Costa Rica: Social Spending and the Poor

• Headcount poverty declined from 27 percent in 1990 to 21 percent in 2000
• Access to healthcare and primary education is nearly universal
• Life expectancy has risen, while infant mortality rates have fallen.

However, there are also worrying signs that progress in these areas is stalling, and that future improvements may be harder to achieve:

• The pace of reduction in income poverty slowed during the second half of the nineties, and between 1990 and 2000, Costa Rica fell from 28th to 48th in the Index of Human Development.
• In education, there has been a small decline in secondary enrollment, and increases in repetition rates. Across the board, education levels are worse for those in the lower income quintiles.
• In health, performance continues to improve in terms of life expectancy, infant mortality and health systems performance, but there is increasing dissatisfaction with the system, as waiting lists grow, and patients requiring more sophisticated treatment for chronic diseases are turned away.
• In social protection, Costa Rica has a well-established social assistance network to protect vulnerable groups, but it does not adequately reach the very poor.

Costa Rica is not likely to be able to rely on favorable economic conditions to reverse these trends. Macroeconomic projections do not show signs of the consistent growth that characterized the past ten years, and which allowed the government to continue increasing investment in the social sectors. Relative to GDP, Costa Rica already spends more on social services overall than other countries in Latin America, and considerably more than the average for other countries at similar stages of development outside the region.

Moreover, fiscal pressures will not only limit the government's ability to increase social spending, but could also act as a drag on real growth prospects for the economy as a whole. This underscores a key finding of the report: that social sector challenges can not be resolved only through the allocation of more resources, but that they will require reforms which improve management and efficiency in the use of available resources. New instruments and approaches will be required that focus on obtaining value for money in the social programs.