As it happened before in the U.S. and Europe, the ticos (as the people from Costa Rica are called) have started to reduce their consumption levels and this is raising some concerns about the country’s economic future. Between the increase in credit card interest rates, a reduction in the import trade figures, and the current increases in the current debt level, the country could find itself in a period of transition that could further challenge small business and individual employment in the short term.
Two of the primary factors that could substantially affect the small business are the lack of a proper logistics infrastructure, and the current trend in credit card utilization changes. The lack of a properly developed logistics infrastructure in a country with a relatively small but highly diverse geographical area could be responsible for up to a 26% cost increase for small business, increasing their operational costs and reducing their competitiveness in the market. Just in transportation over 46% of the cost of transportation is due to the need to cover the empty returns of the delivery trucks and vans to the point of origin. In addition credit cards used only by 30% of the population and other consumer credits have increased their rates to more than 18%, further affecting the purchasing power of individuals and small business alike.
For individuals, the economic challenges could further increase their abilities to find employment due to the cost increases for the small business, and the increased competitiveness in the local labor market. Call centers, once the staple of success for the middle class in Costa Rica, are increasing their requirements for the new applicants, and a good knowledge of english is no longer enough to guarantee a long term career.
While none of these changes by themselves should substantially affect the current economic perspectives of the Central America nation, they could be the heralds of further economic challenges in the near future. In order to increase their competitiveness the country needs to invest heavily in the development of a solid logistics infrastructure that will allow the local industries as well as foreign investors to expand their operations from the capital San Jose, to the rest of the country. This could help diversify both the employment opportunities as well as the investment opportunities to other areas of the nation, helping improve salaries, launch new small and medium business, and even increase overall real estate values in other areas of the country.
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