Tuesday, October 09, 2007

Quick note on Costa Rica 

Agreed, we should be happy that Costa Rica has voted to join CAFTA and the world of free trade, but this shouldn't be a huge surprise. Costa Rica has long been a country more free than many of its neighbors and, unlike Dani Rodrik's El Salvador story, it has in fact grown. Looking at The World Economy we find that after Costa Rican per capita GDP grew only 0.8% per year on average between 1920 and 1950, growth accelerated to 2.3% per year from 1950 to 2000. (El Salvador grew only 1.2% per year in the last half-century.) Thus living standards in Costa Rica have doubled every 30 years. If Bob Lawson wants an example to counter El Salvador ...
... a nation with a history of low economic freedom and political stability with little credibility in the eyes of domestic and foreign investors. It has only recently begun to stabilize and improve its economic institutions. I would not expect it to grow quickly immediately. These things take time. I would predict things to improve only after some degree of credibility is earned. In El Salvador's case, this could take a long time.
...he could do a lot worse than to pick Costa Rica.

Labels: ,