The Central American republic of Costa Rica has coastlines on the Caribbean Sea and the Pacific Ocean. Area: 51,100 sq km (19,730 sq mi). Pop. (1995 est.): 3,344,000. Cap.: San José. Monetary unit: Costa Rican colón, with (Oct. 6, 1995) a free rate of ₡187.50 to U.S. $1 (₡296.42 = £1 sterling). President in 1995, José María Figueres Olsen.
The year 1995 began with Costa Rica’s government struggling to cope with a deteriorating economy, high inflation, and a budget deficit of 8% of gross domestic product. In February Pres. José María Figueres announced a plan to reduce the deficit with spending cuts and increased taxes, which was widely unpopular. Instead of increasing taxes to raise revenue, the opposition Social Christian Unity Party (PUSC) proposed an accelerated privatization program.
The nation’s economic team failed to convince the International Monetary Fund that the government was taking the necessary steps to meet its economic targets. As a result, the World Bank refused to grant Costa Rica $100 million earmarked to finance the implementation of the country’s structural adjustment program. Divisions within the Cabinet and the ruling National Liberation Party (PLN) led to a Cabinet reshuffle in March in which the president of the central bank was replaced.
On April 28 President Figueres and the leader of the PUSC, Rafael Angel Calderón, signed an accord that was followed the next day by approval of part of the fiscal reform package at a special session of the Legislative Assembly. As a result of the accord, the PLN agreed to vote in favour of a law to liberalize the banking system, support privatization, and end state monopolies in insurance, hydrocarbons, and telecommunications. Labour unions continued to organize strikes in protest against the economic measures, however, especially the tax increase and the planned layoff of 8,000 public-sector workers. Teachers went on strike in July and did not return until the government agreed in August to review its economic plan with labour union leaders.
This updates the article Costa Rica, history of.