Apr. 28, 2019
Costa Rica's OECD accession journey began in April 2015 when constituent nations agreed to open membership talks. Since then it has been assessed in terms of its progress in 22 core areas including its tax regime, competitive environment, tackling of economic disparity, and concerted efforts to fight corruption. Today, it considers itself close to full membership.
Since its inception in 1961—an era marked by the rise of technologies that would ultimately determine the shape of global commerce—the OECD has championed policies that support transparent government and economic and social wellbeing among trading nations, despite being the proverbial 'club of rich countries,' with its members accounting for 70% of the global market. Costa Rica has become a regional near-shore technical service hub as Business Process Outsourcing (BPO) skyrocketed in recent years. Membership, it believes, will better shape the policy imperatives of enterprises working within its borders. It would also grant Costa Rica meatier international credentials.
Candidate status may be a waiting game, but San José did not sit out on the sidelines and wasted no time in getting involved with a wide array of specialized committees as the national action plan takes shape. Meanwhile, national policy issues and perceived shortcomings earmarked for attention have been debated both locally and within a multilateral context based on the experiences of other nations. Former president Luis Guillermo Solís noted at the time that no less than twenty-seven ministries and public institutions were involved in implementing Costa Rica's Action Plan.
No arms twisted, just conscience piqued
OECD guidelines for multinational corporations are not law, but voluntary confirmation of a certain type of commitment that goes deeper than commercial imperative and quarterly earnings reports. Neither are these guidelines a reinvention of the wheel; existing international bodies and principles such as the International Labor Organization (ILO), the UN, and the Universal Declaration of Human Rights (UDHR) have already promoted them. The OECD simply lobbies for nations to comply and to give something tangible back to the communities in which they operate.
In the OECD's own words
Costa Rica has registered impressive economic and social progress over recent years, having turned economic growth into near-universal access to education, health care and pensions. GDP grew 3.55% YoY in 2Q2018, up on an already welcome 2.76% rise a quarter earlier. Indeed, the OECD's 2018 Economic Survey of Costa Rica forecasts 3.7% growth for the 2018-19 period, and proposes holistic thinking to address shortfalls in pursuit of a “virtuous cycle of inclusive growth" demanding comprehensive reforms in key policy areas. These should rest on policy that tackles labor market informality and social imbalances, as well as curbs perceived public overspending to enable sustainable budgeting. It notes a need to direct spending towards early and secondary education to expand opportunities and encourage greater female participation in the workforce. To fund this, Costa Rica must tackle the informal economy to raise its tax base. The latter will also help in taming a high debt-to-GDP ratio.
The pain of gain
In the real world, many notions that sound smart in theory result in consequences for the general public. In the pursuit of sustainable economic performance and compliance with precisely the criteria handed down by the OECD, the government of President Alvarado championed a tax reform package and fiscal roadmap that by September 2018 had prompted widespread public marches in protest. The charge, a familiar one, is that the proposed tax reform would disproportionately penalize the working and middle classes.
Costa Rica is resolutely committed to its membership in a club that can only be as effective as its own domestic policies. It is of course important to set guidelines whereby the spoils of foreign participation in the economy benefit local communities. But first, the government will need to convince the public that the bitter pill of reform has a sweet aftertaste. ✖