The Rice Cartels Of Costa Rica. Why Tariffs and Price Fixing Do Not Fix Poverty.

Costa Rica is known internationally as having the ‘Pura Vida’ lifestyle and a low level of corruption. Tourists will, unfortunately, notice that all supermarkets have very high prices. Many of the expats will be familiar with the hilariously priced $8 tiny jars of Skippy peanut butter.

The fact of the matter is that Costa Rica heavily relies on food imports and the government heavily taxes everything. The local agriculture cannot sustain the rapidly growing population but Costa Rican protectionist laws are stuck in the past.  It is not just tasty luxury goods that are taxed, but basic staples are heavily taxed. Rice has tariffs of 35%, beans 30%, and milk at 65% just to name a few.

A small group elite families have deep roots within the government that allow them to take advantage of the system. The rice companies that belong to Corporaci√≥n Arrocera (Conarroz) are the only entities allowed to import rice duty-free. Since rice is price controlled, these companies can only sell the rice at a maximum price. Imported rice is much lower than local rice, so these companies simply sell the cheap foreign rice at the fixed prices and pocket the rest. Since rice is such an important part of the working class’s diet, this gives Conarroz members a lot of power.

Good old Uncle Pelon.

It is no secret that foreign investment in Costa Rica has increased the prices dramatically. The unfortunate thing is all construction materials are also heavily taxed. Families that want to construct a simple home on a rural plot of land will have to pay nearly double in comparison to neighboring countries. For working class folk that make $400 a month, they would be lucky to own a shack of corrugated iron.

Some places are not so Pura Vida. Uruca, San Jose

Costa Rica is a country that has had extreme poverty for decades due to the lack of industry. The poverty has relatively remained the same since the 1990’s due to the extremely high cost of living for a developing country. Even Nicaraguans are starting to enjoy a similar standard of living even with earning less than half of the typical Tico. The promised intention of tariffs and price fixing was to take from the rich and give to the poor, but the exact opposite is happening in Costa Rica.

Interesting Links:

List of Import tariffs. Some of these percentages may shock you.

An interesting comparison of the food prices by various foreigners. By News.co.cr

A more thorough explanation of Costa Rica’s poverty. ‘Growth without Poverty Reduction: The Case of Costa Rica’. The Cato Institute

 

 

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