Countries of the World/COUNTRYS.BIN/dp/0097/00973.txt

Text File | 1991-06-24 | 24KB | 374 lines

$Unique_ID{COW00973}
$Pretitle{290}
$Title{Costa Rica
Chapter 3C.   Manufacturing}
$Subtitle{}
$Author{Donald P. Whitaker}
$Affiliation{HQ, Department of the Army}
$Subject{percent
costa
oil
power
development
energy
de
major
government
million}
$Date{1983}
$Log{}
Country:     Costa Rica
Book:        Costa Rica, A Country Study
Author:      Donald P. Whitaker
Affiliation: HQ, Department of the Army
Date:        1983

Chapter 3C.   Manufacturing

     Manufacturing using modern production methods started in the early
twentieth century when factories to produce beer, cigarettes, textiles, and
various other consumer nondurable goods were established. Development of the
sector proceeded slowly, however. It was not until after enactment of the
Industrial Development Law of 1959-and in particular the establishment in
1960 of the Central American Common Market (CACM) in which Costa Rica finally
became an active participant three years later-that significant, rapid
expansion of manufacturing took place (see The Central American Common
Market, ch. 1). The advantages offered by the CACM, including free trade
within the region and protection from outside competition by trade barriers,
were strengthened by liberal fiscal incentives. Added to this were Costa
Rica's open economy, which permitted unrestricted foreign investment, and
the generally high educational level of its work force that made the
country a preferred place for foreign risk capital outlays.

     The incentives structure of the CACM-especially the free entry of
capital goods and raw materials and the high tariffs on the import of
finished goods-encouraged the development of import-substitution industries
and a concentration on producing for the local market and the CACM. At the
same time, the free importation of machinery and technology accompanied by
liberal depreciation rates led to the development of capital-intensive
operations and excessive capacity. A major result of the unrestricted
importation of raw materials was the development of a high degree of
dependence on foreign inputs and a corollary failure to develop
agroindustries based on local resources. Exports of manufactures regularly
failed to cover the cost of those inputs. Since the early 1970s the
government has sought to increase sales to areas outside the CACM.
Enactment of the Exports Promotion Law of December 1972 added a major new
incentive for such exports in the form of tax credits. By 1980 fully processed
manufactures exported to non-CACM countries had risen to 28 percent of exports
of all manufactures compared with about 18 percent at the beginning of the
1970s, but these still constituted only a very small part of total exports.
When the Monge government assumed office in 1982, it found government
attitudes toward manufacturing development little changed; resources were
still largely directed into development of import-substitution and
capital-intensive industries. The new government voiced its desire to alter
this bias, but what effect this had had on investment in new plants or the
expansion of older ones was not clear in late 1983.

     Manufacturing production, including a relatively small contribution by
mining and quarrying, grew at an annual average rate of about 10.6 percent
(in constant 1966 prices) from 1961 to the early 1970s. In the period 1973-79,
however, the rate declined to slightly over 7 percent, and in the 1977-79
period it was under 5 percent. Among the more significant reasons advanced for
the decline has been the gradual satisfaction of most Costa Rican and CACM
market demands. Another was the failure to expand exports outside the CACM
sufficiently to utilize the built-in excess capacity of many plants, which was
estimated at about 40 percent at the beginning of the 1970s. During the two
decades, manufacturing production's share (in constant prices) of the GDP also
grew from over 13 percent in 1961 to some 22 percent in 1979; it had stagnated
thereafter at approximately that proportion at least through 1981.

     Manufacturing expansion has provided the country with facilities
producing a very wide variety of goods ranging from foods and beverages to
items such as adhesives, cosmetics, bricks, cement, fertilizers, ink, office
furniture, paints, plastics, petroleum products, refrigerators, solar energy
collectors, textiles, tires, tubes, motor vehicle spare parts, and yachts. In
1982 approximately 1,000 manufactured items were exported. All manufacturing
was in the light industry category and, by international standards, on a small
scale. Food processing, including beverages and tobacco, was the largest
industry branch; throughout the 1970s it accounted for 50 percent or more of
annual gross industrial production. About 35 percent of the remainder was
produced by the chemical, metalworking, textile, and leatherworking branches.

     Manufacturing is highly concentrated in the Meseta Central, chiefly in
and around San Jose; smaller numbers of enterprises are found in Alajuela,
Cartago, and Heredia. Small-scale operations of fewer than 30 workers,
according to an industrial survey in 1975, employed about half of the
industrial work force. Much of the investment in manufacturing
development has been from foreign sources, and many foreign companies have
subsidiaries in Costa Rica. It has been estimated that in the period 1960-75
only about one-third of the capital invested was from domestic sources. The
remainder came from abroad in the form of loans or direct investment or was
provided by surpluses of the operating units. In 1973 the government
established CODESA to help provide financing for industrial (including
agroindustrial) development. CODESA has been involved in assisting
hard-pressed companies, but it also has invested heavily in the establishment
of several large enterprises, including an aluminum-processing plant, two
cement plants, and a sugar mill; in 1983 it had a total of 14 wholly or
partially owned subsidiaries; CODESA's overall operations have reportedly been
generally unprofitable, and in 1983 efforts were under way to sell various
plants, including the major fully owned enterprises, to the private sector.

Mining

     In 1983 the contribution of mining to GDP was well below 1 percent. The
major proportion, moreover, came from nonmetals-limestone, sand, and clay.
Limestone deposits were vast, estimated at some 13 billion tons. One such
deposit was located at the upper end of the Golfo de Nicoya; it contained
proved reserves of over 532 million tons and provided the raw materials for a
major cement plant. Clays, including kaolin, occur in relatively small
deposits but are found in numerous localities and are important to the
domestic ceramics industry. The remaining minerals of significant value in the
early 1980s were salt and gold. Silver and diatomite were also mined, but
their value was small. Salt was produced by solar evaporation, mostly on the
Peninsula de Nicoya. The annual output of roughly 35,000 tons generally met
domestic requirements.

     The two principal areas of gold production were the western approaches of
the Cordillera de Tilaran, where auriferous veins were worked, and the
Peninsula de Osa, where gold-bearing alluvial deposits were found and where
most gold mining was carried on in 1983. Gold mining has gone on continuously
since early colonial times, and gold bars long were an important export
item. Only limited data on gold production were available; it was reported
that almost 720 kilograms of gold were exported in 1944, but the total
dropped precipitously to one-tenth that amount in 1946. Output appears to have
risen substantially after the great increase in the world price of gold in the
late 1970s. The United States Bureau of Mines estimated Costa Rican production
at roughly 400 to 500 kilograms annually at the beginning of the 1980s. Mining
on the Peninsula de Osa was mainly by individual placer operators who did
not report production, much of which was believed smuggled across the border
into Panama.