CRC Daily: The challenges Costa Rica will face in 2021

Costa Rica has several hurdles to clear as the country reaches its 200th birthday

Costa Rica will celebrate its 200th birthday on September 15, 2021.

While the bicentennial is cause for celebration, Costa Rica faces several major challenges in 2021. Here’s what the country must overcome this year:

Covid-19 and the vaccine rollout

Covid-19 was Costa Rica’s leading cause of death in 2020. Health authorities attributed 2,185 deaths to the disease — an average of more than 7 per day since the first case was identified in March.

The country’s healthcare infrastructure has been stretched, but it has not been saturated. And in December, Costa Rica became one of the first countries in the world to begin a national vaccination campaign against Covid-19.

It will take months for Costa Rica to reach herd immunity through vaccines. Until then, the country must continue to balance economic opportunities with its efforts to mitigate the pandemic.

Unemployment and underemployment

The latest figures indicate 46% of Costa Rica’s workforce is either unemployed or underemployed.

Costa Rica reached record unemployment in mid-2020 due largely to the pandemic. Many jobs should return when tourists do, but it could take years before international travel reaches pre-pandemic levels.

Costa Rica alone can’t stimulate global tourism. Health authorities across the world are discouraging travel, and many people have less disposable income now than they did in 2019.

As a result, Costa Rica may need to look elsewhere for economic recovery. It could benefit from aggressively attracting foreign retirees (or digital nomads), authorizing hemp farming, and investing in major infrastructure projects as avenues to create jobs.

Costa Rica’s debt crisis

Central government debt in Costa Rica is projected to reach 84% by 2022, and the government spends increasing amounts each year on interest payments.

“Without significant consolidation, debt dynamics will remain adverse due to a subdued economic recovery coupled with high borrowing costs, increasing risks to debt sustainability,” Fitch Ratings says.

Costa Rica’s proposed solution is a $1.75 billion loan from the International Monetary Fund (IMF). However, this is politically contentious.

If Costa Rica pursues a deal with the IMF, it must agree to internal financial measures to repay the loan. Expect public discontent if — when — these measures include new taxes and spending cuts.

But if Costa Rica can’t consolidate its debts, the government warns the country could experience a crisis similar to that of the 1980s: skyrocketing inflation, currency devaluation and widespread poverty.

Other big themes for Costa Rica’s 2021

  • Costa Rica’s next presidential elections will be in February 2022. During the previous elections, a right-wing candidate, Fabricio Alvarado, performed well after staunchly denouncing marriage equality. The rise of far-right politics may be an ongoing theme in 2021.

  • Immigration is an oft-contentious topic in Costa Rica, especially since the country hosts some 77,000 Nicaraguan refugees and asylum seekers who have fled Nicaragua since 2018.

  • Costa Rica’s international relations will change in 2021. Under President Donald Trump, the United States quadrupled financial assistance to help Costa Rica combat international drug trafficking and crime. Costa Rica authorities say they hope to resume climate change talks with President-elect Joe Biden.

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