Costa Rica: The Jewel of Central America

Aired January 2005

Costa Rica, whose name in English means “rich coast” is bordered by Nicaragua on the north and Panama on the south.

European settlers began to arrive in 1522, and for nearly three centuries, Spain administered the region as part of the Captaincy General of Guatemala under a military governor. Costa Rica became independent from Spain in 1821 and has been relatively stable ever since.

Costa Rica's basically stable economy is based primarily on tourism, electronics exports and agriculture. Poverty has been substantially reduced over the past 15 years, and a strong social safety net -- including well developed education and health systems -- has been put into place. Foreign investors remain attracted by the country's political stability and high education levels, and tourism continues to bring in significant foreign exchange.

FINANCE

Costa Rica’s financial sector includes the Central Bank, three state-owned commercial banks and over 15 private commercial banks, along with many other types of financial-services firms. All benefit from Costa Rica’s long tradition of supporting democracy and free-market principles as well as the country’s history – exceptional in Central America – of peaceful, orderly government succession; the lack of an armed forces has contributed to this stability.

Controlling the budget deficit remains the biggest challenge for the country’s policymakers. Interest payments related to this deficit consumed around 32.1% of the government’s total revenues last year, and approximately 18.9% of the national budget was financed by public borrowing. This limits the resources available for needed investments in the country’s public infrastructure.

INDUSTRY

In the 1990s, manufacturing and industry overtook agriculture in contribution to the country’s GDP, largely thanks to foreign investment in Costa Rica’s free-trade zones; over half of this investment was from the United States.

The United States is Costa Rica’s most important trading partner, accounting for over half of Costa Rica’s tourism revenues and more than two-thirds of its foreign investment. Two-way trade between Costa Rica and the United States exceeded 6 billion US dollars in 2003.

Costa Rica has sought to widen its economic and trade ties, both within and outside the region, and recently concluded negotiations with the United States to participate in the US-Central America Free Trade Agreement (US-CAFTA).

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 Europe and Asia. This combination of positive factors has created a unique economic and industrial environment, and many US and international companies have chosen to make Costa Rica their base in Central America and in Latin America.

TRANSPORT SECTOR

Unlike some of its neighbors, Costa Rica offers investors many of the benefits of operating in a developed country, including significant economic incentives and infrastructure that can fulfil the needs of national and international investors. The country has an extensive road system of more than 30,000 kilometers, although much of it is in disrepair, and most parts of the country are accessible by road. The main highland cities in the country's Central Valley are connected to each other and to the coasts by paved all-weather roads, while the Pan American Highway links Costa Rica to its neighbors Nicaragua and Panama and to countries beyond. Costa Rica's ports and railroads are expected to be opened to competitive bidding opportunities for private investment and management in the near future.

SCIENCE & TECHNOLOGY

Costa Rica has transformed its economy significantly over the past decade so that microchips and software have replaced coffee and bananas as the country’s top exports.

Costa Rica not only offers a highly educated IT work force ranked 28th in the world in expertise, but also an advanced telecommunications infrastructure that includes an efficient domestic telephone system, fiber-optic and coaxial cable links, and international connections through the Central American Microwave System, satellite earth stations and two submarine cables.

TOURISM

Costa Rica offers outstanding tourism attractions that include a wide range of landscapes, from rugged volcanoes to pristine beaches and rainforests, all within a relatively small area that can easily be explored thanks to the country’s developed infrastructure. Although it covers only .03% of the surface of the planet, Costa Rica accounts for approximately 6% of Earth’s biodiversity, and has long been known as one of the world’s top ecotourism destinations. Costa Rica is, in fact, a paradise for nature-lovers and sports enthusiasts. Visitors can view rare animals and plants, hike in unspoiled rainforests, kayak down some of the world’s most unspoiled rivers, surf and scuba dive along the country’s two coasts, and much more. Direct flights from the United States to San Jose and to Liberia on the country’s northwest coast have boosted Costa Rica’s tourism arrivals.

Costa Rica attracts many different types of tourists. The country has a tradition of catering to budget travelers, but the recent increase in construction of luxury hotels and resorts, particularly near San José and along the country’s northwest coastline, has resulted in strong growth in the numbers of higher-end visitors. There are many opportunities for US investors in the real estate and tourism sectors throughout Costa Rica.

The Costa Rican government is committed to preserving the country’s eco-tourism potential by ensuring that new tourism developments preserve Costa Rica’s natural heritage.