About
Costa Rica

Economy of Costa Rica

After experiencing positive growth over the previous several years, the Costa Rican economy shrank slightly in 2009 (-2.5%) due to the global economic crisis. The services sector--around 68% of GDP--was the most affected, with tourism falling by 8%. The economy experienced a rebound in 2010 with a 3.6% GDP growth rate. Costa Rica enjoys the region’s highest standard of living, with a per capita income of about U.S. $10,569, and an unemployment rate of 6.7%. Consumer price inflation is high but relatively constant at about a 10% annual rate in the last decade. Both the central government and the overall public sector ran fiscal surpluses in 2007.

Costa Rica's major economic resources are its fertile land and frequent rainfall, its well-educated population, and its location in the Central American isthmus, which provides easy access to North and South American markets and direct ocean access to the European and Asian continents. Costa Rica is known worldwide for its conservation efforts with more than 26% of its land under protection, thus safeguarding more than 5% of the entire world's biodiversity. The country's top economic priorities include passing fiscal reform, pursuing responsible monetary policy, and creating opportunities for inclusive economic growth. Significant legislative hurdles slow down passage of new laws and present challenges for the country’s economic policymakers.

Costa Rica used to be known principally as a producer of bananas and coffee, but pineapples have surpassed coffee as the number two agricultural export. Manufacturing and industry's contribution to GDP overtook agriculture in the 1990s, led by foreign investment in Costa Rica's free trade zone. Well over half of that investment has come from the United States. Del Monte, Dole, and Chiquita have a large presence in the banana and pineapple industries. In recent years, Costa Rica has successfully attracted important investments by such companies as Intel Corporation, which employs 3,200 people at its $1.996 billion microprocessor plant; Procter and Gamble, which employs about 1,200 people in its administrative center for the Western Hemisphere; and Boston Scientific, Allergan, Hospira, and Baxter Healthcare from the health care products industry. Two-way trade between the U.S. and Costa Rica exceeded $10.3 billion in 2010. Costa Rica was the United States' 37th largest goods export market in 2009.

The country is rich with renewable energy. It gets about 99% of all its electrical energy from clean sources, and it is aiming to become carbon neutral by 2021. Costa Rica has oil deposits off its Atlantic Coast, but the Pacheco administration (2002-2006) decided not to develop the deposits for environmental reasons. The Arias administration (2006-2010) reaffirmed this policy. The country's mountainous terrain and abundant rainfall have permitted the construction of a dozen hydroelectric power plants, making it largely self-sufficient in electricity, but it is completely reliant on imports for liquid fuels. Costa Rica has the potential to become a major electricity exporter if plans for new generating plants and a regional distribution grid are realized. Its mild climate and trade winds make neither heating nor cooling necessary, particularly in the highland cities and towns where some 90% of the population lives.

Costa Rica ranked 121st out of 183 countries in the 2010 World Bank's Ease of Doing Business Index. This hampers the flow of investment and resources badly needed to repair and rebuild the country's public infrastructure, which has deteriorated from a lack of maintenance and new investment. Most parts of the country are accessible through an extensive road system of more than 30,000 kilometers, although much of the system has fallen into disrepair. Contamination in rivers, beaches, and aquifers is a matter of rising concern. Although Costa Rica has made significant progress in the past decade in expanding access to water supplies and sanitation, just 3.5% of the country's sewage is managed in sewage treatment facilities, and the Water and Sewage Institute (AyA) estimates that perhaps 50% of septic systems function. In 2007, Costa Rica experienced nationwide blackouts resulting from a severe dry season (which limited hydroelectric resources) and the state electricity monopoly's inadequate investment in maintenance and capacity increases.

Costa Rica has sought to widen its economic and trade ties within and outside the region. The country signed a bilateral trade agreement with Mexico in 1994, which was later amended to cover a wider range of products. Costa Rica also has signed trade agreements with Canada, Chile, the Dominican Republic, Panama, and several Caribbean Community countries. In March 1998, it joined other Central American countries and the Dominican Republic in establishing a Trade and Investment Council with the United States. Following a 2007 public referendum, Costa Rica ratified the U.S.-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR), which entered into force in January 2009. The country was an active participant in the negotiation of the hemispheric Free Trade Area of the Americas and is active in the Cairns Group, which is pursuing global agricultural trade liberalization within the World Trade Organization.

In October 2007, Costa Rica began negotiating a regional Central American-European Union (EU) trade agreement. Together with El Salvador, Guatemala, Honduras, Nicaragua, and Panama, its free trade agreement with the EU came into force in January 2011. In April 2010 Costa Rica signed free trade agreements with China and Singapore. Additionally, Costa Rica is looking to join the Asia-Pacific Economic Cooperation (APEC) forum.

GDP (2010): $38.27 billion.
GDP PPP (2009 est.): $48.19 billion.
Inflation (2010 est.): 6.9%.
Real growth rate (2010 est.): 3.6%.
Per capita income: (2009) $6,900; (2010 est., PPP) $10,569.
Unemployment (2010 est.): 6.7%.
Currency: Costa Rica Colon (CRC).
Natural resources: Hydroelectric power, forest products, fisheries products.
Agriculture (6.5% of GDP): Products--bananas, pineapples, coffee, beef, sugar, rice, dairy products, vegetables, fruits, ornamental plants, corn, beans, potatoes, timber.
Industry (25.5% of GDP): Types--electronic components, medical equipment, textiles and apparel, tires, food processing, construction materials, fertilizer, plastic products.
Commerce, tourism, and services (68% of GDP): Hotels, restaurants, tourist services, banks, and insurance.
Trade (2010 est.): Exports--$10.01 billion: integrated circuits, medical equipment, bananas, pineapples, coffee, melons, ornamental plants, sugar, textiles, electronic components, medical equipment. Major markets (2009)--U.S. 32.61%, Netherlands 12.82%, China 11.81%, Mexico 4.2%. Imports--$13.32 billion: raw materials, consumer goods, capital equipment, petroleum. Major suppliers (2009)--U.S. 44.72%, Mexico 7.65%, Venezuela 5.56%, China 5.15%, Japan 4.36%

Geography of Costa Rica

Government of Costa Rica

Costa Rica is a democratic republic with a very strong system of constitutional checks and balances. Executive responsibilities are vested in a president, who is the country's center of power. There also are two vice presidents and a 20-plus member cabinet. The president and 57 Legislative Assembly deputies are elected for 4-year terms. In April 2003, the Costa Rican Constitutional Court annulled a 1969 constitutional reform which had barred presidents from running for reelection. As a result, the law reverted back to the 1949 Constitution, which permits ex-presidents to run for reelection after they have been out of office for two presidential terms, or 8 years. Deputies may run for reelection after sitting out one term, or 4 years.

The electoral process is supervised by an independent Supreme Electoral Tribunal--a commission of three principal magistrates and six alternates selected by the Supreme Court of Justice. Judicial power is exercised by the Supreme Court of Justice, composed of 22 magistrates selected for renewable 8-year terms by the Legislative Assembly, and subsidiary courts. A Constitutional Chamber of the Supreme Court (Sala IV), established in 1989, reviews the constitutionality of legislation and executive decrees and all habeas corpus warrants. The last national elections took place in February 2010.

The offices of the Comptroller General of the Republic, the Solicitor General, and the Ombudsman exercise oversight of the government. The Comptroller General's office has a statutory responsibility to scrutinize all but the smallest public sector contracts and strictly enforces procedural requirements. Along with the Sala IV, these institutions are playing an increasingly prominent role in governing Costa Rica.

There are provincial boundaries for administrative purposes, but no elected provincial officials. Costa Rica held its first mayoral elections in December 2002, whereby mayors were elected to 4-year terms by popular vote through general elections. Prior to 2002, the office of mayor did not exist, and the president of each municipal council was responsible for the administration of his/her municipality. The most recent nationwide mayoral elections took place in December 2010.

Costa Rica's insurance, telecommunications, electricity distribution, petroleum distribution, potable water, sewage, and railroad transportation industries are currently state monopolies. However, with the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR), Costa Rica accords substantial market access in a wide range of services, subject to very few exceptions. The wireless telephony, data telecommunications, and insurance markets opened to market competition in 2010. As part of the implementing agenda for CAFTA-DR, Costa Rica intends to strengthen and modernize the state monopoly telecommunications provider (ICE) so that it can remain competitive with new companies entering the market.

Costa Rica has no military and maintains only domestic police and security forces. A professional Coast Guard was established in 2000.

POLITICAL CONDITIONS
Costa Rica has long emphasized the development of democracy and respect for human rights. The country's political system has steadily developed, maintaining democratic institutions and an orderly, constitutional scheme for government succession. Several factors have contributed to this trend, including enlightened leadership, comparative prosperity, flexible class lines, educational opportunities that have created a stable middle class, and high social indicators. Also, because Costa Rica has no armed forces, it has avoided military involvement in political affairs, unlike other countries in the region.

On May 8, 2010 Laura Chinchilla, of the National Liberation Party (PLN), was sworn in as President of the Republic of Costa Rica. Throughout her campaign, Chinchilla’s primary message was strengthening security; her platform also included improvement of the country’s infrastructure, creation of a progressive income tax and expanding jobs through a “green jobs” initiative, better living conditions for children and senior citizens, and supporting women’s issues. Immediately upon assuming office, Chinchilla signed four decrees, two involving citizen security and two in the social and environmental field. Following the 2010 elections, the 57-member unicameral Legislative Assembly fragmented into several parties, with no faction having a plurality--the PLN won 23 seats, the PAC 12 seats, ML 9 seats, and the Social Christian Unity Party (PUSC) 6 seats, with the remaining seats split among lesser known parties.

Principal Government Officials
President--Laura CHINCHILLA Miranda
Vice Presidents--Alfio PIVA and Luis LIBERMAN
Foreign Minister--Rene CASTRO Salazar
Ambassador to the United States--Muni FIGUERES Boggs
Ambassador to the Organization of American States--Jose Enrique CASTILLO Barrantes
Ambassador to the United Nations--Jairo HERNANDEZ Milian

Costa Rica maintains an embassy in the United States at 2114 S Street NW, Washington, DC 20008 (tel. 202-328-6628).

Type: Democratic republic.
Independence: September 15, 1821.
Constitution: November 7, 1949.
Branches: Executive--president (head of government and chief of state) elected for one 4-year term, two vice presidents, Cabinet (15 ministers, two of whom are also vice presidents). Legislative--57-deputy unicameral Legislative Assembly elected at 4-year intervals. Judicial--Supreme Court of Justice (22 magistrates elected by Legislative Assembly for renewable 8-year terms). The offices of the Ombudsman, Comptroller General, and Procurator General assert autonomous oversight of the government.
Subdivisions: Seven provinces, divided into 81 cantons, subdivided into 421 districts.
Political parties: National Liberation Party (PLN), Citizen's Action Party (PAC), Libertarian Movement Party (PML), Social Christian Unity Party (PUSC), and other smaller parties.
Suffrage: Universal and compulsory at age 18.

Back to Top

History of Costa Rica

In 1502, on his fourth and last voyage to the New World, Christopher Columbus made the first European landfall in the area. Settlement of Costa Rica began in 1522. For nearly three centuries, Spain administered the region as part of the Captaincy General of Guatemala under a military governor. The Spanish optimistically called the country "Rich Coast." Finding little gold or other valuable minerals in Costa Rica, however, the Spanish turned to agriculture.

The small landowners' relative poverty, the lack of a large indigenous labor force, the population's ethnic and linguistic homogeneity, and Costa Rica's isolation from the Spanish colonial centers in Mexico and the Andes all contributed to the development of an autonomous and individualistic agrarian society. An egalitarian tradition also arose. This tradition survived the widened class distinctions brought on by the 19th-century introduction of banana and coffee cultivation and consequent accumulations of local wealth.

Costa Rica joined other Central American provinces in 1821 in a joint declaration of independence from Spain. Although the newly independent provinces formed a Federation, border disputes broke out among them, adding to the region's turbulent history and conditions. Costa Rica's northern Guanacaste Province was annexed from Nicaragua in one such regional dispute. In 1838, long after the Central American Federation ceased to function in practice, Costa Rica formally withdrew and proclaimed itself sovereign.

An era of peaceful democracy in Costa Rica began in 1899 with elections considered the first truly free and honest ones in the country's history. This began a trend continued until today with only two lapses: in 1917-19, Federico Tinoco ruled as a dictator, and, in 1948, Jose Figueres led an armed uprising in the wake of a disputed presidential election.

With more than 2,000 dead, the 44-day civil war resulting from this uprising was the bloodiest event in 20th-century Costa Rican history, but the victorious junta drafted a constitution guaranteeing free elections with universal suffrage and the abolition of the military. Figueres became a national hero, winning the first election under the new constitution in 1953. Since then, Costa Rica has held 14 presidential elections, the latest in 2006.

People of Costa Rica

Unlike many of their Central American neighbors, present-day Costa Ricans are largely of European rather than mestizo descent; Spain was the primary country of origin. However, an estimated 10% to 15% of the population is Nicaraguan, of fairly recent arrival and primarily of mestizo origin. Descendants of 19th-century Jamaican immigrant workers constitute an English-speaking minority and--at 3% of the population--number about 119,000. Few of the native Indians survived European contact; the indigenous population today numbers about 29,000 or less than 1% of the population.

Nationality: Noun and adjective--Costa Rican(s).
Population (2010): 4.516 million.
Annual population growth rate (2010 est.): 1.347%.
Ethnic groups: European and some mestizo 94%, African origin 3%, Chinese 1%, Amerindian 1%, other 1%.
Religion: Roman Catholic 76.3%, Evangelical Protestant 13.7%, other 4.8%, none 3.2%.
Languages: Spanish, with a southwestern Caribbean Creole dialect of English spoken around the Limon area.
Education: Years compulsory--9. Attendance--99% grades 1-6; 71% grades 7-9. Literacy--96%.
Health: Infant mortality rate--9.45/1,000. Life expectancy--men 74.61 yrs., women 79.94 yrs.
Work force (2009 est.): 2.05 million; this official estimate excludes Nicaraguans living in Costa Rica legally and illegally.