Import Substitution in Costa Rica
40 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What was the trade policy of Costa Rica from the late 1800s to 1960?

  • Liberal trade (correct)
  • Protectionism
  • Export-led growth
  • Import substitution

    • Which strategy characterized Costa Rica's trade policy between 1960 and 1982?

  • Import substitution (correct)
  • Complete market isolation
  • Export promotion
  • Minimal government interference

    • What was a consequence of the import substitution policy in Costa Rica?

  • Encouragement of domestic production (correct)
  • Excessive dependence on imports
  • Increased foreign investment
  • Limited local production incentives

    • What challenge did Costa Rica face regarding market size during the import substitution policy?

    <p>Small market size for large-scale production</p> Signup and view all the answers

    What major shift in policy occurred in Costa Rica after 1982?

    <p>Liberalization of imports and export promotion</p> Signup and view all the answers

    Which factor is noted as influencing policy evolution in Costa Rica?

    <p>Domestic and foreign conditions</p> Signup and view all the answers

    What is a political sensitivity mentioned regarding trade policies?

    <p>The economic priorities of the nation's leaders</p> Signup and view all the answers

    What period did Costa Rica focus on policies of import substitution?

    <p>1960 to 1982</p> Signup and view all the answers

    What was a primary objective of the Central American Common Market (CACM)?

    <p>To allow goods produced in member countries to enter freely into each other's markets.</p> Signup and view all the answers

    By 1980, what was Costa Rica’s agricultural contribution to GDP?

    <p>18 percent</p> Signup and view all the answers

    Which factor contributed to the mixed results of Costa Rica's strategic trade policy?

    <p>The focus on domestic markets rather than the larger CACM market.</p> Signup and view all the answers

    What trend was observed in Costa Rica's economy regarding agriculture before the import substitution policy?

    <p>A decline in economic dependence on agriculture.</p> Signup and view all the answers

    What was the main driver for pharmaceutical investment in Costa Rica?

    <p>Efficiency in small-scale packaging and processing.</p> Signup and view all the answers

    How many countries formed the Central American Common Market alongside Costa Rica?

    <p>Four</p> Signup and view all the answers

    What was one unintended consequence of the import substitution policy in Costa Rica?

    <p>Domestic products becoming less competitive.</p> Signup and view all the answers

    Which export-related observation was made about Costa Rica in 2011?

    <p>A bit more than 50 percent of exports went to three countries.</p> Signup and view all the answers

    What percentage of Costa Rica's merchandise exports are manufactured goods?

    <p>60%</p> Signup and view all the answers

    Which of the following companies has NOT been mentioned as investing in Costa Rica's medical device sector?

    <p>Johnson &amp; Johnson</p> Signup and view all the answers

    Which country's president participated in a helicopter survey of plant sites in Costa Rica?

    <p>José Figueres</p> Signup and view all the answers

    What has become the backbone of Costa Rica's economy and export earnings?

    <p>High-tech products</p> Signup and view all the answers

    What type of approach is contrasted with laissez-faire in Costa Rica's trade policy?

    <p>Interventionist Approach</p> Signup and view all the answers

    What is a key factor in Costa Rica's trade and factor mobility strategy?

    <p>Movement of capital and technology</p> Signup and view all the answers

    Which statement best describes the export concentration of Costa Rica?

    <p>A bit over 50% of exports go to three countries.</p> Signup and view all the answers

    What is an essential question Costa Rica faces regarding trade?

    <p>Which products should we import and export?</p> Signup and view all the answers

    What was the main reason for Costa Rica to shift its economic policy in 1983?

    <p>To respond to rapid growth in neighboring countries</p> Signup and view all the answers

    What significant action did Costa Rica take to support its new export promotion policy?

    <p>Removed import barriers for international competition</p> Signup and view all the answers

    What was the purpose of the Caribbean Basin Initiative launched by the United States?

    <p>To reduce tariffs on Caribbean products entering the U.S.</p> Signup and view all the answers

    What role did CINDE play in Costa Rica's economic development strategy?

    <p>Helping to attract foreign direct investment</p> Signup and view all the answers

    What benefits did companies receive by operating in Costa Rica's export processing zone (EPZ)?

    <p>Tax exemptions and tariff-free imports</p> Signup and view all the answers

    What sector saw a significant increase in companies locating in the EPZ by 1989?

    <p>Textiles and footwear</p> Signup and view all the answers

    What was one of the top priorities of CINDE as part of its initiatives?

    <p>Attracting foreign direct investment</p> Signup and view all the answers

    What concerns did CINDE's officials have regarding their initiatives by 1989?

    <p>Potential problems not specified in the content</p> Signup and view all the answers

    What is the basis of a country's wealth according to the theory of absolute advantage?

    <p>The production of goods and services more efficiently than others</p> Signup and view all the answers

    How does specialization increase a country's efficiency according to the theory of absolute advantage?

    <p>By allowing labor to become more skilled through repetitive tasks</p> Signup and view all the answers

    What are the three reasons specialization increases efficiency?

    <p>Skill development, reduced switching time, and improved methods</p> Signup and view all the answers

    What should determine in which products a country specializes?

    <p>Marketplace dynamics</p> Signup and view all the answers

    What does natural advantage refer to in the context of absolute advantage?

    <p>Climatic conditions, natural resources, and labor force availability</p> Signup and view all the answers

    Why does a country want to use its excess specialized production?

    <p>To purchase more imports</p> Signup and view all the answers

    What is one potential drawback of specialization mentioned in the context?

    <p>Loss of versatility in labor</p> Signup and view all the answers

    Which type of advantage considers labor force availability as a factor?

    <p>Natural advantage</p> Signup and view all the answers

    Study Notes

    Import Substitution in Costa Rica

    • Costa Rica implemented import substitution policies between 1960 and 1982.
    • The government limited imports to encourage local production of goods and services.
    • Import substitution was intended to provide incentives for domestic and foreign investors.
    • However, the Costa Rican market was too small to support large-scale production.
    • To address this, Costa Rica joined the Central American Common Market (CACM) with El Salvador, Guatemala, Honduras, and Nicaragua.
    • The CACM allowed free trade among member countries, providing access to a larger market.
    • The results of import substitution were mixed, with some sectors benefiting while others struggled.
    • Despite the policy shift, Costa Rica’s agricultural dependence continued to decline.
    • Most manufacturers focused on the domestic market rather than the larger CACM market.
    • Import substitution helped attract pharmaceutical investment but not due to market size, as small-scale production is efficient for pharmaceuticals.

    Export Promotion and Foreign Investment

    • By the early 1990s, Costa Rica shifted towards export promotion and attracting foreign investment.
    • This shift was influenced by the success of Asian countries competing in international markets.
    • The government removed import barriers to encourage competition and attract foreign expertise.
    • The U.S. Caribbean Basin Initiative provided lower tariffs for Caribbean goods, creating an opportunity for Costa Rican exporters.
    • Costa Rica formed CINDE (Coalición Costarricense de Iniciativas de Desarrollo) to attract foreign direct investment.
    • This private organization was funded by the government and U.S. grants.
    • An export processing zone (EPZ) was established, offering tax incentives for exporting companies.
    • By 1989, the EPZ attracted 35 companies, primarily textile and footwear producers seeking cheap labor.

    High-Tech Industry Development

    • Costa Rica focused on attracting high-tech companies, particularly in the medical device sector.
    • This strategy involved high-level government outreach and incentives for companies like Intel, Abbott Laboratories, Baxter, and Procter & Gamble.
    • High-tech products now constitute the backbone of Costa Rica’s economy and export earnings.
    • Manufacturing goods now account for about 60 percent of Costa Rica's merchandise exports, while coffee and bananas remain important.

    Trade Theory Framework

    • The case study of Costa Rica’s trade policy demonstrates the application of various trade theories.
    • The import substitution phase was driven by protectionist measures and interventionist policies.
    • The shift towards export promotion and foreign investment reflects the principles of comparative advantage and specialization.
    • The country’s focus on high-tech industries highlights the importance of technology and knowledge-based industries in a globalized economy.

    Export Concentration

    • Costa Rica's exports are concentrated in a few countries, as shown by over 50 percent going to just three countries.
    • This concentration can be explained by various trade theories, including:
      • Gravity Model: Trade is more likely between countries that are geographically closer and share similar economic sizes.
      • Comparative Advantage: Countries tend to export goods they produce most efficiently, creating trade patterns based on specialized production.
    • The concentration also reflects the role of regional trade agreements and historical relationships in shaping trade flows.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    International Business Environments and Operations PDF

    Description

    This quiz explores the import substitution policies implemented in Costa Rica from 1960 to 1982. It covers the intentions behind these policies, the formation of the Central American Common Market (CACM), and the outcomes of these economic strategies. Delve into how these decisions impacted local production and the broader economy.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser