A downward profit spiral in construction and agriculture has led a leading Costa Rican business group to express its fears that prosperity in the Central American country will stagnate or decline in the coming months, unless the government grabs the bull by the horns and acts positively to save its ailing businesses.
Samuel Yankelewitz, president of the Union of Costa Rican Private-Sector Chambers and Associations (UCCAEP), commented on the the lacklustre results of the chamber’s January-March General Business Survey, saying 'This is a confidence problem. Politicians are the ones who make the rules. If they would act less defensively, but more aggressively to modernize the country, I’m sure we’d see this tendency turn around.'
The chamber's survey, which is published quarterly, analyses the business perceptions of industry, commerce, services, tourism, finance, construction and agriculture, and this time around 62 per cent of companies queried replied that their levels of growth, investment, hiring and prosperity during the April-June second quarter would be the same or worse as those experienced from January-March.
The sectors with the greatest cause for concern are construction, which has contracted by about 20 per cent in the last year , and agriculture, which has been ravaged by declining international prices, particularly for coffee and bananas. The banana industry expects to export 15 per cent less this year than it did in 1999. The Costa Rican daily La Nación recently reported that the US banana grower Standard Fruit Company is to cancel contracts to buy the production of 11 smaller growers.
The UCCAEP is clearly concerned about the situation. Yankelewitz said 'The deterioration of these sectors is extremely worrisome, not because they aren’t working efficiently, but rather because international prices are so low.' Although industrial exports, mainly by multinational companies exploiting Costa Rica's tax-exempt status, are now the mainstay of the country's economy, even growth in this sector has slowed in recent months.
The problems do not lie just with large-scale industry and agriculture. Small and medium-sized companies that produce for national consumption have been unable to shake off the virtual stagnation that began last year - reporting a very low figure of one to two per cent growth – and they do not expect that to change much this year. Yankelewitz said that these companies, which employ an estimated 70 percent of all Costa Ricans, are not expanding plants or operations or creating jobs in line with population growth.
Both Yankelewitz and UCCAEP Executive Director Alvaro Ramírez place much of the blame for the problem on a cautious attitude assumed by companies that are hoping interest rates will fall and are awaiting the outcome of lethargic political efforts to modernize state monopolies in telecommunications and power generation.Yankelewitz predicts that production is unlikely to grow more than 5 per cent this year, despite Central Bank predictions of 6.3 percent growth.
Yankelewitz does not let the Costa Rican government escape blame, saying that disagreement over the modernisation of telecommunications and electricity monopolies has already scared off four US companies from investing in the country. According to a report from the private-sector Coalition for Investment Initiatives (CINDE), which woos foreign companies seeking overseas investments, American companies AMR/Data Management Services, Oracle, Sealand and Dallas Semiconductor chose last year not to initiate new operations or expand existing operations in Costa Rica, which would have seen a combined investment of more than US$8.8 million.
Yankelewitz's words are harsh but they betray frustration that Costa Rica could do well, but is being held back He said ' In this country, modernization is coming at the speed of an oxcart. In today’s world, it is no longer the big guy who eats the little guy; it’s the fast guy who eats the slow guy. The damage that the political sectors are doing to this country by dragging their feet on modernization is nothing short of devastating.'
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