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Financial Analysis on Costa Rica: 2013 Observations and 2014 Forecasts

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BCR Banco de Costa Rica

Customers in a branch of Banco de Costa Rica

It is that time of the year when economists and financial analysts in Costa Rica compile their 2013 observations and make their forecasts for 2014. While the outlook is positive for large enterprises in some sectors, the same cannot be said for workers and consumers in Costa Rica, who will generally earn less at their jobs and pay more at cash registers.

More Work in 2014

According to a recent survey and study by international staffing firm Manpower, the first quarter of 2014 will present more employment opportunities for job seekers in Costa Rica. The results of the survey were published by online news daily CRHoy.com. Out of the 620 employers surveyed, the great majority does not foresee reductions in personnel; in fact, 24 percent plan to increase their staffing capacity. The sectors that are more likely to hire include manufacturing, communications and construction. The provinces of San Jose and Heredia will lead in this regard.

The Lower Salary Trend Will Continue in 2014

Many workers in Costa Rica have seen their salaries stagnate or even contract over the last few years. 2014 will not be any different. As recently explained by Tatiana Gutierrez of CRHoy.com, a study by the United Nations Economic Commission for Latin America and the Caribbean (Spanish acronym: CEPAL) confirmed what many Ticos already know: Their incomes are not keeping pace with consumer inflation.

Although Costa Rica has a minimum wage system that is commensurate with skills and education, consumer prices are rapidly outpacing salaries. Shoppers in Costa Rica have not retreated, but they seem to be taking on higher amounts of credit debt. Employee turnover is also leading many companies to reduce their salaries since there seems to be an adequate number of skilled workers willing to work for less.

Higher Prices for Everyone

As reported by Oscar Rodriguez of national newspaper La Nacion, the Central Bank of Costa Rica expects the inflation rate to close lower than 4 percent this year, but only because that institution was forced to intervene several times in 2013 to contain it. Economic growth in sectors such as the Free Trade Zones was optimal in 2013, but the Central Bank is concerned that small business owners are not as productive despite greater access to credit and more favorable terms for commercial loans.

Inflation through October 2013 was actually less than in 2012, but it is on track to climb in terms of basic goods, clothing, footwear, communications, and public transport. Although Costa Rica has experienced higher rates of inflation in the past, the greatest concerns are the artificial currency value of both the colon and the United States dollar, as well as the reduced salaries.

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