Winners and Losers of Export-Oriented Model

By Maricel Sequeira, IPS, 13 March 1998

SAN JOSE, Mar 13 (IPS) - In less than two decades, the export promotion model has changed Costa Rica's productive structure, and given rise to two kinds of producers: winners and losers.

In this Central American country whose chief export is coffee, the difference is especially marked in the agricultural sector. But local industrialists also refer to two groups of entrepreneurs: those who travel by jet, and those who are still plugging along in the car they bought back in the 1960s.

The president of the Chamber of Industry, Marco Vinicio Ruiz, says the stratification of the industrial sector has arisen from the establishment of duty-free zones, where foreign companies enjoy enormous incentives.

According to Chamber of Industry figures, only six percent of industry in Costa Rica produces for export, while providing 34 percent of jobs in the sector. The other 94 percent produces for the local market.

But only the export-oriented companies enjoy tax incentives, local industrialists complain. "That does not allow local industry to grow, because it has to compete in conditions that differ greatly from those enjoyed by the small and privileged group of companies operating in the free zones," said Ruiz.

Local industry also has another problem: it has failed to become a provider for the free zones, which are supposed to generate jobs and foster development by giving rise to surrounding rings of local firms that provide services to the foreign companies.

A report on the "State of the Nation", sponsored annually by the UN Development Programme (UNDP) to provide an updated x-ray of the country, has identified winners and losers in agribusiness.

According to the report, the new export-oriented model has favoured the development of some branches, particularly non- traditional products, considered the winners, while at the same time "indirectly penalising those who depend on traditional products, especially producers of basic grains."

The situation has brought changes to the agrarian social structure, where new relations between those involved in the production process have emerged, and gaps between them have been created or deepened.

The study cites the efforts of local peasants and entrepreneurs to establish ties with agribusiness complexes that export bananas and other tropical fruit, in order to become their providers.

As in the industrial sector, the social and economic gap is growing in the agro-exporting branch due to the differential treatment.

"Some agribusiness complexes involved in new exporting activities are characterised by high concentrations of incentives, capital, land, technology and income...due to the control they exercise over the most profitable phases of the production process, especially external marketing," says the study.

Although reconversion of the productive sector has been discussed for years as one way to close that gap, it has not yet been applied. (END/IPS/TRA-SO/MSO/AG/SW/98)