3/4/2017 - Costa Rica should increase agricultural productivity and take new steps to promote competitiveness to ensure that the farm sector continues to contribute to sustainable and inclusive growth, according to a new OECD report.
Agricultural Policies in Costa Rica proposes reforms that facilitate the sector’s success, particularly by reducing bottlenecks related to infrastructure, innovation and access to financial services. New investments will be needed to boost productivity and encourage diversification, and reinforce efforts to adapt to the challenge of climate change.
“Agriculture is a significant contributor to GDP and employment in Costa Rica, and has in recent years developed into a dynamic and competitive export sector,” said OECD Deputy Director of Trade and Agriculture Carmel Cahill.
“Looking ahead, it will be important to address the blockages that hold back productivity growth and limit opportunities in the farm sector. In particular, market distorting producer support, which raises prices for low-income households and constrains flexibility in crop choice for farmers, should be reduced. Together with efforts that enhance climate change adaptation, such policy measures will help ensure a vibrant farm sector for future generations,” Ms Cahill said.
Agriculture’s share of GDP has fallen from 13.7% in 1995 to 5.6% in 2013, while employment in the sector fell from 21.4% to 12.7% over the same period. Despite these drops, agriculture remains Costa Rica's second largest employer, playing a central role in rural areas. An outward-oriented growth strategy has led to the development of an internationally competitive sector, which accounts for almost 40% of Costa Rica’s exports.
Achieving the government’s dual objectives – growing the agriculture sector while reducing poverty – will require new policies that encourage productivity growth, which has stalled in recent years, even in the competitive export sector. Better implementation of government programmes, improved co-ordination among public institutions, and reduced bureaucratic processes would improve public services and help farmers achieve higher productivity.
Support for agriculture is relatively low, at 10% of farm revenue (2013-15), as measured by the OECD’s Producer Support Estimates, compared with the OECD average of 17.6% for the same period. The report finds, however, that tariffs and current price support for certain products, such as rice, distort production and markets, and largely support major landowners while raising prices for poor households. The report proposes that a clear announcement be made by the government specifying the pathway and timeframe for future reforms to agricultural policy.
To meet the challenge of liberalisation foreshadowed under international trade agreements, Costa Rica should improve the quality and timeliness of services to agriculture; continue to invest in agricultural innovation and in the development of high-value niche export products; and ensure opportunities for farmers to access marketing structures in Costa Rica.
As part of a broader adjustment strategy, the report also highlights the need to improve rural education and skills and to help identify alternative paths for farmers that may struggle to compete, as well as the need for continued investment in the social safety net to assist displaced farmers
The report recognises Costa Rica as a global leader in climate change mitigation and adaption in the agricultural sector. Going forward, it recommends continued progress in ensuring that climate change and agricultural policies re-inforce each other, the strengthening of programmes to encourage farmer awareness and greater emphasis on addressing future vulnerabilities by, for example, introducing standards for climate-proof infrastructure.
For further information, journalists should contact OECD Mexico Centre Media Manager Carolina Ziehl (+52 55 9138 6235) or Dalila Cervantes-Godoy, Agricultural Policy Analyst, Development Division, OECD Trade and Agriculture Directorate (+33 6 89 65 86 12).
***NOTE TO EDITORS***
Agriculture Policies in Costa Rica feeds into the country’s ongoing OECD accession process, which was launched in April 2015 by the OECD Council.
Costa Rica is now working through an Accession Roadmap, which sets out the terms, conditions and process for its accession to the Organisation. The Accession Roadmap calls for a series of in-depth reviews conducted by 22 OECD technical committees, which, in turn, will provide a formal opinion to the OECD Council on Costa Rica’s willingness and ability to implement OECD standards and of its policies and practices as compared to OECD best policies and practices in the relevant area.
These reviews are seen as an opportunity to support the Costa Rican authorities in pushing forward reforms in line with OECD standards and best practices. There is no set timeline or end date for the accession process, and progress made ultimately depends on the ability of Costa Rica to respond to recommendations made by OECD committees, formed by its Members, in order to successfully complete the technical reviews.
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