Costa Rica has had a competitive political system for more than 100 years, and has been a full democracy for almost the last 50. Significant advances were made in 1949 with the adoption of a constitution that laid the foundation not only for the institutionalization of a stable democratic system, but also for the more general characteristics of Costa Rica’s policymaking process. This policymaking framework permitted a fourfold increase in GDP per capita between 1950 and 2000, whereas in the Latin American region as a whole GDP per capita barely doubled. The country also has one of the lowest rates of income inequality in the region and compares favorably with upper-middle-income countries in respect to basic education and health outcomes. Underlying these positive development results are broadly effective public policies. Costa Rica ranks among the top five countries in the region in respect to all but one of the key features of public policies discussed in Chapter 6, including stability, coordination/coherence, implementation and enforcement, and public-regardedness. Only in respect to the characteristic of adaptability does Costa Rica rank more toward the middle tier of countries.

Effective policies have been possible in Costa Rica in part because highly competitive and fair elections centered on two main political parties/coalitions provide incentives for politicians to orient their policy decisions toward satisfying the interests of the median voter, and, therefore, to design institutions to meet ambitious social welfare objectives. The 1949 Constitution also establishes a distinctive institutional design which limits the scope of conflict between the elected branches of government and devolves important policy responsibilities to autonomous bureaucratic institutes. Neither the president nor legislators—all of whom are elected on separate ballots for concurrent, four-year terms—can stand for immediate reelection. In addition, the constitution limits the ability of the president to shape the legislative agenda and creates “fast-track” procedures for enacting the annual budget. The legislative assembly must modify or approve the executive’s budget within 90 days, and the president can subsequently veto it. These procedures have succeeded in preventing the budget from getting bogged down in inter-branch conflict.

As a result of steady expansion since 1949, the decentralized State sectors now consist of more than 100 autonomous institutions. In these sectors, including health care, old-age pensions, election management, housing, higher education, and monetary policy, the autonomous institutions are the key players. Although in total they spend as much as the central government, autonomous institutions do not have to submit their budgets to either the president or the legislature. They have programmatic, budgetary, and administrative autonomy and often rely on specific or protected revenue sources. The comptroller general of the republic, an auxiliary institution of the legislature, exercises oversight of the decentralized State sectors.

As a consequence of these long-term inter-temporal agreements by key partisan actors to delegate policy authority to autonomous agencies, important areas of policy have been safeguarded against the instability and incoherence that might otherwise have resulted from government turnover and partisan conflict. An independent supreme court has enforced these agreements by repeatedly upholding the autonomy of the institutions in its rulings, especially during the 1960s. The desire of politicians to regain some control over this large portion of the State apparatus led to a constitutional reform in 1968 and other statutory reforms in the 1970s, which affirmed the executive and legislative branches’ authority to set general policy in the sectors and permitted more partisan-based appointments in their directorates. Nonetheless, the institutions largely retained their budgetary and administrative autonomy.

Policymaking in areas pertaining to the central State was fairly centralized from the 1950s until around 1990. The unicameral legislature and the relatively cohesive party system (2.5 effective parties) limited the number of distinct actors in the policymaking process, which permitted some degree of policy adaptation despite the weakness of the president in respect to constitutional powers. Adaptability was facilitated by the relatively large share of seats (48 percent) typically controlled by the governing party and the president’s influence in determining who is nominated and elected to the congress from his party. But the president’s partisan powers and ability to enact laws weaken during the course of the four-year presidential term. Term limits make presidents “lame ducks” by the third year as legislators, even from the governing party, distance themselves from the incumbent. Legislators focus instead on aligning themselves with a future president, hoping perhaps for a cabinet or senior bureaucratic post in the new administration, or for an advantage in the world of local government.

Since the early 1990s policymaking in Costa Rica has become more fragmented. Growing disenchantment with the two-party system contributed to an increasing vote for parties and candidates not affiliated with the National Liberation Party (PLN) and the Social Christian Unity Party (PUSC) and a reduction in the share of legislative seats controlled by the governing party. In addition, the establishment of the Constitutional Chamber in 1989 entailed the introduction of a new veto player that has the power to prevent bills from becoming law even while they work themselves through the legislative process. Thus, the flexibility of policymaking in respect to the areas under the control of the central State has diminished as a consequence of electoral and institutional changes.