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BUSINESS:
IDB Approves us$116M Loan To
Costa Rica
A us$116,835,000 loan from the
Inter-American Development Bank
will support a program to boost
Costa Rica’s competitiveness by
investing in strategic sectors
for economic growth: small- and
medium-size enterprise
productivity, trade management,
technological innovation and
rural roads.
The program, which combines
investment and technical
assistance components, is part
of the “complementary agenda”
proposed by the Costa Rican
government to smooth the
transition to free trade.
“These programs can help
countries prepare for
competition in an open economy,”
said IDB President Enrique V.
Iglesias after the Board of
Executive Directors approved the
loan. Iglesias also praised
Costa Rica’s efforts to address
“its society’s legitimate
concerns” regarding integration.
The IDB-supported program seeks
to help Costa Ricans maximize
the benefits of trade
liberalization by responding to
needs identified in national and
international studies and in the
government’s dialogue with the
country’s productive sectors.
Costa Rica carried out a
successful process of trade and
economic liberalization from the
mid-1980s, promoting export
diversification and attracting a
growing flow of long-term
investment. On the basis of
comparative advantages such as
political stability, persistent
investment in education and an
aptitude for scientific and
technological innovation, Costa
Rica managed to grow at an
annual rate of 5.2 percent
during the 1990s, surpassing the
regional average.
However, some of the factors
that weigh in Costa Rica’s
competitiveness have been
eroding during the present
decade, such as the quality of
its transportation
infrastructure – particularly
its rural roads. There are also
shortcomings in the transfer of
scientific and technological
innovations to SMEs as well as
in the state’s mechanisms to
promote economic output.
These needs were identified as
priorities in broad
consultations the Costa Rican
government held with hundreds of
companies in 49 different
productive sectors, business
chambers, local governments,
academic institutions and civil
society organizations.
In light of these priorities,
the program will make
investments and provide
technical assistance in the
following areas:
Support for SMEs. Even though
they contribute nearly one-third
of national income and generate
a great part of the jobs in
Costa Rica, small- and
medium-size enterprises
represent just 13 percent of
exports. To foster more SME
participation in trade, the
program will co-finance business
development services to help
them overcome their lack of
information about opportunities
and knowledge of regulations and
quality requirements in foreign
markets. It will also support
instruments to involve more SMEs
in collaborative export
projects, supplier development
plans and productive chains.
Assistance for the transition
to free trade. The program
will finance, together with
private sector associations,
projects to raise productivity
across entire economic sectors.
It will support, among other
activities, consultancies and
managerial and technical
training; technological research
and development, sector-wide
quality standards, marketing
plans, logistics systems
development and the adoption of
international measurements and
animal and plant health
regulations.
Trade management. The
program will strengthen and
modernize the public sector
agencies responsible for
implementing trade agreements,
in areas such as labor
legislation compliance; animal
and plant health and food
safety, drug quality control,
competition, consumer rights,
unfair trade practices and
safeguards, farm census and
productive sector surveys and
intellectual property
protection.
Science and technology.
Costa Rica still has a certain
advantage in the Central
American region but its levels
of investment in research and
development are below those of
the world’s most dynamic
economies, and the private
sector’s participation is low.
In order to encourage private
investment, the program will
co-finance projects to
strengthen links between
businesses and academic centers
and ensure the pertinence of
scientific research and
technological development to the
country’s productive sectors. It
will also increase the
productivity and capacity to
innovate of research and
development centers, education
institutions and technology
services in three strategic
poles identified by the Science
and Technology Ministry:
biology, materials science and
engineering and information and
communication technologies.
Rural roads. In order to
contribute to the
competitiveness of Costa Rica’s
rural economy, the program will
finance the rehabilitation of
rural roads to make them useable
year-round. Using a system of
participative planning,
execution and monitoring, 2,000
km of roads will be improved and
drainage works will be carried
out along 1,500 km of roads. The
project will help Costa Rica
speed up the recovery of its
rural roads networks,
contributing to reduce
transportation costs for people
and businesses in the
countryside. At present, nearly
half the roads are in poor
condition.
The rural roads maintenance
system, which involves all three
levels of government (national,
regional and local), will also
be strengthened. As part of the
program, local residents will be
trained in Costa Rica’s 81
municipalities so they may form
road committees to plan and
carry out routine and periodic
road maintenance. It will also
strengthen the capacity of
municipal governments to
implement systems to monitor
rural roads in their
jurisdiction, as well as the
Ministry of Public Works and
Transport as the sector’s
regulating agency.
The IDB expects that this
program, which reflects its
strategy of supporting Costa
Rica’s national development
plan, will generate greater
benefits than the sum of its
parts by contributing to improve
the country’s business climate
and creating more incentives for
its companies and productive
sectors.
The loan is for 25 years, with a
five-year grace period and a
variable interest rate. Local
counterpart funds will total
US$91,474,000.
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