Although explored by the Spanish early in the 16th century, initial attempts at colonizing Costa Rica proved unsuccessful due to a combination of factors, including disease from mosquito-infested swamps, brutal heat, resistance by natives, and pirate raids. It was not until 1563 that a permanent settlement of Cartago was established in the cooler, fertile central highlands. The area remained a colony for some two and a half centuries. In 1821, Costa Rica became one of several Central American provinces that jointly declared their independence from Spain. Two years later it joined the United Provinces of Central America, but this federation disintegrated in 1838, at which time Costa Rica proclaimed its sovereignty and independence. Since the late 19th century, only two brief periods of violence have marred the country's democratic development. In 1949, Costa Rica dissolved its armed forces. Although it still maintains a large agricultural sector, Costa Rica has expanded its economy to include strong technology and tourism industries. The standard of living is relatively high. Land ownership is widespread.
Central America, bordering both the Caribbean Sea and the North Pacific Ocean, between Nicaragua and Panama
Population - distribution
roughly half of the nation's population resides in urban areas; the capital of San Jose is the largest city and home to approximately one-fifth of the population
Spanish (official), English
SAN JOSE (capital) 1.17 million (2015)
- Conventional long form
- Republic of Costa Rica
- Conventional short form
- Costa Rica
- Local long form
- Republica de Costa Rica
- Local short form
- Costa Rica
- San Jose
- Geographic coordinates
- 9 56 N, 84 05 W
- Time difference
- UTC-6 (1 hour behind Washington, DC, during Standard Time)
accepts compulsory ICJ jurisdiction; accepts ICCt jurisdiction
Since 2010, Costa Rica has enjoyed strong and stable economic growth - 4.3% in 2016. Exports of bananas, coffee, sugar, and beef are the backbone of its commodity exports. Various industrial and processed agricultural products have broadened exports in recent years, as have high value-added goods, including medical devices. Costa Rica's impressive biodiversity also makes it a key destination for ecotourism.
- External debt stocks
- US$ 23,667,498,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -1,879,571,054
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 18,329,828,592
- Exports of goods and services
- US$ 18,155,624,953
- Total Merchandise Trade
- FDI, net inflows
- US$ 3,179,583,017
- Commercial Service Exports
- US$ 8,268,108,335
bananas, pineapples, coffee, melons, ornamental plants, sugar, corn, rice, beans, potatoes; beef, poultry, dairy; timber
medical equipment, food processing, textiles and clothing, construction materials, fertilizer, plastic products
- bananas, pineapples, coffee, melons, ornamental plants, sugar; beef; seafood; electronic components, medical equipment
- US 35.2%, China 6.5%, Mexico 4.8%, Netherlands 4.4% (2015)
- raw materials, consumer goods, capital equipment, petroleum, construction materials
- US 46.8%, China 10.1%, Mexico 7.3% (2015)
- Country Risk Rating
- A somewhat shaky political and economic outlook and a relatively volatile business environment can affect corporate payment behavior. Corporate default probability is still acceptable on average.
- Business Climate Rating
- The business environment is relatively good. Although not always available, corporate financial information is usually reliable. Debt collection and the institutional framework may have some shortcomings. Intercompany transactions may run into occasional difficulties in the otherwise secure environments rated A3.
- Democratic institutions (since 1949)
- Best social indicators in the region: education and health
- Services and cutting-edge industries (pharmaceuticals, microprocessors) attractive for FDIs
- Diversified trade thanks to multiple trade agreements
- Tourism resources: hotels, national parks
- Exposure to natural disasters
- Inadequate transport infrastructures
- Economically and financially dependent on the United States
- Weak public accounts
- Lack of skilled labor/undeclared work
Growth will remain stable in 2017. External trade will be less buoyant due to stagnating exports, associated with sluggish activity in the United States, the country's major trading partner. At the same time, imports will post increases in response to the still low oil price. The investment will sustain activity, thanks to continued public investment projects on the one hand, and on the other, due to the expected increase in FDI: progress on port and motorway infrastructure will continue in 2017 after the delays recorded in 2016. Moreover, the preferential fiscal conditions within the free-trade zone, as well as the opening up to foreign companies of the services to businesses industry will act as additional incentives for FDIs.
Inflation is expected to rise in 2017: the effects of the accommodative monetary policy aimed at limiting the disinflation observed in 2016 are expected to materialize in 2017. The depreciation of the Costa Rican colon will thus lead to imported inflation, so the Central Bank could tighten monetary policy by raising key rates in 2017.
In order to halt the upward trend of public debt, the government introduced a restrictive fiscal policy in 2016. Fiscal consolidation currently appears to be supported by efforts on tax collection, in particular through the imposition of measures to combat tax evasion. The government is relying, in particular, on its tax reform program to boost its revenues. This involves the introduction of 15% VAT to replace the current sales tax (13%), as well as the elimination of tax exemptions (health services in particular). However, these tax reforms are not new (they were already tabled in 2015, but never validated). The government and the opposition are apparently in agreement over the need for fiscal consolidation, but finding a compromise on how to achieve it will be difficult. This means adopting the fiscal reforms will be done very slowly.
The current account deficit is also likely to remain stable. Ongoing weak oil prices (3rd largest import item) combined with the strong dependence on consumer goods and intermediate goods intended for factories in the free-trade zone will result in a widening trade balance deficit. The income balance will continue to run a deficit, because of dividend repatriation by the multinationals based in the country, while the transfer deficit is expected to remain modest. The inflow of funds from migrant workers will still be offset by the outflow of funds from Nicaraguan workers living in the country. Nonetheless, the balance of services will improve slightly, due to increased US visitor numbers.
In power since 2014, President Luis Guillermo Solis from the center-left party, the PAC, is struggling to get his reform program passed. His party actually has only 20% of the seats in the legislative assembly, the presidency of which will return in 2016-2017 to the opposition, who are proving very hostile to the changes. This could make it more difficult to adopt corrective tax measures and to combat urban crime and the development of money laundering networks linked to drug trafficking, and slow down the plans aimed at improving the institutional framework.
The business climate will continue to be affected by inadequate infrastructure (especially transport and telecommunications) and the relatively high energy costs (electricity).
With regard to international relations, President Solis has not yet decided on whether to join the Pacific Alliance (the economic community whose member states are Chile, Mexico, Peru, and Colombia), in view of the wider public debate. Effectively, he is waiting for the results of an inter-ministerial consultation before deciding. Discussions with the OECD with a view to the country's accession are still ongoing.