QCOSTARICA — On Tuesday, the United States held its elections, one of the most important. Rodrigo Araya, economist and professor of International Trade at Universidad Fidélitas comments on how these results can affect the economy of Costa Rica.
The following is taken from the Araya interview conducted by Revista Summa prior to the election on Tuesday.
How will the results of the US elections affect trade and trade agreements, such as CAFTA-DR, in Costa Rica and the region?
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The elections in the United States can be described as “historic.” The current geopolitical context adds uncertainty and complexity, making it difficult for analysts to clearly foresee their effects and impact on the global order.
The United States uses its trade policy not only as an economic tool, but also as a strategic mechanism to meet its geopolitical objectives. Therefore, in terms of trade and treaties, any forecast is premature.
However, the validity of the current treaty could motivate any of the political forces to propose a renegotiation to update a two-decade-old agreement. However, due to commercial pressures, sectoral interests, and the priorities of other countries, a significant update is unlikely to be achieved in the short term. This effort represents a high opportunity cost for the United States, which is currently facing regional challenges such as migration, drug trafficking, and China’s growing commercial position in the region.
What migration policies could the candidates implement if they win, and how would they influence Costa Ricans and Central Americans residing in the United States?
Regarding immigration policies, both candidates in the United States present different approaches on the same issue. Trump’s position is oriented towards the exit of people who do not meet the requirements for permanence and tightening the conditions for entry at the border. On the other hand, Harris’ proposal seeks to prevent the entry of those who do not comply with the immigration policies of the United States.
This context forces Costa Rica and the countries of the region to internally manage the humanitarian effects of these measures, since we are transit countries for migrant caravans, which in turn poses the challenge of how to address the challenges and externalities of these flows. For Costa Rica, in particular, it is crucial to evaluate its position in relation to Nicaragua and Panama, so that it can mitigate the impact of being caught in the middle of the region’s migration policies. Regardless of who wins the elections in the United States, Costa Rica will face important challenges in this area. Preparing in advance will allow us to better manage humanitarian commitments and minimize undesirable situations in the country in relation to the migrant population.
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How would the economic policy of each candidate impact the flow of foreign direct investment to Costa Rica and other Central American countries?
In economic matters, both candidates seek to meet the expectations of their voters, presenting optimistic proposals focused on generating well-being and improving the purchasing power of American citizens. Consequently, no measures are anticipated that would discourage foreign direct investment flows to Costa Rica and the region. However, in these historic elections, it is important to consider that our main trading partner faces a complex and volatile geopolitical context, where scenarios can change suddenly. In this sense, it is prudent to maintain constant risk management and a close relationship with our trading partners, in order to have alternatives in the face of possible changes in the favorable conditions for foreign direct investment.
It is important to note that the United States, in the current administration, has implemented international economic policies that encourage its companies to move to allied countries such as Costa Rica, to attract the production of strategic inputs in the case of the technological industrial ecosystem such as microprocessors. This situation places Costa Rica in a position of competitive advantage, which predicts a favorable outlook in the short and medium term “ceteris paribus.”
How could the elections affect cooperation between the United States and Costa Rica on security and organized crime issues?
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Costa Rica stands out as a strategic ally in the region in the fight against drug trafficking and organized crime. International cooperation is a central element in the bilateral relationship between both nations and, although adjustments in this area (migration policies) are possible, no drastic changes are anticipated.
However, a change in global conditions could trigger modifications in foreign policy and cooperation agreements, prompting the United States to encourage countries not to depend exclusively on external aid in these issues, due to the need to redirect resources toward other priority issues. This situation underscores the importance of countries strengthening their policies and programs to reduce dependence on international cooperation and be able to respond quickly to problems that affect the economy, security, and well-being of the population.
What approach does each candidate have regarding climate change and how would this benefit or harm sustainability efforts in Costa Rica and the region?
The proposals of both candidates are clearly opposed. Trump, who withdrew the US from the Paris Agreement, would likely repeat that decision if he returned to power, which would significantly impact environmental policies. His approach favors fossil fuels over renewable energy, seeking to position the energy industry as a commercial tool, offering Europe alternatives to dependence on Russia. In general, his policies aim to soften environmental regulations to boost production in various sectors.
On the other hand, Harris strongly supports the permanence of the US in the Paris Agreement. Her proposal focuses on promoting electric mobility and applying environmental regulations in production processes, allocating resources to sustainable initiatives.
Both positions directly impact the sustainability efforts of Costa Rica and the region, affecting both cooperation and the climate. Although Costa Rica and other nations already face these climate challenges, geopolitical changes and the growing importance of energy production and fossil fuels pose new risks. In this context, it is crucial that Costa Rica continues to strengthen its environmental management and climate policies. At the same time, it must ensure adequate management of fuel imports to mitigate potential economic, social and environmental effects from price fluctuations.
What are the prospects for U.S. monetary policy, and how would this impact interest rates and the exchange rate in Costa Rica and Central America?
Ceteris paribus, the arrival of either candidate could maintain positive results in U.S. monetary policy. However, it is prudent to approach this issue with caution due to its multiple ramifications. Naturally, the US will seek to create favorable conditions for its population, but given its close economic interdependence with the countries of the continent, especially with the Central American region and in particular with Costa Rica, it is crucial to analyze in detail the final policies that the elected candidate implements in the short and medium term.
On the one hand, possible tariff proposals by Trump could negatively affect exports, while Harris proposes a continuity of the Biden administration’s policies. However, geopolitical fluctuations could significantly alter the outlook both in the US and in the linked economies.
In this context, positive effects on interest rates and exchange rates are anticipated for countries in the region whose economies are not dollarized, which can be beneficial for their economies in terms of stability and competitiveness in the international market.
What changes could there be in aid and international cooperation policies with Latin America under each possible administration?
The scenarios foreseen are complex in both cases, since international cooperation with Latin America has political and geopolitical nuances for both candidates. At this juncture, critical issues such as the management of migratory flows and efforts to reduce China’s influence in the region stand out. This last aspect represents a challenge for the US, since in recent administrations, traditional cooperation has weakened, allowing China to occupy strategic spaces. Both candidates will direct efforts towards these objectives.
In addition, it is expected that security issues and the fight against drug trafficking will continue to develop in synergy with the countries of the region. Without a doubt, relations with Nicaragua, Cuba and Venezuela, as well as with South America in general, will gain prominence on the agenda of the new administration, especially given the marked difference in the candidates’ vision. However, any approach will also depend on the political configuration of Congress, which will influence the adjustments and nuances of US foreign policy towards Latin America.
How would Costa Rica’s tourism sector be affected, considering the importance of the US as a source of tourists, if security and visa policies change?
Ceteris paribus, in the context of the Biden administration’s trade policies, which seek to relocate operations of US companies from Asia to nearby allied countries, Costa Rica presents itself with multiple opportunities. This approach, mainly oriented to meet geopolitical objectives, predicts a positive outlook for the country, opening the possibility of improving conditions in areas of security and visa requirements to facilitate the arrival of qualified labor. Strengthening these aspects would increase employment opportunities and create a more favorable environment for the installation and operation of companies, driving productive and economic growth.
It is important to note that these elections are taking place in an environment where the immigration and economic policies that are ultimately implemented can impact relations with countries in the region. Therefore, in addition to evaluating the vision of each candidate, it is prudent to consider the composition of the other levels of power that will result from this election and the leaders in different government positions. This will allow for a better understanding of the possible impacts, both positive and negative, of this historic presidential election.
This version organizes the text for greater clarity and cohesion, highlighting the factors to consider in the context of the election.
How would each candidate’s stance on the digital economy and technological investments, especially in the shared services and technology sector operating from Costa Rica, influence?
Costa Rica has been designated as the first strategic ally country of the United States under the Semiconductor and Science Act, which reinforces its position as a key partner for the operations of American technology companies. Although this policy is driven by the Biden administration, it also responds to a broader geopolitical agenda. Despite the differences in the economic and immigration visions of both candidates, there are areas of consensus, such as in the technology sector, that generate positive opportunities for Costa Rica.
This context suggests a favorable outlook for the country in terms of attracting investment and creating well-paid jobs that contribute to a high quality of life. It is therefore essential that Costa Rica continues to implement actions aimed at improving its productivity and strengthening its position as a regional technological hub.
What type of relationship could each administration build with Latin America and what role would Costa Rica have in that framework?
In Latin America, these elections are mainly marked by migration issues. The tone of the relations will depend on the candidate who is elected: with Harris, a negotiating, cooperative and open approach to dialogue is anticipated, while with Trump a less conciliatory and very determined stance is projected in certain currents. However, when considering the political, economic and sociocultural aspects, it is clear that each administration will face important challenges in fulfilling its objectives with respect to Latin America.
Regarding the relations between Costa Rica and the United States, these tend to be more state-based than political, which allows for a stable and cordial diplomatic relationship. This positions Costa Rica with an advantage to strengthen its bilateral ties and assume a regional leadership role, aligned with the political vision of its own government. In this sense, Costa Rica has diplomatic opportunities that can be leveraged for the benefit of the country, the region and its relations with the United States.
Since publishing the interview, Donald J. Trump is the project president-elect. In the coming days we will be publishing more expert opinions and interviews how the Trump return to the White House will affect our country.
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