San José, Costa Rica, since 1956

1 in 5 People Lives in Poverty

IN one year, Costa Rica’s poverty rate jumpedfrom the lowest it has been in more than a decade,to the highest it has been in that time, according tostatistics released last week.Still, experts maintain that despite the numbers,little has changed since 1994 in the fact that one infive people living in the country must survive onless than $80 a month.Last year, President Abel Pacheco championedthe drop in the poverty rate to 18.5% of the country’sappoximately 4 million inhabitants as evidenceof his administration’s success in combatingpoverty.Now, as that rate has jumped to 21.7%, hisadministration is blaming high oil prices and theLegislative Assembly’s inability to pass thePermanent Fiscal Reform Package, which Cabinetmembers say would improve tax collection andallow for increased government funds for socialprograms.“I don’t have money (for social spending),”Pacheco said Tuesday at his weekly Cabinet meeting.“And why don’t I have any money? Becausethe rich are not paying taxes. It’s not that hard tounderstand. If they don’t give me money, povertywill continue to rise.”However, increased social spending alone cannotchange the fortune of those living in poverty,according to some experts.Juan Diego Trejos, assistant director of theInstitute of Economic Sciences Research at theUniversity of Costa Rica, told The Tico Times thePacheco administration, and administrationsbefore it, have been negligent in creating an economic policy that truly prioritizes jobcreation and fighting poverty instead ofjust creating economic growth.MORE than 40,000 additionalhouseholds in Costa Rica are living inpoverty compared to 2003, according tothe most recent Household Survey of theNational Statistics and Census Institute(INEC), released Nov. 25.The poverty line is based on thecanasta básica (basic basket) – an establishedlist of staple foods considered theminimum necessary for a family’s survival– and the cost of some non-foodnecessities. For urban living, the povertyline is ¢35,866 ($80) per person, permonth. For rural areas, the line is¢28,543 ($63).Families whose household monthlyincome, including all sources, falls belowthe poverty line for each person are consideredliving in poverty. For example, asingle mother with three kids who makes¢143,464 ($318) would be living slightlybelow the poverty line.FAMILIES whose household incomeis equal to or less than the cost of thebasic food basket – ¢16,542 ($36) inurban areas and ¢14,489 ($32) in ruralareas – per person are considered inextreme poverty.The percentage of homes in extremepoverty in Costa Rica this year is 5.6%,up from 5.1% in 2003.The poverty rate peaked at 31.9% in1991. It dropped to 20% by 1994, and hashovered around 20% since then.Trejos cites three reasons for thisconsistency despite government effortsfor its reduction: decreased spending onpublic education, inconsistent economicgrowth and falling average incomesbecause of the job market.SINCE the economic crisis of the1980s, the high-school graduation ratehas been about one-third, leaving two-thirdsof young people to enter the workforcewithout a high-school diploma,Trejos said. Education spending is onlynow about to reach the level it was in thelate 1970s.“We won’t see the difference this willmake for at least 10 years,” Trejos said.“Children of impoverished families willreceive educations, and will be able toget jobs and improve their standard ofliving. But investment in education takestime to make change.”While the government’s social policiesrecognize the need to combat poverty,economic policies are detached fromsuch ambitions, Trejos said.NOT unlike most countries in theworld, Costa Rica’s economic policy hasfocused on creating stable economicgrowth. However, the deficit has producedhigh interest rates and consequentlylow investment, making growthvolatile in recent years, according toTrejos.Furthermore, Costa Rica has notmade appropriate investments in infrastructureto promote growth that stimulatesthe type of job creation that reducespoverty.“The most dynamic economic sectorhas been the external sector – tourism,free zones (where foreign companies donot pay many taxes), focused on exports. Butthis sector does not employ the majorityof the population,” said Jorge Vargas,coordinator of general research for the 10th State of the Nation Report.These jobs often require English andhigh-tech skills, Trejos added.“BECAUSE people can’t find jobs inthe formal sector, they turn to the informalsector – as roaming street vendors, guardingcars, washing cars, anything they can find.These jobs pay very little for much work.Meanwhile the jobs for more educated peopleare paying better, as technology getsmore advanced, so the salary gap is growing,”he said.The average income of a household inthe poorest fifth of the population is ¢64,349($143), while the average income of ahousehold in the richest fifth is ¢653,418($1,450) – more than 10 times as much.Since last year, unemploymentdecreased slightly from 6.7% to 6.5%.However, the number of new jobs createdfrom July 2003 to July 2004 grew by only11,000, less than half of the annual averageof 25,000 jobs created in years past.Víctor Hugo Céspedes, president of theINEC administrative council, said governmentofficials are surprised by the smallnumber of new jobs created.He said the rate could be caused byyoung people who view the state of theeconomy with pessimism and decide to noteven try to enter the workforce.TO reverse the statistics, according toTrejos, the Pacheco administration mustreprioritize its economic policy to one thatpromotes not only economic growth, butalso job creation and poverty reduction.For example, in infrastructure, investmentsshould be made in rural bridges,rather than San José highways, allowingsmall farmers to better distribute their goods.Government should also take a more activerole in helping small businesses formalliances to facilitate exporting, and participatein job creation, perhaps by subsidizingemployment opportunities, Trejos said.“It would be a turnaround from currentpolicy, and is not common anywhere in theworld, where the free market resolves everything.It would involve much more intervention,”Trejos said.LAST year, when Pacheco proclaimed apartial victory against poverty – declaringthe 2.1% drop from 2002 to 2003 representedmore than half his administration’s goalof a 4% reduction of poverty – experts saidthe numbers were misleading (TT, Nov. 14,2003). Vargas agrees, saying an usually highnumber of rich people answered the survey.This year, with the poverty rate at 21.7%,it is the Pacheco administration alleging thenumbers are misleading. For example, thecost of the food basket increased 16.3%,while inflation overall (the Consumer PriceIndex – a measure of more than 200 goodsand services) rose only 12.4%.The actual cost of living did not actuallyincrease as much as the cost of the food basket,making the poverty rate higher than reality,said Gilberto Barrantes, Minister ofEconomy, Industry and Commerce.While the rise in worldwide oil pricesaffected most industries, the rise in prices ofrice and papayas – both part of the basic foodbasket – were dramatic, he said.ECONOMIST Ronulfo Jiménez, whountil early September served as Pacheco’stop economic advisor and is now part of theeconomic think tank Central AmericanAcademy, said the most important aspect ofmeasuring poverty is to use the same methodsfrom year to year to achieve consistency.“While the canasta básica is arbitrary,it is established and documented,”he said.INEC is in the process of defining anew canasta básica, since the basketused for the current statistics representssurveys conducted in 1987-1988.This lengthy process involves balancingseveral different factors: nutritionists’assessments of what a healthy dietincludes, calculations of the number ofcalories needed for different lifestyles(active vs. sedentary, urban vs. rural),data regarding what Costa Ricans typicallyeat and studies of prices in differentregions of the country, among other considerations.(Tico Times reporter Katherine Stanley contributed to this report.)

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