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Natural-Resource Losses Reduce Costa Rican GNP Gains

BETWEEN 1970 and 1989, national output in the Central American republic of Costa Rica grew at an average annual rate of 4.6 percent.To economists, that's handsome progress. It beats the high 2.5 percent annual growth in Costa Rica's population and thus raised living standards. But to economist Robert Repetto there's a serious flaw in those numbers. They don't take account of the destruction of natural resources in this tropical democracy. In a report for the World Resources Institute (WRI) in Washington and the Tropical Science Center in San Jose, Costa Rica, Mr. Repetto and several other authors note that Costa Rica's conventional national accounts record timber output, fish harvest, and crop production as income but ignore the costs of deforestation, overfishing, and soil erosion. Natural resource assets worth more than one year's gross national product (about $4.1 billion in 1984 United States dollars) vanished without a trace in those two decades, the study calculates. "A nation's depletion of its natural resources - consumption of national capital - can ... masquerade as growth for decades, even though it will clearly reduce income prospects from resource sectors in the future," notes James Gustave Speth, president of WRI. "Just as ignoring the deterioration of man-made assets skews economic assessments, so does overlooking the degradation of natural assets."

Idea gains favor This idea of taking account of resource depletion in the measurements of a nation's economy is "catching on," Dr. Repetto says. Developing countries such as Mexico, El Salvador, Chile, Brazil, the Philippines, Indonesia, Malaysia, and India have been studying the issue. China, switching from the old communist measure of "net material product" to the broader Western system of national accounting, has also examined measures of resource depletion. Among industrial nations, Norway, Germany, the Netherlands, Canada, and Australia are looking into the issue. France has a "patrimony" account that attempts to include natural resource factors. In the United States, Congress appropriated funds two years ago for a study by the Bureau of Economic Analysis in the Commerce Department. Repetto would like the United Nations' Statistical Commission, which is in the process of revising the UN system of national accounts (SNA), the standard-bearer for measuring economic developments in countries around the world, to include measures of changes in natural resource assets. "The current UN system of national accounts is a cover-up for the environmental degradation that's occurring," he states. "There is a dangerous asymmetry in the way economic performance is analyzed that validates the notion that rapid economic growth can be achieved and sustained by exploiting the environment. The UN's national income accounting framework is a relic of the 1930s when raw materials were cheap and few economists could foresee environmental threats." The study suggests that the UN should announce at the June 1992 meeting in Brazil of the UN Conference on Environment and Development that "this distortion in the treatment of natural resources will be removed in the ongoing revisions to the SNA." The Brazil conference follows the 1987 report of the World Commission on Environment and Development, which called for "sustainable development" that meets the current generation's needs without depriving future generations by drawing down productive assets.

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Potential growth cut 30 percent In Costa Rica, the study used remote sensing and satellite imaging, detailed field studies, scientific samplings, and Geographic Information Systems methodologies and mapping to measure natural resource losses. They found that the depreciation in the value of Costa Rica's forests, soils, and fisheries averaged 5 percent of GNP per year over the 20 years of the study or one-third of gross capital formation. This means a 25 to 30 percent reduction in potential economic growth. Net capital formation was in effect overestimated by at least 40 percent.