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Costa Rica :Costa Rica :44thth Trade Policy Trade Policy ReviewReview
24 September 2013
Costa Rica Trade Policy Review:Discussant’s
Remarks:What external sources say: WEF, World Bank, OECD, EIU, UNDP, Heritage
Foundation, IHS Global Insight, WIPO/Insead, Costa Rican agencies
State of Costa Rican economy Importance of trade to Costa Rica Costa Rica’s relative performance
Economic & other indicators Challenges faced
Issues identified and responsive measures Looking ahead
The policy choices & their relationship to trade
State of Costa Rican Economy: the importance of Trade to Costa Rica
Average Growth Rate 2007-12 : 3.2% World Bank LatAm 2012 growth rate: 2.7%
Average Applied MFN tariff: 6.9% World Bank developing country average: 13.6% Ag products high at 14% (other products: 5.5%) Bound rate is 44.1%
Trade was 79.5% of GDP in 2012 Was 102% in 2007
Source: WTO Secretariat Report & World Bank
State of Costa Rican Economy: Preferential Trade Agreements
Source: Secretariat Report & Costa Rican Investment Promotion Agency
•Central America – Dominican Republic & US
•Central America – Panama
•Costa Rica – CARICOM
•Central America – Chile
•Costa Rica – Canada
•Costa Rica – China
•Central America – Mexico
•Costa-Rica – Peru
•Costa Rica – Singapore
•Central America – EU
•Costa Rica – Colombia
•Costa Rica – EFTA
“In 2010, 90% of goods from Costa Rica were exported to world markets under Free Trade Agreements”
• Costa Rica also has Investment Promotion & Protection Agreements with 15 countries
State of Costa Rican Economy: the importance of Trade to Costa Rica Employment by Sectors:
Agriculture, forestry, fishing: 13.4% Govt protection/support affects productivity
Manufacturing: 11.3% State monopoly, high electricity tariffs have effect on
competitiveness Services: 67%
Services regime more open than GATS commitments Competition introduced but State still present in some
market segmentsSource: WTO Secretariat Report & IHS Global Insight
AgGoodsServicesOthers
State of Costa Rican Economy: Relative Global Rankings
Source: As cited, and IHS Global Insight
WEF Global Competitiveness Index: 54/148 World Bank Ease of Doing Business: 110/185 WIPO/Insead/Cornell Global Innovation Report:
39/142 Heritage Foundation Economic Freedom Index:
49/177 UNDP Human Development Index: 62/187
Steady improvements across indicators since 2005 EIU Democracy Index : 22/167
2nd in Latin America
State of Costa Rican Economy: Challenges from global rankings…
Sources: WEF Global Competitiveness Index 2013, World Bank Doing Business Report 2013
WEF Global Competitiveness Index: 54/148 Open economy, strong institutions, good
education, skilled workforce, high technological adoption
Poor transport infrastructure, concerns about government spending/bureaucracy, access to finance
World Bank Ease of Doing Business: 110/185 Registering property, trade across borders,
accessing electricity Protecting investors, starting businesses,
insolvency, construction permits
Challenges in the Economy: What the rankings highlight… Indicator Costa Rica LatAm &
CaribbeanOECD
STARTING A BUSINESS
Number of procedures 12 9 5
Time (in days) 60 53 12
C0st (% of income per capita) 11.4 33.7 4.5
Paid-in min. capital (% of income per capita) 0 3.7 13.3
GETTING ELECTRICITY
Number of procedures 5 5 5
Time (in days) 62 66 98
Cost (% of income per capita) 256 559 93
PROTECTING INVESTORS
Extent of disclosure index (0-10) 2 4 6
Extent of director liability index (0-10) 5 5 5
Ease of shareholder (law) suits index (0-10) 2 6 7
Strength of investor protection index (0-10) 3 5 6.1
Sources: WEF GCI 2013, WB Doing Business Report 2013, IHS Global Insight
Challenges in the Economy: Transport Infrastructure…
Sources: WEF GCI 2013, WB Doing Business Report 2013, IHS Global Insight
WEF rankings for various types of infrastructure (out of 144):
Overall infrastructure: 95 Roads: 131 Railroads:
106 Air transport 60 Quality of electricity 42
supply
Challenges in the Economy: Responses to mitigate… Integration into Global Value Chains
(GVC) Continuous and continued reform
External benchmarking against OECD for long term structural reform Short term enhancements like Trade
Facilitation to bolster competitiveness
Aggressive investment attraction Building on a proven track record
Sources: IHS Global Insight
Looking Ahead: A GVC response to challenges…
Source: Costa Rica Ministry of Foreign Trade
deepening deepening trade trade
liberalizationliberalizationquality skilled labor
science, engineering
& design
knowledge-knowledge-driven societydriven society
Innovation
Upgrading infrastructure
Diversifying FDI
updating FDI promotion
Increasing labour supply
reducing trade costs
Better understanding Costa Rica’s participation in the GVC
Looking Ahead: A GVC response to challenges…
Source: UNCTAD World Investment Report 2013
Looking Ahead: An OECD driven response…
Sources: Costa Rica Ministry of Foreign Trade, OECD Trade Facilitation Indicators
External benchmarks for long term structural benefits Adherence to the OECD
Declaration on International Investment and Multinational Enterprises
Compliance with OECD Guidelines Human Rights Employment and industrial
relations Combating bribery, bribe
solicitation and extortion Trade Facilitation
Fared well in OECD’s assessment
Looking Ahead: Promoting Investment as a response…
Sources: Costa Rica Ministry of Foreign Trade, UNCTAD World Investment Report
Investment Policy Framework:
Open and transparent legal regime for FDI, though no specific law in place
Foreigners and nationals are granted equal rights by constitutional mandate
Limited exceptions to national treatment are established by law
Access to information is guaranteed by the Political Constitution
Free transfer of funds 14 bilateral investment
treaties in force and 11 FTAs with investment provisions in force
FDI Inflows 1990 to 2012
Looking Ahead: Wishing Costa Rica well in continuing
tough reforms… Political stability is valuable asset
Policy coherence & continuity should be a good by- product of such stability
Bipartisan support for continued reforms… Including hard public finance decisions Continued privatisation of SOEs Enhancing competitiveness of the
economy
Sources: IHS Global Insight
Costa Rica :Costa Rica :44thth Trade Policy Trade Policy ReviewReview
24 September 2013