Central America and the Quest for Socioeconomic Stability

 

 

 

 

 

 

Paper by Chitua Alozie

Ethics of Development in a Global Environment

Winter 2003

Professor Bruce Lusignan

 

 

 

            Costa Rica is a rich country, located on the southern tip of Central America. It borders Nicaragua to the north and Panama to the south, and lies in between the Pacific Ocean and the Caribbean Sea. The standard of living is well above that of all other Latin American countries, so much so that it is often given second world status. Costa Rica offers extensive medical care and education. The economy thrives on technological advancement and widespread tourism. Landownership is also rather common. It maintains a lovely tropical climate and landscape, perfect for agriculture and as a vacation spot: from December to April is the dry season and from May to November rainy season. The only natural resource that it has is hydropower, yet it is rich in human resources and agriculture (CIA, 1). 

 

There are just over four million people in Costa Rica. The CIA World Factbook 2002 records that 94% of the population is white or mestizo, 3% is black, 1% Chinese, 1% Amerindian and 1% other (CIA, 3). Many of the immigrants in Costa Rica come from the Caribbean and the other Latin American countries, particularly Nicaragua, as well as from the United States and China.

Sixty four percent of the population is between the ages of 15-64, 31 percent is between 0-14 and 5 percent is sixty-five years and older (CIA). This is quite a contrast to the population of the United States in which there are three times as many people over the age of 65. As a result, the U.S. spends a great proportion of its tax revenue on Social Security and Medicare. 21% of Costa Ricans live below the poverty line (CIA).

Like many countries in Latin American, Christopher Columbus first colonized Costa Rica. He was attracted to the country upon arrival by its beauty and resources. One of the first images he was greeted by was an indigenous native, which Columbus called an Indian, adorned in gold. To Columbus’ mistake, he assumed the gold was real and soon brought disease, corruption, slavery, war and devastation to conquer the land he called “Rich Coast,” or Costa Rica in Spanish. The jewelry the Indians wore only contained very little gold. In fact, the jewelry was a metal alloy. However, the consequences of Columbus’ greed were irreversible. The majority of the natives were killed, marginalized, and diminished. Even today, most of the Costa Rican population is European or mestizo, which is a mixture of “Indian” and European blood (Wee-Cheng, 1). Costa Rica later gained its independence from Spain on September 15, 1821 (CIA).

 

While the Chinese make up about one percent of the population, they maintain close-knit communities in most of the major cities such as San Jose. In an article called “Rice & Beans, Beans & Rice,” Tan Wee-Cheng documents her experiences in Costa Rica. As a Chinese woman, she found significant comfort in the notable Chinese presence—community, restaurants, and overall influence (Wee-Cheng, 1). She was unused to eating beans and rice for every meal of the day, a common practice by Costa Ricans, and “to survive it all” she frequented the Chinese restaurants, which in her opinion serve “the most authentic home-cooked Chinese meals [she has] tried in Latin America.”  Costa Rica maintains one of the largest Chinese populations in Latin America (Wee-Cheng, 1).

 

Costa Rica is unique from all other Latin American countries in that it does not have a standing military. Rather, it diverts more of its financial resources towards education and health care.  The Costa Rican army was abolished in 1949 (Antonio, 1) by Jose Figueres who was president at the time. Although the country does not have a standing army, it does maintain a paramilitary force of 7,500 who are responsible for border patrol and general policing (Tweb, 4). Recently, the legislative assembly has agreed to cooperate with the United States in creating a new general public security law to professionalize local police and proscribe military training (Tweb, 4). Costa Rica uses an approach called ICT—the Information and Communications Technologies, which is an export engine that has significantly contributed to the country’s economic growth of 8.3% of the GNP in 1999 (Accenture, 1). This was the highest growth rate in Latin America. The high standard of living that many Costa Ricans enjoy may be attributed to political stability, its democratic tradition, and emphasis on equal access to health and education for all Costa Ricans. Of all the countries in Latin America, Costa Rica demonstrates that it is possible for each one to be politically and socially stable when it has the right mix of skills, infrastructure, and enterprise (Accenture, 1). Because the country is open to economic investment and world trade, it has developed itself into a feasible location for high-tech industries by providing an educated population and an optimal geographic location. It also has the reputation of being successful with Intel, Microsoft and others. The next step the Costa Rican government is taking is to build technological skills in the population, develop partnerships between the government and business, and to upgrade its already functional telecommunications network (Accenture, 1).

 

Education is free to everyone and is compulsory between the ages of six and thirteen (Tweb, 3). The country has several foreign schools in German, French and English with an academic year that runs from March to November; some of the English schools have schedules that parallel U.S. academic calendar. As opposed to spending a significant percentage of the GDP on military and defense, Costa Rica has redirected these funds to health provision and education, spending about ten percent of the total GDP (Tweb, 3). The results of this effort are evident. In 1999, the illiteracy rate was below 3.5 percent and 18.5 percent of the active population had completed university, technical and para-university studies (Tweb, 3).

 

The country is a democratic republic with a government breakdown similar to that of the United States. The government has executive, legislative and judiciary branches. Much of the executive power is vested in the president—presently Abel Pacheco—nonetheless, the president is aided by two vice presidents and an appointed cabinet (Tweb, 1). In comparison to the United States, Costa Rican presidents are elected for four-year terms and all persons over the age of 18 are enfranchised.

 

The economy depends on agriculture, tourism and the exportation of electronics (CIA). Their largest revenue generator from exports is from electric circuits and microstructures, and the second largest revenue generator is from tourism (Antonio, 1). Their main imports include industrial raw materials, petroleum, industrial capital goods, and durable consumer goods. Costa Rica is a member of the Central American Common Market (CACM), a trade organization that began in 1960 to establish trade between Guatemala, Honduras, Nicaragua, El Salvador and later Costa Rica (infoplease, 1). By the next decade CACM had made advances towards economic integration and increased trade between its member nations by ten since its beginning. In 1967, CACM established a more intimate relationship with the Latin American Free Trade Association to create a basis for a comprehensive Latin American common market (Bartleby, 1). Unfortunately, by the early 1990s the group made little progress towards this common market, partially as a result of internal strife, competition among the members. Rather than work as complementary economies, their economies were competitive. Despite these setbacks, CACM has been judged as one of the more successful trading groups that lowered trade barriers in Latin America. (infoplease, 1)

            During this time period, between the 1960s and 70s, CACM made a large positive impact on the flows of trade in Central America. Exports within the region increased dramatically from seven percent in 1960 to 26 percent in 1970 and were transported through the main ports and harbors in Costa Rica located in Caldera, Golfito, Moin, Puerto Limon, Puerto Quepos and Puntarenas (Memory, 3). Meanwhile, the total value of trade grew from US$33 million in 1960 to US$1.1 billion in 1980 (Memory, 3). Before 1970, 95 percent of all goods traded within Central America attained duty-free status. The goods that were exempted from free trade within this region consisted mainly of traditional agricultural exports destined for global markets (Memory, 4).

            The majority of the trade within the region was mainly in consumer goods and processed foods. By 1970 food processing was the largest industrial activity within CACM and it accounted for half of total gross industrial outputs (Memory, 2). Additionally, the trading group promoted investment in industry by creating generous tax incentives and exemptions for new and existing industrial companies. CACM also introduced the implementation of regional infrastructure developmental projects as an incentive to industrial development. Organizations specializing in infrastructure development were established during the 1960s to improve transport and communication within the region. The following organizations are among those created: the Regional Telecommunications Commission (Comisión Técnica de las Telecomunicaciones de Centroamérica-- Comtelca), the Central American Corporation of Air Navigation Services (Corporación Centroamericana de Servicios de Navegación Aérea--Cocesna), the Central American Maritime Commission (Comisión Centroamericana de Transporte Marítimo--Cocatram), and the Central American Railways Commission (Comisión Centroamericana de Ferrocarriles--Cocafer) (WTO, 1). “These organizations were financed mainly by the Regional Office for Central America and Panama (ROCAP) of the United States Agency for International Development (AID) as part of the Alliance for Progress initiative (Library of Congress, 1). AID/ROCAP also financed a Regional Highway Program to improve highway routes considered vital to intraregional trade” (Library of Congress, 1). Policies and programs to encourage trade include Free Trade Zone law and duty free export of products to the US, Mexico and Central America, and reduced duties to the European Union.

Costa Rica’s trade relations breaks down in the following manner:

Imports:

            U.S. 53%

            E.U. 10%

            Mexico 6%

            Venezuela 5%

            Central America 5%

Exports:

            U.S. 52%

            E.U. 20%

            Central America 6%

            Puerto Rico 5%

            Mexico 5%

 
Costa Rica began its participation with GATT—the General Agreement on Tariffs and Trade—in 1990 and since then has actively been involved in the multilateral trading system. In order of descending importance, Costa Rica’s major trading partners include the U.S., the E.U., Mexico and Central American countries—as listed above. The average tariffs are significantly higher for agriculture than for industrial products. The WTO maintains that “as part of its market access commitments under the WTO Agreement on Agriculture, Costa Rica established tariff quotas for various agricultural products, (e.g. certain dairy and poultry products), although in almost all cases the filling levels have been low. Tariff reductions under preferential agreements have also contributed to greater access to Costa Rica's market” (WTO, 2). Please see Appendix B for more information.
The Ministry of External Trade holds the main responsibility for trade policy implementation in Costa Rica, according to a recent economic update by the WTO, which has focused on integrating the country into the world economy. Resultantly, trade in goods and services rose from about 78 percent to almost 100 percent (97%) in the five years between 1995 and 2000 (WTO, 2).

 

Costa Rica has created one of the “most attractive investment environments” in Latin America for development in the high-tech industry. The country has characteristics that make Costa Rica unique and attractive to investment by high-tech companies from power and system integration technologies and call centers. These characteristics include its beautiful and strategic location, political stability, free trade zones, the supply of human capital and the government’s active promotion of these resources. Since 1995, foreign electronic companies—including Intel, Microsoft, Lucent Technologies and Siemens—have placed plants in Costa Rica (Accenture, 1). As a result of the increase of certain technological industries, the balance of trade has been balanced by the significant increase in exports. Furthermore, Costa Rica has established generous pay and stock options for workers, as well as created new standards of efficiency and safety that are being imitated by local businesses (Accenture, 1).

There are also an abundance of opportunities for growth and expansion of franchising within the country. Corporate and individual entrepreneurs appreciate the opportunities that franchising systems offer. “Franchising is viewed as a way of entering the free market without necessarily possessing extensive knowledge of an industry. The Internet is the primary source of information for local franchisees about potential new franchise opportunities. Approximately 4,000 Costa Ricans are employed by various franchises” (Accenture, 1).

 

Another important aspect of the Costa Rican economy is tourism. Costa Rica is one of the most popular countries for tourism, ecotourism, and retirement. The country has “successfully pioneered ecotourism” (Wee-Cheng, 1). About one million tourists—from the U.S., Europe, and Asia—visit Costa Rica each year to partake in the country’s wildlife, rainforests, and beautiful landscape. Several Americans choose to reside in Costa Rica after retirement to enjoy the country’s fertile lands, beautiful beaches and biodiversity. In doing a simple Google search, it is amazing that almost all of the sites that appear are for tourists and other travelers. Only with more specific searches does Google display information pertaining to the country’s profile and other specific facts. According to the ‘Official Site of the Costa Rica Tourism Board’:

Considered one of the most bio-diverse regions in the world, Costa Rica boasts 20 national parks, 8 biological reserves, and a wealth of other protected areas that have captivated lovers of ecotourism for decades. The variety of activities include horse-back riding, hiking mountainous paths in the cloud forests, and guided bird-watching tours. (VisitCostaRica, 1)

 

            The fact that the country does not have a military bolsters the confidence of foreign tourists in Costa Rica; many feel safer about being in this country over all other Latin American countries. Even after the attacks of September 11, 2001 the amount of tourists in Costa Rica continues to grow. While tourism is a major industry, there are several laws that restrict its growth to maintain sustainability. Ruben Pacheco, the Minister of Tourism, proudly proclaims that as minister he has been stern about implementing certain laws to protect the country’s land and people by limiting the size of the tourist industry. He says: “The fact that over 80% of all our hotels are under 50 rooms is a prime example of sustainable tourism development. The fact that our tourism incentive law stipulates that a hotel that wishes to receive incentives must not build taller than the tallest tree, that it can not build with a greater density than 20 rooms to a hectare, that it can not build on land that is at more than a 30% incline, that it must properly dispose sewage and drainage waters, etc. is also an extraordinary example of our implementation of sustainable tourism. And maybe our greatest contribution in this area is the design and implementation of the Certification for Sustainable Tourism Program (CST) that will eventually revolutionize the way the greater part of the world does tourism” (International Reports, 1).

 

Although Costa Rica is far ahead of its neighboring countries, it maintains a large fiscal and trade deficit. The WTO published a summary on the economy of Costa Rica. Below (as well as in Appendix C) is an excerpt from the WTO Trade Policy website describing the economic developments of the country:

Between 1995 and 2000, real GDP grew at an annual average rate of 4.7%. Growth was particularly strong in 1998 and 1999, when GDP rose at an annual average rate of just over 8%. This resulted in good part from major construction projects undertaken in free zones and, subsequently, sharp export increases from the new facilities. Economic growth fell sharply in 2000 as construction ended and exports contracted, but was expected to rebound somewhat in 2001. Per capita GDP stood at close to US$4,100 in 1999. In per capita terms, real GDP grew at an annual average rate of 2.2% over 1995-2000, while disposable national income grew at only 0.5%, the difference being mainly explained by profit remittances associated with free zone activities.

Since Costa Rica's previous Review, persistent deficits in Central Government and Central Bank operations have kept the public fiscal deficit consistently high. In part as a result, total public debt is high, having reached the equivalent of 54% of GDP at the end of 2000. The public deficit has traditionally been financed through the issuance of domestic debt, putting pressure on domestic interest rates and contributing to the relatively high cost of credit. The authorities have succeeded in reducing the inflation rate, which fell from 23% in 1995 to 10% in 2000.

Exchange rate policy has sought to maintain the external competitiveness of domestic goods through daily adjustments of the exchange rate on the basis of the differential between inflation in Costa Rica and its main trading partners. Since 1995, the current account balance has registered important deficits, over 1995-97 due mainly to the trade deficit and from 1998 to the widening of the factor services deficit: the latter resulted from the sharp increase in profit remittances associated with the expansion of free zones activities. Deficits were partly covered by foreign direct investment inflows. The balance of trade in non-factor services has traditionally been positive mainly due to tourism exports. The structure of merchandise exports has changed substantially due to the expansion of electronic components and the stagnation of agricultural exports. The share of agricultural products in total exports dropped from 68% in 1995 to some 30% in 1999 (WTO, 2).

 

 

Costa Rica is currently pushing for economic developments that will enhance the country’s economy. One of these initiatives, called the Plan Puebla Panama, is one of the most controversial proposals for Central America. Starting in 2001, it is a multi-billion dollar infrastructure development plan designed to attract large corporations and entice investment in eight countries, including southern Mexico, Guatemala, Belize, Nicaragua, Costa Rica, El Salvador, Honduras and Panama. It has been met by opposition by human rights activist groups that claim the plan neglects the more important issues—poverty and socioeconomic inequalities.

The Mexican president Vicente Fox is implementing Plan Puebla Panama (PPP), an infrastructure development plan to occur in the eight countries mentioned above. It is a twenty-five year, multi-billion dollar initiative sponsored by the Inter-American Development Bank designed to boost the economies of the aforementioned Central American countries, including Mexico. “It includes massive agribusiness and biotechnology projects as well as the construction of megahighways, dams and factory zones throughout southern Mexico and Central America” (IDEX, 1). Accordingly, in order to develop this vision of economic advancement, the PPP project seeks the widespread support of several developed countries—to provide financial support in the form of loans and investment from large corporations—and the cooperation of the countries involved in the initiative.

The plan has eight major components: sustainable development; human development; prevention and mitigation of natural disasters; tourism promotion; facilitation of trade; highway integration to link and improve highways along the Pacific and Atlantic coasts; energy interconnection; and integration of telecommunication services (CIEPAC, 2). Human and sustainable development includes assisting disadvantaged groups such as farmers, indigenous communities and Afro-Caribbean peoples (CIEPAC, 2). PPP administrators hope to encourage the participation of these groups in programs for the environment and usage of natural resources. Facilitating trade is an initiative that will eventually eliminate non-tariff barriers and other obstacles to interregional commerce. The telecommunications and electrical interconnection aspects of PPP will create a regional fiber optic network, called the Electrical Interconnection System for Central America Project. The main objective is to link the electricity grids of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

“The PPP made headway in June, 2001 at a meeting of the heads of state of Mexico, Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica, and Panamá in San Salvador. Together with the governors of Mexico's southern states of Campeche, Chiapas, Guerrero, Oaxaca, Puebla, Quintana Roo, Tabasco, Veracruz, and Yucatán, the leaders agreed to the outlines of Fox's ambitious plan.” (JN, 1)

 

 

 

The Fox administration pitches the plan as a way to extend the benefits Mexico receives from its relationship with the United States to the rest of Central America through infrastructure projects (Bounds, 1). Amidst mass criticism, the administration maintains that the project was created and will be implemented in the best interests of the Central American people. In one of his recent speeches at a summit with the seven mid-American countries, Vicente Fox stated that Plan Puebla Panama could “end the backwardness of the region in order to incorporate it fully in the corridors of world commerce” (Bounds, 1). The plan is to mirror and/or build off of the well-established international unions, such as the European Union. For example, the plan intends build a land bridge connecting the Gulf of Mexico and the Pacific with ports, railroads, highways and electricity and telecommunications projects throughout the region (Summit, 1). Neutral sources hold that while Plan Puebla Panama recognizes indigenous rights and cultures, it does not seem to address the flagrant poverty and socioeconomic inequalities in these areas (Summit, 1). Although similar plans have been proposed and almost implemented in the past, they were stopped by civil wars from old rivalries and insecurity. This time around, President Vicente Fox, as well as the presidents of the U.S. and Central America, sees much more potential in this plan.

President Fox’s Plan Puebla-Panama is an initiative to change the impoverished and broken region and to share the benefits of Mexico’s relationship with the United States with the rest of Central America in the form of developed infrastructure (JN, 2). The aim is to end corruption in the region and incorporate it into world commerce. El Salvadorian president Francisco Flores fully supports the plan because it will promote the creation and improvement of roads and telecommunication links. Mexico hopes to accomplish these goals by attracting investment from private firms. Electrical interconnection will in large part be financed by the Interamerican Development Bank. This interconnection will eventually become a single grid from Panama to Canada with electricity generated in Mexico, from Mexican gas. The grid will cover 28 million people in Mexico and 37 million people in Guatemala, El Salvador, Honduras, Belize, Nicaragua, Costa Rica and Panama (RCA, 1).

The model Plan Puebla-Panama hopes to create for Central America will be along the lines of the European Union. However, old rivalries and insecurity have undermined the process. For example, in Nicaragua territorial conflicts with Honduras and Costa Rica are continual, as well as between El Salvador and Honduras, and Guatemala with Belize. There have also been military clashes between Nicaragua and Honduras. The intervention will hopefully help these countries overcome these differences.

Not everyone supports the United States- Mexico plan. Grassroots organizations, as well as environmentalists and human rights activists have attacked Plan Puebla Panama as an initiative that will exploit the biodiversity and cheap workforce of Central American countries. Although Plan Puebla Panama seems to be a project that is in the best interest of all parties—big business, the inhabitants of each country, the economies, the leaders, etc—it has been met with fierce opposition by several Human Rights Activist groups. Below is a list of the organizations involved in resisting Fox’s widespread economic development and collaborative plan, as well as their focus and reasons for resisting PPP.

IDEX is an organization that promotes economic justice for low-income communities all over the world (IDEX, 1). It recently joined NO PPP, an international network of organizations desiring to counter the plan and create positive alternatives to reach the objectives of the PPP. In contrast, ACERCA—Action for Community and Ecology for the Regions of Central America (a project of ASEJ—Action for Social and Ecological Justice) does not propose positive alternatives to the PPP. Their viewpoint is more negative; they do not see any of the aspects of PPP as positive or as a benefit to these countries. They denounce PPP as a form of corporate globalization. The Foro Mesoamericano is an organization against the globalization of Central America (Perales, 1).

Besides these few groups mentioned above, there exists a plethora of organizations whose mission is to counteract the Plan Puebla Panama. Although each group has a different objective and a different solution to the perceived problem, the main argument is that Plan Puebla-Panama is an initiative to weaken the indigenous groups in Central America. All agree that it is a plan designed by the United States and promoted by Mexico’s new president, Vicente Fox. One article stresses that this U.S. proposal has been created years ago; however, it was not implemented until now because our government was waiting for the appropriate political conditions: a well-liked, “democratic” Mexican president. They uphold that these conditions were predisposed and prearranged in order to execute PPP, and that in reality, PPP is closely linked with the Mesoamerican Biological Corridor, the American Energy Plan, System of Electrical Integration for Central American Countries, March to the South, Plan South and Operation New Horizons (Luna, 1). They also claim that PPP is just one aspect of the Free Trade of the Americas treaty, which facilitates trade and investment among all involved countries.

These organizations oppose PPP for the following reasons (according to these groups only).

1.                          PPP will displace marginalized communities—indigenous groups and afro-descendants, and peasants (Luna, 2).

2.                          It is called “the colonization of the Americas” (ACERCA, Article 2)

3.                          ASEJ accuses PPP of being a plan to “transform much of southern Mexico and Central America into a network of transit corridors and maquiladors (sweatshop) zones.”

4.                          Carlos Torres of the Association of Indigenous Communities of the Northern Zone of the Isthmus (UCIZONI) stated that the PPP “means the immediate expulsion of our communities from our lands” (ACERCA, Atr. 2).

5.                          This project will privatize water, health and education, and will result in the denial of their basic rights to water, health, and education (O’Neill, ACERCA).

6.                          Controversial budgeting practices. It is claimed that of the Mexican budget, only 2.9% is being devoted to health or social development projects while 82% is for transportation funding (Call, 1).

7.                          The plan presents a serious risk to rich biological and cultural diversity of the region (Call, 2).

 

An article entitled “Resisting the Plan Puebla Panama,” proposes that in place of Plan Puebla-Panama the governments of the Central American countries should replace PPP with a development plan that “supports rural development and enhances food security; does not rely on assemby plant maquiladoras and agroexports; respects the diverse cultures and customs of the region; protects biodiversity; provides local communities with electrical power not based on large-scale dams; and involves affected communities in planning aqnd implementation phases” (Call, 2). The public sentiment seems to be disappointment in their lack of involvement in a proposal that will so greatly affect them.

            Because the arguments for and against Plan Puebla-Panama are quite contradicting, it is difficult to discern the true intentions of both the pro and con groups. Of noticeable mention is the fact that almost all of the websites in opposition to the project have the exact same wording. This indicates that the arguments, main points and literature on each website all come from the same source. Not only are the arguments questionable, but also rather suspicious because most of the material is unoriginal. Additionally, there are very few websites that are in support of the project. The small number of websites that detail the project in a positive light are written in Spanish.

           

            Nonetheless, Plan Puebla-Panama is a positive incentive that should not be stopped in order to bring economic vitality to Central America. The initiative will also assuage the longstanding bitterness between the Mexican government and the Zapatistas, a left-wing organization struggling to obtain equal rights for indigenous Mexican tribes. President Fox has placed a high priority on resolving long-standing tensions in Chiapas and is behaving in a reasonable fashion; he recently agreed to compromise with the radical group about obtaining rights for indigenous groups in Mexico. Soon after taking office, Fox released several Zapatista prisoners and removed roadblocks and patrols from an area within the conflict zone where a march for indigenous dignity was to be held (Stein, 2).

            The rights of indigenous populations have always been a controversial subject and an issue for natives. The Aztecs in Mexico and the Mayans in Guatemala have fought for centuries to maintain their lands.

            In Mexico, the indigenous groups in Chiapas declared war on the Mexican Government over five years ago. They have organized a rebellious group, the Zapatistas, which has three main demands of its government: democracy, liberty and justice (ZapatistaRevolution, 1). The government clearly did not tolerate the demands or violent methods of the Zapatistas; children of families who support the Zapatistas have been denied access to government schools.  While many indigenous families maintain that a child does not need government education to learn about the world and while many refuse to send their children to schools that teach them to deny their own culture, beliefs and values, this attitude often creates a downward cycle of denial and rejection for these communities (Stein, 4). The uncompromising nature of the Mexican government resulted in violence on several occasions.

 

It is important to recognize that basic education can play a pivotal role in overcoming material poverty. Alienation and poor self-esteem inevitably translate into lower retention and graduation rates, and the cycle of material poverty continues. According to Mario Ruben Noj, a Kiche Mayan working with an Indigenous organization to make the education system more sensitive and relevant to Guatemala’s various cultural groups, “All people have the right to pass down to their children the knowledge and wisdom they have gained over time and which defines their identity ...The education which we want to promote in our pluricultural and multilingual society is one that does not promote the idea of control and domination of nature, but one that provides our children with a vision of the world which looks beyond an obsession with economic growth and preserves our spiritual relationship with nature” (Oxfam, 5).

The struggle of indigenous peoples exists throughout the world and usually calls for culturally appropriate education and territorial rights as part of their right to maintain their own culture, language and worldview. Another organization called the Community Aid Abroad is working to help to achieve these rights in Central America by supporting other organizations with similar goals.

            As the new president of Mexico, Fox has offered to talk with Mexico’s rebel groups. He recently toured Chiapas with the intention of circulating ideals of self-reliance and development, and discouraging uprisings. Plan Puebla-Panama is a scheme that will aid rural development to help the corn and coffee farmers of Chiapas. He hopes that they will first begin helping themselves, rather than looking toward the government for hand-outs, saying that it is up to everyone and their families to take advantage of what there is to offer (Ruiz, 1). Although Fox has visited Chiapas several times to speak with indigenous groups, he has yet to speak directly with the Zapatista rebels, who are located mostly in the mountainous eastern part of the state. His talks in Chiapas address the Zapatistas, calling for “peace, harmony, and coexistence” in Chiapas (Ruiz, 1).

            President Fox pledged to do all that it takes to solve the conflict in Chiapas. He is making earnest efforts to encourage peace in all of Mexico by offering to speak with other guerrilla groups—several leftist groups smaller than the Zapatistas. Fox is trying to communicate that the doors of compromise are open, and that violence does not solve anything, neither do street protests and pressures. The main goals is to investigate how all people in Mexico can benefit from the EU-Mexico free trade agreement that took effect on July 1st last year (Chiapaslink, 1). Fox emphasizes his determination to end the armed standoff in Chiapas between the government and the Zapatistas fighting for indigenous rights.

            The main reason President Fox has not yet met with the Zapatistas directly is because they have been unwilling to meet with him. The President is disposed to removing all obstacles in the way preventing Chiapas from achieving economic and human development, thus Plan Puebla-Panama. Furthermore, after immediately entering office he agreed to revitalize the San Andres peace accords from 1996, which were, in reality, never put into effect by the former president’s administration, Ernesto Zedillo. The only step that now remains is for the Zapatistas to respond to these offers.

                The San Andres Accords from 1996 was an agreement between the Zapatista National Liberation Army (EZLN) and the Mexican government. This contract resulted from dialogues that had been ongoing between the two parties, focusing on indigenous rights and cultural preservation. The main components are listed explicitly online and are summarized below.

  1. Basic respect for the diversity of the indigenous population of Chiapas;
  2. The conservation of the natural resources within the territories used and occupied by indigenous peoples;
  3. A greater participation of indigenous communities in the decisions and control of public expenditures;
  4. The participation of indigenous communities in determining their own development plans, as well as having control over their own administrative and judicial affairs;
  5. The autonomy of indigenous communities and their right of free determination in the framework of the State; (San Andres Accords, 1)

As a result of the peace accords, many parties felt a sense of relief, that Chiapas and the Mexican government had finally reached understanding and peace, and that both sides were sincere in their efforts to maintain open dialogue (Global Exchange, 1). From this newly defined relationship, EZLN and the Mexican administration would devise more ways to address other important issues, such as poverty and the improvement of living conditions in indigenous communities, democracy, justice, well-being, development, and the situation of women in Chiapas (Global Exchange, 1).

However, in the following months communication deteriorated. What the indigenous communities of Mexico saw instead of peace was infiltration of the Mexican military and paramilitary groups. According to CONAI, the independent mediator of the dialogue between both parties, “...the Federal Government refused to talk, or bring advisers and independent guests to the second round of discussions centering around issues of Democracy and Justice” (Global Exchange, 1). Consequently, the Zapatistas decided to retreat from its relations with the government and continue as before until the government followed through on its promises. This time, the Zapatistas had new demands:

  1. The installation of the Implementation and Verification commission for the San Andrés accords, as well as the fulfillment of the part of the San Andrés Accords that specifically addressed the issues of the indigenous rights and cultures.
  2. That the Federal Government present a proposal that specifically addresses issues of democracy and justice.
  3. Liberation for the political prisoners accused of being Zapatistas, as was agreed upon during the construction of the Dialogue and Conciliation Laws signed on the 11th of March 1995, signed by both the Mexican Government and the EZLN.
  4. An end to the low intensity warfare initiated by the government, and including the disarming of paramilitary groups in the northern zone of Chiapas.
  5. The designation of a governmental delegation with the capacity to help resolve the conflict with full respect of the Zapatista mediation body. (Global Exchange, 2)

As relations between the government and the Zapatistas worsened, the Commission of Concordia and Pacification (COCOPA), the monitoring body of the federal congress in charge of resolving dialogue, began to seek a resolution by converting the San Andres Accords into an official legal legislation. Their plan was presented to the government and the Zapatistas near the end of 1996, at which EZLN agreed to the terms they presented and signed the proposal (Global Exchange, 3). At the time, the government was in agreement with the proposal; however, days later, it rejected COCOPA’s proposal. Instead, the government presented a counterproposal that contained principles different from those originally established in the San Andres Accords. Not only were the government’s editions different, they went completely against the purpose of the peace accords. Not surprisingly, EZLN and the government were again in discord. This situation erupted into violence and disharmony, and according to many, the government used this as an opportunity to characterize the Zapatistas as uncivilized, uninterested in obtaining peace, and uncompromising (Global Exchange, 4).

The chart below outlines the proposal that the Commission of Concordia and Pacification presented to the government and the Zapatistas. It was taken from the website of an organization called Global Exchange, which details various campaigns around the world. It presents both sides of the argument from a neutral, unbiased perspective. The document below addresses the original concerns of indigenous rights. Alongside of COCOPA’s proposal is that of the Mexican government. The discrepancies are flagrant and astounding.

COCOPA Initiative, November 20, 1996

Mexican Federal Government's most recent counter proposal to the COCOPA initiative, Marth 15th, 1998

The Mexican Nation has a multicultural population originally based on its indigenous communities, being those directly descended from the people who inhabited this country at the time of colonization and before the establishment of the borders of the United States of Mexico, and who, whatever their legal situation, preserve their own social, economic, cultural, and political institutions, or part of these. The indigenous communities have the right to free determination and the like expression of this, as subjects of an autonomous body, as part of the State of Mexico in order:

The Mexican Nation has a multicultural population originally based on its indigenous communities, being those directly descended from the people who inhabited this country at the time of colonization and before they established the current borders of the United Sates of Mexico and who, whatever their legal situation, preserve their own social, economic, cultural, and political institutions, or part of these. With respect to the other provisions of this Constitution and the unity of the State of Mexico, the indigenous communities have the right to free, self-determination, the concrete expression of that right to the autonomy of the indigenous communities, in order to:

I. To decide their internal forms of social, economic, political and cultural organization

I. To decide their internal forms of social, economic, political, and cultural organization

II. To apply their normative systems in the regulation and solution of internal conflicts, respecting individual guarantees, human rights, and in particular, the dignity and integrity of women; their procedures, judgements, and decisions will be confirmed by the judicial authorities of the state.

II. To apply their normative systems in the regulation and solution of internal conflicts, respecting individual guarantees, human rights, and in particular, the dignity and integrity of women; their procedures, judgements and decisions will be confirmed, within the boundaries that the laws signal, by the legal authorities of the State.

III. To elect their authorities and exercise their internal forms of government in agreement with their norms in the confines of their autonomy, guaranteeing the participation of women under the conditions of equity.

III.To elect their authorities and exercise their internal forms of government in agreement with their norms, guaranteeing the participation of women under the conditions of equity

IV. To strengthen their participation and political representation in accord with their specific cultures.

IV. To strengthen their participation and political representation in conformity with their traditions.

V. To have collective access to the use and benefit of the natural resources of their lands and territories, understood as the totality of the habitat that indigenous communities use and occupy, except that which corresponds as the direct dominion of the Nation.

V. In agreement with the forms and modalities of property provided for in article 27 of this Constitution, To have collective access to the to the use and benefits of the natural resources, except that which correspond as the direct dominion of the Nation.

VI. To preserve and enrich their languages, knowledge and all of the elements that make-up their culture and identity, and

VI. To preserve and enrich their languages, knowledge, and all of the elements that make up their culture and identity, and

VII.To acquire, operate, and administrate their own modes of communication.

VII. To acquire, operate, and administrate their own modes of communication, in the terms to be provided under the applicable laws.

The Federation, the states, and municipalities must, in the limit of their respective jurisdictions, and with the attendance of the indigenous communities, promote their equitable and sustainable development, and bilingual and intercultural education. Also, they must impel the respect and knowledge of the diverse cultures that exist in the nation, and combat all forms of discrimination.

The Federation, the States, and the Municipalities must in the limit of their respective jurisdictions, and with the attendance of the indigenous communities, promote their equitable and sustainable development, and bilingual and intercultural education. Also, they must impel the respect and knowledge of the diverse cultures that exist in the nation, and combat all forms of discrimination.

The federal, state, and municipal education authorities, in consultation with the indigenous communities, will define, and develop educational programs of regional content, in which the cultural heritage of indigenous communities will be recognized.

The Federal Executive, in consultation with the indigenous communities, will define, and develop educational programs of regional content, in whichthe cultural heritage of indigenous communities will be recognized.

The state will also impel specific programs that protect the rights of indigenous migrants as much in the national territory as in foreign territory.

The state will also impel specific programs that protect the rights of indigenous migrants as much in the national territory as in foreign territory; the latter will conform to the principles of international right.

To guarantee the complete access of indigenous communities to the jurisdiction of the state, in all judgements and procedures that involve indigenous individually, and collectively. In this process they will take into account their legal practices and cultural specifics, respecting the precepts of this Constitution. The indigenous will have at all times the right to be assisted by interpreters and public or private defense attorneys, that have knowledge of their languages and cultures.

To guarantee the complete access of indigenous communities to the jurisdiction of the state, in all judgements and procedures that involve indigenous people, they will take into account their practices and cultural specifics, respecting the precepts of this Constitution. The indigenous will have at all times the right to be assisted by interpreters and defense attorneys, that have knowledge of their language and culture.

The state will establish institutions and policies necessary in order to guarantee the rights of indigenous communities and their integral development, which must be designed and operated jointly with the said communities.

The State will establish the institutions and policies necessary in order to guarantee the rights of Indigenous communities and their integral development, which must be designed and operated jointly with the said communities.

The Constitutions and the laws of the States of the Republic, conforming to their particular characteristics, will establish the pertinent modalities for the application of the principal parts, guaranteeing that this Constitution recognize the rights of indigenous communities. Males and females are equal before the law.

The Constitution and the laws of the States of the Republic, conforming to their particular characteristics, they will establish the dispositions and pertinent modalities for the application of the principal parts, guaranteeing the rights that this Constitution grants to the indigenous communities.

Article 115.
The States will adopt...
I. Each municipality...
II. The municipalities...
III.The municipalities with the attendance of the states...
IV.The municipalities will administrate freely...
V.The municipalitiesWithin the terms that the local legislation establishes, the population nucleus will participate in the municipal development plans and the programs that derive from these. In each Municipality mechanisms of citizen participation will be established in order to help the municipal government in the programming, exercise, evaluation and control of the resources which are destined for social development including those of federal origin.
VI...VIII

Article 115
The State will adopt...
I.Each municipality...
II.The municipalities...
III.The municipalities with the attendance of the states...
IV.The municipalities will administrate freely...
V.The municipalities
Pursuant to the corresponding federal laws and the relative states, the municipalities will be authorized to formulate, approve and administer the zonification, as well as the municipal and urban development plans and programs; to participate in the creation and administration of their territorial reserves; to control and watch over the utilization of the land in their jurisdictional territories; to intervene in the regularization of the tenure of urban land; to grant licenses and permits for construction, and to participate in the creation and administration of ecological reserve zones. For such effect and of conformity to the final parts of the third paragraph of article 27 of this Constitution, they will expedite the regulations and administrative dispositions necessary.

Within the terms that the local legislation establishes, the population nucleus will participate in the municipal development plans and the programs that derive from these. In each Municipality, mechanisms of citizen participation will be established in order to help the municipal government in the programming, exercise, evaluation and control of the resources which are destined for social development including those of federal origin.
VI...VII

IX.The self-determination of indigenous communities will be respected in all of the limits and levels according to their autonomy, with the capacity to encompass one or more indigenous communities, in agreement to the particular circumstances and specifics of each federative entity. The indigenous communities as bodies of public law, and the municipalities that recognize their pertinence as indigenous communities, will have the right of free association in order to coordinate their actions. The competent authorities will fulfill the ordered and gradual transfer of resources, in order that those same will administer the public funds that they assign them. It will correspond to the State Legislatures to determine, in its case, the functions and faculties they could then transfer.

IX. In each Municipality, the indigenous communities will have the right of free association in order to coordinate their actions for the promotion of their economic and social development.

In the end of the last paragraph of the 3rd part of this article, the Municipalities with a majority indigenous population will be able to coordinate and associate in order to promote their development. The competent authorities will transfer in an ordered manner the resources that they assign these Municipalities, for their direct administration by the same, and

X. In the municipalities, communities, town council auxiliary bodies and similar authorities that they are made up of indigenous communities, the inhabitants will have the right to decide, in accordance with their political traditions, the procedures for the election of their authorities or representatives, and for the exercise of their own forms of internal government that secures the unity of the National State. The local legislation will establish the bases and modalities to secure the complete exercise of this right. The legislators of the States will be able to proceed with the re-municipalization of the territories which are defined as indigenous communities, which must be carried out in consultation with the involved population.

X. In the Municipalities with an indigenous majority, the local legislation will establish the grounds and methods to ensure the participation of the indigenous communities in the formation of the municipal governments, auxiliary organisms and similar instances. When approving new Municipalities, the state legislatures will take into account the geographic distribution of the indigenous communities, and the prior consultation of the involved populations.

Article 18
Only by crime that merits.
The governments...
The governors...
The Federation...
The culprits of nationality...
The indigenous will be able to carry out their sentences preferentially in the establishments closest to their residence, thus propitiating their reintegration to the community as part of an essential mechanism of social readaptation.

Article 18
Only by crime that merits.
The governments...
The governors...
The Federation...
The culprits of nationality...
The indigenous will be able to carry out their sentences preferentially in the establishments closest to their residence, thus propitiating their reintegration to the community as part of an essential mechanism of social readaptation.

Article 26
The State will organize...
The finality of the project...
The law will authorize...
The corresponding legislation will establish the necessary mechanisms in order that the plans and programs of development will take into account the indigenous communities in their necessities and their specific cultures. The State will guarantee them their equitable access to the distribution of national riches.

Article 26
The State will organize...
The finality of the project...
The law will authorize...
The corresponding legislation will establish the necessary mechanisms in order that the plans and programs of development will take into account the indigenous communities in their necessities and their specific cultures. Also, they will promote equal opportunities in order that the indigenous communities, based on their own effort, will have equitable access to the distribution of the national riches.

Article 53
The territorial demarcation...
In order to establish the territorial demarcation of the directly elected representatives and the circumscription of the representationally elected representatives, consideration must be given to the location of indigenous communities, in order to assure their participation and political representation at a national level.
For the election.

Article 53 The territorial demarcation...
In order to establish territorial demarcation of directly elected representatives, consideration must be given to the location of indigenous communities, in order to assure their participation and political representation at a national level.

Article 73
The Congress has the capacity.
I...XXVII
XVIII. To expedite laws that establish the concurrence of the Federal Government, the states and municipalities in the limit of their respective competencies, respect of the indigenous villages and communities, with the object of fulfilling the final provisions of the articles 4 and 115 of the Constitution;

Article 73
The congress has the capacity
I...XXVII
XVIII. To expedite the applicable laws on the responsibilities of the Federal Government respectful of indigenous communities, and the form in which this will be coordinated with the state governments and municipalities, with the object of fulfilling the final provisions of the articles 4 and 115 of the Constitution;

Article 116
The public power of the states...
1...
2. The number of representatives...
The deputies of the legislature...
In the electoral legislation...
In order to guarantee the representation of indigenous communities in the legislature of the state by the principal relative majority, the electoral districts must adjust in accordance with the geographical distribution of the said commentates.

Article 116
The public power of the states
1...
2. The number of representatives...
The deputies of the legislature...
In the electoral legislation...
In order to guarantee the representation of indigenous communities in the state legislature, in the demarcation of electoral districts, consideration will be given to the geographic distribution of the said communities.

(Global Exchange, 2).

The two documents run counter to each other. While COCOPA’s proposal gives more rights to indigenous populations, the government’s document completely limits their rights.

            Since Vicente Fox became the president of Mexico, he has been determined to change communication relations between the government and the Zapatistas. It is clear that he wants to bring an end to the bitter relations between Zapatistas and the government; however, his sincerity is still being questioned by the Zapatistas, despite his diligent efforts to keep peace in Chiapas. As part of his strategy to reach negotiations with EZLN, Fox initiated a series of initiatives that will establish trust between the two groups. To start, the Mexican army was ordered to retreat from their positions in the indigenous communities of Chiapas, and several prisoners were released. 53 military checkpoints were dismantled; patrolling was suspended, as were flights in the conflict zone (Stein, 1). He also supports the proposal made by COCOPA to Congress for ratification, underlining respect for the rights in native Mexicans. Fox’s desire to obtain peace and reach an agreement with the rebellious groups is also testament in his Plan Puebla-Panama. He acknowledges autonomy for the Indians and foresees instruments to guarantee that they have access to political representation, material resources, proper judiciary support and education, and protection of their own traditions and cultures (Stein, 1). To reiterate:

President Fox's government also favoured the right environment of openness and tolerance so that the march of the leaders of the EZLN to Mexico City would culminate in complete safety and without any kind of eventualities. As a result of this political initiative, on the 28th of March, the 23 commanders of the EZLN attended the Lower House of Congress to take part in the joint session of the Commissions that examine the initiative for the constitutional reform on Indian rights and culture.

On the 25th of April, the Senate approved by unanimity the constitutional reform on Indian rights and culture. This initiative proposes reforms to articles 1, 2, 3, 18 and 115 from the Political Constitution and adds four transitory articles. This historic reform has the aim to guarantee constitutional rank to the rights of the indigenous people as an integral part of the Mexican nation, as well as its right to free determination and autonomy. Likewise, the initiative defines the right of the indigenous communities to co-ordinate and associate themselves within the municipality. (Mexican Embassy, 3)

 

            The reaction of Mexican society is in favor of the government’s actions. They are in full support of the dialogue and of peace talks between the two parties (Mexican Embassy, 3). Approval of this initiative will demonstrate the ability of Mexico, as a democratic nation, to achieve peace between the government and the indigenous communities of Chiapas, a feat that has been difficult for former Mexican administrations to reconcile for decades.

            Almost all Central American countries have faced similar sociopolitical challenges. Guatemala has experienced decades of strife between Mayan communities and the government. It is a country with one of the largest surviving indigenous populations in the world. 70% of Guatemalans are of Mayan descent, and several of these groups are still struggling to maintain their lands (Oxfam, 2).

                The road to compromise is not easy. Native Mayan communities have been victim to violence and repression by the government, in which over 100,000 people were murdered, 50,000 disappeared and over half a million were made homeless (McLaughlin, 1). As has been demonstrated by the example of Chiapas, it can take several years before any kind of agreement is reached. Indigenous rights are continually denied as obstacles are repeatedly placed before them—a new political structure, political corruption, and greed.

            Several human rights activist groups exist to support these communities through projects that promote more equitable gender relations, respect for cultural diversity, autonomy, income-generating projects and environmentally sustainable agricultural production and try to establish free economic commerce (Oxfam, 1). One such group, the Community Aid Abroad, supports indigenous organizations in Guatemala. Their initiatives include supporting projects that promote research, propagation and practice of the principles and values of the Mayan Cosmovision through education, training and cultivation of community leaders that will influence local and national power structures (Oxfam, 2). They also support the Medicinal Plants program in Honduras, which supports the Tawahkan Indigenous People in their efforts to maintain their traditions, customs, culture and land through the documentation of their own knowledge on traditional medicine and medicinal plants.

            Not only is the Guatemalan government responsible for societal discord, but the United States has also played a large role in assisting genocide and state terrorism. According to a UN-sponsored report, “Guatemala, Memory of Silence,” with the support of the U.S., Guatemalan administrators have carried out the torture and murder of 200,000 people, the vast majority were Mayan Indians, during a civil war that lasted for 34 years and finally ended in 1996. After the civil war, 9,200 witnesses on all sides were interviewed to investigate the circumstances surrounding the deaths of 42,000 people. The results showed that 93% of deaths were caused by human rights violations by the military and the Guatemalan government, 3% by leftist guerrillas of the Guatemalan National Revolutionary Union—who eventually ceased action after the war ended in 1996, and for 4% of deaths it could not be determined who was responsible (McLaughlin, 1). Following are comments from various individuals who were witness to, involved in or affected by the civil war. Each contributes a unique perspective to the situation.

·        “The massacres that eliminated entire Mayan villages are neither perfidious allegations nor figments of the imagination, but an authentic chapter in Guatemala's history.” The Guatemala Memory of Silence

·        “The majority of human rights violations occurred with the knowledge or by order of the highest authorities of the state. The responsibility for a large part of these violations, with respect to the chain of military command as well as the political and administrative responsibility, reaches the highest levels of the army and successive governments.” Guatemalan Commissioners.

·        The massacres were politically motivated: “Believing that the ends justified everything, the military and state security forces blindly pursued the anti-Communist struggle, without respect for any legal principles or the most elemental ethical and religious values, and in this way completely lost any semblance of human morals.” Memory of Silence

·        “[The Guatemalan government’s policy during the years 1981 to 1983 were] acts of genocide against groups of the Mayan people. Some 83 percent of the victims of massacres were Mayan Indians, and one Mayan tribe, the Ixil, lost between 70 percent and 90 percent of its villages.” Christian Tomuschat, coordinator of the CEH (Comisión para Esclarecimiento Histórico).

The peak of the civil war, in terms of the most elevated level of atrocities, occurred in the early 1980s when General Efrain Rios Montt was president of Guatemala, Ronald Reagan was in the White House, and Alexander Haig in the Department of State (McLaughlin, 1). Accordinag to the article, “US Government Responsible for Terror and Genocide in Guatemala,” the Guatemalan army executed almost 600 massacres during what they called a “scorched-earth campaign” to exterminate the Mayan Indian population in the upland region of the country, more than half of them in a single province, El Quiche. The targets of this massive killing were believed to be involved in or supporters of the guerrilla movement. Tomuschat, mentioned in a quote above, claims that the U.S. gave support to the terror campaign for more than twenty years (McLaughlin, 1). The high point in the civil war seems to coincide with a contra war against Nicaragua that was backed by the U.S. It also coincided with U.S. military aid sent to the death squad regime in El Salvador. During this time, almost all of Central America was involved in a regime of anticommunist terror backed by the U.S.

Unfortunately, there are several instances of negative U.S. involvement in Central America. “Guatemala, Memory of Silence demonstrates the long-term historical role of American imperialism in this oppressed Central American country. It also constitutes a crushing refutation of the claims of the Clinton administration that the US government is the leader of a global war on ‘international terrorism.’ On the contrary, Washington is today, just as in the 1980s, the leading practitioner of state terrorism, whether in the form of bombing defenseless civilians in Iraq, kidnapping political opponents like Kurdish leader Abdullah Ocalan, or arming and training ruthless dictatorships from the Congo to Indonesia” (McLaughlin, 1).

 

Optimistically, Latin American countries like Guatemala, Honduras and Nicaragua, can learn from the past and follow Costa Rica’s example of autonomy, sociopolitical development and economic growth. Overall Costa Rica is a beautiful country that has a political and social history much different from its Central American neighbors. This is evident in the success the country has experienced economically, politically and socially in reducing poverty and improving social welfare. Statistics from a Social Investment Household Survey (ENISO—Encuesta de Inversión Social) show that poverty has been reduced from 48% in 1982 to 15.8% in 1994. This survey was conducted between December 1992 and February 1993. About 159,000 households are poor, with about one third receiving incomes below the poverty line and having unsatisfied basic needs (UBN) (Household Archives, 1).

As mentioned earlier, almost 30 percent of school-age children do not attend school; and among the poor with unsatisfied basic needs about 20 percent of children ages 7 to 10 are not in school (Household Archives, 1). Access to education is low in rural areas, and school attendance is much lower after age 10 than in urban areas. This contributes to a significant difference in average years of schooling for family heads of households by sector of employment: for agriculture it is only 4.7 years, whereas in non-agricultural sectors it is 7.4 years (Household Archives, 1).

The strategy used by Costa Rica to achieve a low poverty level, free education and access to healthcare is well-stated in a report entitled, “Poverty Assessment Summaries: Identifying the Social Needs of the Poor.”

Costa Rica's success in carrying out a process of structural transformation while continuing the fight against poverty has occurred due to several interrelated factors. The structural adjustment process initiated in the mid-1980s succeeded in reorienting the development strategy toward export- and private-sector-led growth, which allowed the economy to maintain relatively high growth during the process of adjustment. The recovery of growth has supported a large increase in employment and limited the fall in real wages commonly associated with the adjustment process — both of which had a powerful impact on poverty.


 There is a strong link between economic growth and poverty in most countries. This is especially true in Costa Rica. First, much of this growth has been based on sectors that employed a large number of the poor, mainly in agriculture. Over more than a decade, growth has contributed to the narrowing of the rural-urban wage differential and has led to reduced poverty. Second, Costa Rica's long tradition of investing in education was maintained from the 1980s to the present. Despite a decline in education expenditures due to fiscal pressures, there have been significant improvements in educational attainment. In 1981, three-fourths of families were headed by someone with primary education. As better educated young people entered the labor force, this percentage declined to 65 percent by 1992, and the supply of unskilled labor began to diminish as well. Growth did the rest. The current pattern of growth — based on tourism, nontraditional agricultural exports, and urban services — has pulled labor out of low wage agriculture and into higher-paying occupations. (Household Archives, 1)


 

Telecommunications is well in place. It is regulated and maintained by  ICE (Instituto Costarricense de Electricidad or the Institute of Costa Rican Electricity). It provides electricity, basic phone services and high-level Internet access. Nearly all of Costa Rica is well networked, which has earned it the title of being one of the most densely networked countries in Latin America (Accenture, 1). One reason why the country is so well networked is because Costa Rica has an advanced infrastructure, which enables easy access to various regions and the general population. Presently, one in five people has a telephone line, which is a dramatic improvement from its neighboring countries where one in twenty people has access to a phone line (Accenture, 2). Improvement is still lacking in the area of Internet access. While more Costa Ricans use the Internet than their surrounding neighbor countries, this consists only of 2.8 percent of the population (Accenture, 4). Interestingly, the content of the Internet websites consists mostly of a wide range of government services, general information and e-commerce applications, including promotion of the eco-tourism industry, according to the ICT Case Study on Costa Rica. And Costa Rica is the first country in the world to provide all of its citizens with their own email account in a centralized system. Costa Rica is headed on a path of development and political stability that is yet unprecedented in all of Latin America, and it is hoped that neighboring countries will follow Costa Rica’s example as well as embrace Plan Puebla-Panama.

 


APPENDIX A: Costa Rican Membership in International Organizations

 

Costa Rica belongs to a number of international organizations including the following:

 

Central American Bank of Economic Integration (BCIE)

Central American Common Market (CACM)

Economic Commission for Latin America and the Caribbean (ECLAC)

Inter American Development Bank (IDB)

International Coffee Organization (ICO)

Organization of American States (OAS)

Union of Banana Exporting Countries (UPEB)

United Nations (UN) and its agencies, including:

Economic Commission for Latin America and the Caribbean (ECLAC)

Food and Agriculture Organization (FAO)

General Agreement on Tariffs and Trade (GATT)

International Bank for Reconstruction and Development (World Bank)

International Civil Aviation Organisation (ICAO)

International Development Association (IDA)

International Finance Corporation (IFC)

International Fund for Agricultural Development (IFAD)

International Labor Office (ILO)

International Maritime Organization (IMO)

International Monetary Fund (IMF)

International Telecommunication Union (ITU)

UN Educational, Scientific and Cultural Organization (UNESCO)

UN Industrial Development Organization (UNIDO)

Universal Postal Union (UPU)

World Health Organization (WHO)

World Meteorological Organization (WMO)

 


APPENDIX B: WTO publication on Costa Rica

Other Measures Affecting Trade in Goods

There are no estimates of the global impact of programmes to promote production and exports, although their number and diversity raise questions about their effectiveness and the economic distortions they might induce. To promote exports, Costa Rica maintains various special import regimes, notably the free zone regime. Export subsidies granted through a tax credit mechanism (Certificados de Abono Tributarios) were eliminated in late 1999 although some benefits are still being paid. In addition, production, particularly by small and medium size firms, is supported through a plethora of relatively minor programs, including fiscal incentives and concessional credit schemes.

As at early 2001, Costa Rica maintained a tax on banana exports; taxes on coffee and meat exports were eliminated in 1999. From May 2000, Costa Rica has applied quantitative restrictions to coffee exports, retaining 20% of its export supply. The European Union grants Costa Rica's banana exports preferential market access through tariff quotas. Canada and the United States apply import quotas to its textile and apparel exports under the WTO Agreement on Textiles and Clothing.

Competition legislation adopted in the mid 1990s has resulted in an increasing number of actions by the competition authorities. However, competition remains restricted in a few but important areas. For instance, in practice the external and internal commercialization of domestically produced sugar is controlled by a cartel. Likewise, the State holds a monopoly on the importation, refining and wholesale distribution of crude oil, fuels derived from oil, asphalt and naphtha. The State also regulates the price of several goods and services, including public services and the marketing of various agricultural products such as bananas, coffee and sugar.

The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement) became part of Costa Rica's legislation through its ratification of the Marrakesh Agreement. Subsequently, Costa Rica has enacted or amended related domestic regulations to harmonize them with its international obligations and thus facilitate their application. Those changes were notified to the Council for Trade-Related Aspects of Intellectual Property Rights in late 2000.

Sectorial Policies

Since its previous Review, Costa Rica has promoted the expansion of export-oriented manufactures through special fiscal regimes, notably of electronics under the free zone regime. However, despite efforts to generate linkages between export-oriented activities and the rest of the domestic industry, spillovers have so far been limited. Moreover, fostering those activities disadvantages other industries not enjoying the same privileges. Apart from the special fiscal regimes, measures to promote industrial production have focused on small and medium size enterprises.

In spite of its decreasing share in GDP, agriculture remains an important sector because of its contribution to employment and export earnings. A small number of agricultural products for domestic consumption are protected through higher than average tariffs and safeguard measures. Agricultural production in general benefits from other support measures, including fiscal incentives and specific financing programmes. Notwithstanding such support, and in spite of the traditionally high productivity of Costa Rica's producers, its two major agricultural exports, banana and coffee, have come under considerable pressure in recent years. This reflects both adverse international market conditions as well as competition for factors of production, particularly land and labour, from other sectors.

No major changes affected the services sector between 1995 and 2000. Tourism remains a main magnet for foreign exchange and investment, but long-standing inefficiencies in some other service areas impose unnecessary costs on other activities. The State retains monopoly rights on insurance, telecommunications and energy distribution. Notwithstanding growing private participation in the banking industry, state-owned banks, favoured by current regulations, still dominate the industry. Faced with vocal opposition from interest groups, the Government was unable to pass legislation it considered of prime importance to modernize key service activities, notably telecommunications. Pressure for reform arises from the widening gap between decades-old legislation, changing technology and new market imperatives. WTO services negotiations could give new impetus to the reform process but this would require building up wider public awareness of the need to improve the quality and reduce the cost of bank, insurance, telecommunications and energy distribution services.

 
Report by the Goverment

Economic and Trade Policy Environment

In the second half of the 1990s, Costa Rica made a significant shift in its development strategy by devising a policy for attracting foreign investment that was more aggressive and geared towards high-technology industry.

As a result of these endeavours, 1998 saw the start of substantial inflows of foreign direct investment (FDI) into the country, amounting to 4.2 per cent of gross domestic product (GDP) in 1999 (US$620 million). The establishment of enterprises with foreign capital on the national territory brought greater dynamism both to the domestic market and to the export sector by creating new sources of employment and processes of technology transfer, and generating an appreciable amount of foreign exchange. Thanks to the combination of both elements, Costa Rica has been able over the past six years to record average growth of 4.7 per cent, including rates above 8 per cent for two consecutive years (1998 and 1999) and FDI has financed a large part of the balance-of-payments current account deficit.

From 1995 to 2000, the external sector, another mainstay of Costa Rica’s economic growth, expanded by an average of more than 13 per cent, four percentage points above the average growth of imports. The consolidation of the process of opening in the second half of the past decade, the removal of barriers to foreign trade and the forging of closer ties with major trading partners are factors that have helped to account for the pivotal role played by the external sector in Costa Rica. This greater opening up of the economy is more evident in terms of national production, for whilst in 1990 the goods and services trade represented 70.8 per cent of GDP, at the close of the decade the figure was 96.6 per cent.

Goods exports rose by an average of 13.4 per cent during the last five years of the 1990s, driven chiefly by the manufacturing industry (21.7 per cent on average), which now accounts for just over three quarters of the country’s total exports. Most industrial exports come from the electronics, textile and drugs industries. In the agricultural sector for its part – the hardest hit by international market price fluctuations – bananas and coffee continue to be the leaders, whilst pineapples, melons and plants and shrubs are steadily gaining in importance.

Foreign trade in services also expanded over the past six years, albeit to a lesser extent than that in goods, from 15.6 per cent of GDP in 1995 to 19.1 per cent in 2000. In this connection, tourism generated appreciable revenue that enabled the country to post successive surpluses in the balance of payments services account over the past six years. This sector accounts for almost 62 per cent of domestic output and is concentrated mainly in the spheres of trade, real estate, business and rentals, as well as in transport and storage, education, hotels and restaurants, construction and the health sector.

Yet despite the satisfactory results of the policies to attract investment and to integrate Costa Rica’s economy into the international market, public finances continue to show a major imbalance. In terms of revenue, the enactment of the Code of Tax Standards and Procedures (Código de Normas and Procedimientos Tributarios), the expiry of the Tax Credit Certificates (Certificados de Abonos Tributario) and efforts to improve tax collection started to yield encouraging results in late 2000. These policies have been matched by a process of financial engineering whereby domestic debt was replaced with external debt so as to alleviate domestic interest payments. The public sector deficit for the 1995-2000 period has remained close to 3 per cent of GDP, whilst domestic debt absorbed a third of the country’s output this past year.

Yet the state of public finances has not frustrated the effectiveness of endeavours to maintain stability. After a 22.6 per cent annual rise in consumer prices for 1995, inflation could be brought down to 10.3 per cent in 2000 (WTO).

 

 


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