bank awards housing bonds that currently amount to US10,290 and are granted once only to families, not individuals.
To become a potential beneficiary, a familys total income must be no more than US1,456 per month. Current investment in the housing programme corresponds to 0.3 per cent of
GDP.
6.5.3. The Comedores escolares school meals programme
Costa Ricas school meals programme is the Comedores escolares initiative, created in 1975 with the following objectives:
• To provide students with complementary meals to improve their nutrition.
• To encourage hygiene and good behavioural habits.
• To promote a healthy nutrition.
By 2008 some 598,552 school and high school students approximately 55 per cent of the student population were beneficiaries of the programme and ate at their assigned cafeteria
in the academic centre at least once a week. The programme covered 4,750 academic centres and had a budget equivalent to 0.2 per cent of GDP.
6.5.4. The Avancemos conditional cash transfer programme
In 2006 the Government launched the Avancemos programme, a conditional cash transfer programme aimed at reducing the high-school dropout rate. The initiative was fully rolled
out in 2007. Avancemos is the only conditional cash transfer programme in Costa Rica but not the only scholarship-based initiative. In 1997 the national scholarship fund FONABE
was created to reduce the secondary school dropout rate. In principle, FONABE was the sole body in charge of administering scholarships for the whole education system, but after
2009 the Government decided to move Avancemos to the IMAS. As a result, the dual nature of the programme
– to control dropout and to reduce poverty – was made clear. Primary school scholarships are now managed by FONABE and secondary school
scholarships by IMAS. Coverage under Avancemos has increased dramatically in recent years, from 94,621
beneficiaries in 2007 to 130,469 in 2008 and to 165,749 in 2009. In 2009 Avancemos
