| Scope of Method of Study. This study was conducted to evaluate the industrialization and foreign trade policies followed by Costa Rica during the last two decades, utilizing a linear programming model of the two-gap type as the empirical tool of quantitative analysis. Two major questions were asked. First, could the industrialization policies have generated a higher growth rate than the one actually achieved? Second, what are the optimal policies for faster economic development?;Findings and Conclusions. The results support the conclusion that the rate of economic development could have been greater if controlling industrial imports from the rest of the world had been deemphasized, industrial exports to Central America emphasized, agricultural production emphasized, controlling agricultural imports deemphasized, agricultural exports emphasized and an exchange rate unification implemented to counterbalance the effect of a depreciation of the free market exchange rate on development. Thus, it appears that shifting dependency away from agriculture to industry has proved costly, mostly because adverse policies were implemented towards agricultural development. We show that this result is basically due to poor implementation and economic management of development policies. In fact, serious errors in policy devising and implementation were made because of a relative lack of economic planning and economic management capabilities. Among the major policy recommendations to increase the rate of economic development are first, to further develop the agricultural sector by reorganizing land tenure and ownership in order to increase farm size and be able to utilize mechanical technology in planting and harvesting crops. Also technical assistance to small producers and educational opportunities to rural dwellers must be made available. Second, industrialization must be focussed on the production of intermediate products and simple capital goods that are export-oriented. Third, highly qualified business managers are needed in order to keep investment projects profitable. Fourth, a planning and economic management infrastructure must be developed to provide a sound direction to the economy, and fifth, while continuing to export to Central America, Costa Rica must redirect industrial exports to non-Central American markets like Mexico, Brazil, Venezuela, Argentina and the Caribbean countries. |
