Economy of Costa Rica

Economy of Costa Rica

Currency Costa Rican colón
calendar year
Trade organisations
 CAFTA
Statistics
GDP $71 billion (2014, PPP)
GDP growth
 3.5% (2014, Real)
GDP per capita
 US$14,900 (2014)
GDP by sector
 agriculture: 6.2% industry: 21.3% services: 72.5% (2013)
5.6% (2013, CPI)
Population below poverty line
 24.8% (2011 est.)[1]
47.9 (1992-2007)
Labour force
 2.198 million (2012)note: this official estimate excludes Nicaraguans living in Costa Rica
Unemployment 7.9% (2013)
Main industries
 microprocessors, food processing, medical equipment, textiles and clothing, construction materials, fertilizer, plastic products (2012)
121st[2]
External
Exports $11.66 billion (2013)
Export goods
 bananas, pineapples, coffee, melons, ornamental plants, sugar; seafood; electronic components, medical equipment (2012)
Main export partners
  United States 30.6%
 China 13.2%
 Netherlands 10.4%
 UK 9.0%
 Mexico 9.0% (2012 est.)[3]
Imports US$17.56 billion (2013)
Import goods
 raw materials, consumer goods, capital equipment, petroleum, construction materials (2012)
Main import partners
  United States 46.2%
 Mexico 8.1%
 Venezuela 7.3%
 China 5.8%
 Colombia 5.2% (2012 est.)[4]
Public finances
  • $8.1 bn (31 December 2013)
  • 47.4% of GDP (2012)
Revenues US$7.197 billion (2013)
Expenses US$9.621 billion (2013)
BB+ (Domestic)
BB (Foreign)
BBB- (T&C Assessment)
(Standard & Poor's)[5]
Foreign reserves
 US$7.406 billion (31 December 2013)

All values, unless otherwise stated, are in US dollars.

The economy of Costa Rica it is very stable and has evolved from an economy that depended solely on tourism, agriculture, to one more diverse, based on electronics exports, medical manufacturing and IT services.

According to a study conducted by ADEN Business School (which included 18 other countries in the region), Costa Rica is the fourth most competitive country in Latin America in 2012 and is part of a block of countries rated as having a "very good competitive level, with advances and developments in infrastructure, technology and macroeconomic stability".[6] The nation scored a 71.8 out of 100 on a study which measured competitiveness based on 10 criteria. Compared to the 2011 rank, Costa Rica went up by one position (from 5th to 4th).[6]

The CIA World Factbook states that Costa Rica's Gross Domestic Product (GDP) per capita is US$12,900 (2013 est.); the reported GDP summed in 2012 to US$45.1bn with a population of 4,805,000.[7] The World Bank General Government Public Sector Debt (PSDGG) statistics showed a linear rise from US$8bn in 2009 to US$18bn in 2014, which translates to a growth rate of 12%.[8] The Instituto Nacional de Estadística y Censos is charged with measuring other economic performance measures.[9] Poverty has remained around 15-20% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures.

According to the CIA World Factbook, foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the free-trade zones. Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America. However, many business impediments remain such as high levels of bureaucracy, legal uncertainty due to overlapping and at times conflicting responsibilities between agencies, difficulty of enforcing contracts, and weak investor protection. Inflation rose to 22.5% in 1995, dropped to 11.1% in 1997, 12% in 1998, 11% in 1999 and 13% in 2008. Measures taken by the Central Bank have reduced inflation substantially to 4.3% in 2009, and a projected 5.8% for 2010. Curbing inflation, reducing the deficit, and improving public sector efficiency through an anti-corruption drive, remain key challenges to the government. Previous political resistance to privatization had stalled liberalization efforts. However, after the signing of CAFTA, Costa Rica is now open to competition with its Central American partners in its insurance and telecommunications markets.

Costa Rica's economy emerged from recession in 1997 and has shown strong aggregate growth since then. After 6.2% growth in 1997, GDP grew a substantial 8.3% in 1999, led by exports. Costa Rica had a US$6.64bn trade deficit in 2013, on exports of US$11.48bn and imports of US$18.13bn.[10] Hybrid electronic circuits was the leading durable export category in 2013, followed by pineapple, banana, medical equipment, medical bioproducts, and coffee, juices, prosthetics, and surgery tools; these categories added up to over 50% of exports.[10] Miscellaneous circuits including telephones and miscellaneous petroleum products added to just under 25% of imports.[10]

The strength in the nontraditional export and tourism sector is masking a relatively lackluster performance by traditional sectors, including agriculture. The central government deficit decreased to 3.2% of GDP in 1999, down from 3.3% from the year before. On a consolidated basis, including Central Bank losses and parastatal enterprise profits, the public sector deficit was 2.3% of GDP. Costa Rica had a formal line of credit with the World Bank valued at US$947M in April 2014, of which US$645M had been accessed and US$600M remained outstanding.[7]


Natural resources

Costa Rica's 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 has two seasons, both of which have their own agricultural resources: the tropical wet and dry seasons. One-fourth of Costa Rica's land is dedicated to national forests, often adjoining beaches, which has made the country a popular destination for affluent retirees and ecotourists. It has one of the best economies in Latin America. Because of the ocean access 23.7% of Costa Ricas people fish and trade their catches to fish companies. In terms of the 2012 Environmental Performance Index ranking, Costa Rica is 5th in the world, and first among the Americas.[11]

Tourism

Ecotourism is key in Costa Rica's tourism industry. Shown Savegre River, Talamanca.
Main article: Tourism in Costa Rica

With a $1.92-billion-a-year tourism industry, Costa Rica stands as the most visited nation in the Central American region, with 2.42 million foreign visitors in 2013,[12] thus reaching a rate of foreign tourists per capita of 0.51, one of the highest in the Caribbean Basin, and above other popular destinations such as Mexico (0.21), Dominican Republic (0.38), and Brazil (0.03).

Ecotourism is extremely popular with the many tourists visiting the extensive national parks and protected areas around the country. Costa Rica was a pioneer in this type of tourism and the country is recognized as one of the few with real ecotourism.[13] Other important market segments are adventure, sun and beaches. Most of the tourists come from the U.S. and Canada (46%), and the EU (16%),[14] the prime market travelers in the world, which translates into a relatively high expenditure per tourist of $1000 per trip.

In the 2008 Travel and Tourism Competitiveness Index (TTCI), Costa Rica reached the 44th place in the world ranking, being the first among Latin American countries, and second if the Caribbean is included.[15] Just considering the subindex measuring human, cultural, and natural resources, Costa Rica ranks in the 24th place at a worldwide level, and 7th when considering just the natural resources criteria. The TTCI report also notes Costa Rica's main weaknesses, ground transport infrastructure (ranked 113th), and safety and security (ranked 128th).[16] [17]

Agriculture

Costa Rica's economy was historically based on agriculture, and this has had a large cultural impact through the years. Costa Rica's main cash crops, both historically and up to modern times, were Coffee and Bananas. Coffee, especially, had much cultural and political importance during the 1800s, being the crop that brought a newfound wealth to the nation's elite. But this crop has decreased in value to the point where it added only 2.5% to the 2013 exports of the country.[10]

Agriculture also plays a profound part in that country’s gross domestic product (GDP). It makes up about 6.5% of Costa Rica’s GDP, and 14% of the labor force.[18] Depending on location and altitude, many regions differ in agricultural crops and techniques. The main exports from the country include: bananas, pineapples, coffee, sugar, rice, vegetables, tropical fruits, ornamental plants, corn, and potatoes.

Livestock activity consists of cattle, pigs and horses, as well as poultry. Meat and dairy produce are leading exports according to one source,[19] but both were not in the top 10 categories of 2013.[10]

The combined export value of forest products and textiles in 2013 did not exceed that of either chemical products or plastics.[10]

Exports, jobs, and energy

A proportional representation of Costa Rica's exports.
This Intel microprocessor facility in Costa Rica is responsible for 25% of exports and 4.9% of Costa Rica's GDP.

Costa Rica used to be known principally as a producer of bananas and coffee. Even though coffee, bananas, pineapple, sugar, lumber, wood products and beef are still important exports, in recent times electronics, pharmaceuticals, financial outsourcing, software development, and ecotourism have become the prime industries in Costa Rica's economy. High levels of education among its residents make the country an attractive investing location.

Costa Rica has successfully attracted important investments by such companies as Intel Corporation, which employs nearly 3,500 people at its custom built $300 million microprocessor plant; Procter & Gamble, which is establishing its administrative center for the Western Hemisphere in Costa Rica; and Abbott Laboratories and Baxter Healthcare from the health care products industry likewise. Manufacturing and industry's contribution to GDP overtook agriculture over the course of the 1990s, led by foreign investment in Costa Rica's free trade zones. Well over half of that investment has come from the U.S. In 2006 Intel's microprocessor facility alone was responsible for 20% of Costa Rican exports and 4.9% of the country's GDP.[20][21]

Trade with South East Asia and Russia has boomed during 2004 and 2005, and the country obtained full Asia-Pacific Economic Cooperation Forum (APEC) membership by 2007 (the country became an observer in 2004). In 2011 the Financial Times Intelligence Unit awarded Costa Rica with its Caribbean and Central American Country of the Future Award for its successful record in attracting foreign direct investment (FDI) into the country, and being the number one destination country in the region in terms of FDI project numbers since 2003. In the previous assessment for the 2009/10 ranking the country had ranked second after Puerto Rico.[22][23]

In 2013, the total FDI stock in Costa Rica amounted to about 40 percent of GDP, of which investments from the United States accounted for 64 percent, followed by the United Kingdom and Spain with 6 percent each.[24] Costa Rica’s outward foreign direct investment stock is small, at about 3 percent of GDP as of 2011, and mainly concentrated in Central America (about 57 percent of the total outward direct investment stock).[24]

Tourism is booming, with the number of visitors up from 780,000 in 1996, through 1 million in 1999, to 2.089 million foreign visitors in 2008, allowing the country to earn $2.144-billion in that year.[25] Tourism now earns more foreign exchange than bananas and coffee combined.[26] In 2005, tourism contributed with 8,1% of the country's GDP and represented 13,3% of direct and indirect employment.[27]

Costa Rica has not discovered sources of fossil fuels—apart from minor coal deposits—but its mountainous terrain and abundant rainfall have permitted the construction of a dozen hydroelectric power plants, making it self-sufficient in all energy needs, except oil for transportation. Costa Rica exports electricity to Central America and has the potential to become a major electricity exporter if plans for new generating plants and a regional distribution grid are realized. 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.

Infrastructure

Costa Rica's infrastructure has suffered from a lack of maintenance and new investment. The country has an extensive road system of more than 30,000 kilometers, although much of it is in disrepair. Most parts of the country are accessible by road. The main highland cities in the country's Central Valley are connected by paved all-weather roads with the Atlantic and Pacific coasts and by the Pan American Highway with Nicaragua and Panama, the neighboring countries to the North and the South. Costa Rica's ports are struggling to keep pace with growing trade. They have insufficient capacity, and their equipment is in poor condition. The railroad didn't function for several years, until recent government effort to reactivate it for city transportation.

The government hopes to bring foreign investment, technology, and management into the telecommunications and electrical power sectors, which are monopolies of the state. However, political opposition to opening these sectors to private participation has stalled the government's efforts.

Costa Rica has a reputation as one of the most stable, prosperous, and among the least corrupt in Latin America.[28] However, in fall 2004, three former Costa Rican presidents, Jose Maria Figueres, Miguel Angel Rodríguez, and Rafael Angel Calderon, were investigated on corruption charges related to the issuance of government contracts. After extensive legal proceedings Calderon and Rodriguez were sentenced; however, the inquiry on Figueres has since been dismissed by the competent judicial party and no charges were ever raised against him.

Trade policy

Costa Rica's Free Trade Agreements.

Costa Rica has sought to widen its economic and trade ties, both within and outside the region. Costa Rica signed a bilateral trade agreement with Mexico in 1994, which was later amended to cover a wider range of products. Costa Rica joined other Central American countries, plus the Dominican Republic, in establishing a Trade and Investment Council with the United States in March 1998, which later became the Dominican Republic–Central America Free Trade Agreement. Costa Rica has bilateral free trade agreements with the following countries and blocs which took effect on (see date):

Costa Rica also is a member of the Cairns Group which is pursuing global agricultural trade liberalization in the World Trade Organization and helping to maintain the proper economy level in Costa Rica.

Statistics

Poás Volcano Crater is one of Costa Rica's main tourist attractions.

Because the information below lacks citations, its reliability can be questioned.

GDP: $61.43 billion (2013)

GDP PPP: $48.51 billion. (2013)

GDP real growth rate: 3.5% (2013)

GDP per capita: purchasing power parity: $12,900 (2013)

GDP per capita nominal: $12,600 (2012)

GDP composition by sector: agriculture: 6.2% (2013) Bananas, pineapples, coffee, beef, sugarcane, rice, corn, dairy products, vegetables, timber, fruits and ornamental plants. industry: 21.3% (2013) Electronic components, food processing, textiles and apparel, construction materials, cement, fertilizer. services: 72.5% (2013) Hotels, restaurants, tourist services, banks, call centers and insurance.

Population below poverty line: 24.8% (2011)[1]

Household income or consumption by percentage share: lowest 10%: 1.2% highest 10%: 39.5% (2009 est.)

Inflation rate (consumer prices): 5.6% (2013)

Labor force: 2.222 million (2013) Note: Excluding Nicaraguans living in the country

Labor force by occupation: agriculture 14%, industry 22%, services 64% (2006)

Unemployment rate: 10.1% (2015)[30]

Budget: revenues: $7.197 billion (2013) expenditures: $9.621billion (2013)

Industries: microprocessors, food processing, textiles and clothing, construction materials, fertilizer, plastic products

Industrial production growth rate: 4.3% (2013)

Electricity production: 9.473 billion kWh (2010)

Electricity production by source: fossil fuel: 9.28% hydro: 80.62% nuclear: 0% other: 10.1% (1998)

Electricity consumption: 8.532 kWh (2010)

Electricity exports: 135 million kWh (2010)

Electricity imports: 164 million kWh (2010)

Agriculture products: coffee, bananas, sugar, corn, rice, beans, potatoes, beef, timber

Exports: $11.66 billion (2013)

Export commodities: bananas, pineapples, coffee, melons, ornamental plants, sugar; seafood; electronic components, medical equipment

Export partners: US 38.9%, Netherlands 7.5%, Panama 5.1%, Hong Kong 4.6%, Nicaragua 4.4%(2012)

Imports: $17.56 billion (2013)

Import commodities: raw materials, consumer goods, capital equipment, petroleum, construction materials

Import partners: US 49.8%, China 8.2%, Mexico 6.6%(2012)

External debt: $7.401 billion (December 2008)

Economic aid - recipient: $107.1 million (1995)

Currency: 1 Costa Rican colon (₡) = 100 centimos

Exchange rates: Costa Rican colones (₡) per US$1 – 526.46 (March 27, 2015), US$1 – 541.40 (October 13, 2014), US$1 – 512.11 (September 4, 2010), US$1 – 559.51 (October 24, 2008), per US$1 – 500.10 (December 2007), 516.78 (November 2007), 506.11 (April 2006), 479.57 (July 2005), 299.63 (February 2000), 285.68 (1999), 257.23 (1998), 232.60 (1997), 207.69 (1996) and 179.73 (1995)[31]

Fiscal year: October 1 – September 30

References

  1. 1 2 Cifras básicas sobre pobreza e ingresos Page 2. INEC.go.cr, retrieved on February 7, 2011
  2. ↑ "Doing Business in Costa Rica 2012". World Bank. Retrieved 2011-11-21.
  3. ↑ "Export Partners of Costa Rica". CIA World Factbook. 2012. Retrieved 2013-07-26.
  4. ↑ "Import Partners of Costa Rica". CIA World Factbook. 2012. Retrieved 2013-07-26.
  5. ↑ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
  6. 1 2 camtic.org: ADEN Business School Study, Spanish.
  7. 1 2 "Costa Rica - Country Summary - World Bank Group Finances". World Bank Group Finances. Retrieved 11 June 2015.
  8. ↑ World Bank PSDGG Statistics, April 2014
  9. ↑ "Principal". Retrieved 11 June 2015.
  10. 1 2 3 4 5 6 inec.go.cr: "Estadisticas de Comercio Exterior, 2013
  11. ↑ Yale Center for Environmental Law & Policy / Center for International Earth Science Information Network at Columbia University. "2010 EPI Rankings". Retrieved 2012-01-25.
  12. ↑ "Costa Rica registró la llegada de más de 2,4 millones de turistas en 2013" (in Spanish). Nación. 2014-01-16. Retrieved 2014-01-16.
  13. ↑ Honey, Martha (1999). "Ecotourism and Sustainable Development: Who Owns Paradise?". Island Press; 1 edition, Washington, D.C.: 5. ISBN 1-55963-582-7. ...during the 1980s, ...the country transform itself from a low-key destination for nature lovers into the foremost ecotourism destination in the Americas.
  14. ↑ "Informe de Encuestas IV Trimestre 2006. Aeropuerto Internacional Juan Santamaria" (in Spanish). Instituto Costarricense de Turismo. 2006. Retrieved 2008-06-06. 2006 Annual Survey from the Costa Rican Board of Tourism (ICT)
  15. ↑ Jennifer Blanke and Thea Chiesa, Editors (2008). "The Travel & Tourism Competitiveness Report 2008" (PDF). World Economic Forum, Geneva, Switzerland.
  16. ↑ "País segundo en competitividad turística en América Latina" (in Spanish). La Nación. 2008-03-06. Retrieved 2007-03-16.
  17. ↑ "Podemos ser aún mejores" (in Spanish). La Nación. 2008-03-08. Retrieved 2007-03-16.
  18. ↑ CIA - The World Factbook. (2011). Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html
  19. ↑ "Informacion de Costa Rica". Retrieved 11 June 2015.
  20. ↑ "Intel supone el 4,9 por ciento del PIB de Costa Rica" (in Spanish). El Economista. 2006-10-06. Retrieved 2008-04-13.
  21. ↑ "Intel fabrica el procesador "más veloz del mundo" en Costa Rica" (in Spanish). La Vanguardia. 2007-11-13. Retrieved 2008-04-13.
  22. ↑ Walls, Jacqueline (2011-08-11). "Caribbean and Central American Countries of the Future 2011/12". Financial Times Intelligence Unit. Retrieved 2011-08-23.
  23. ↑ "Costa Rica lidera ranquin regional de atracción de inversiones". La Nación (in Spanish). 2011-08-22. Retrieved 2011-08-23.
  24. 1 2 imf.org: "Costa Rica: Selected Issues - IMF Country Report No. 13/80" Mar 2013
  25. ↑ Hassel Fallas (2007-12-19). "País cierra el año con llegada de 1,9 millones de turistas" (in Spanish). La Nación. Retrieved 2008-04-13. Translation: Country closes year with the arrival of 1,9 million tourists
  26. ↑ José Enrique Rojas (2004-12-29). "Turismo, principal motor de la economía durante el 2004" (in Spanish). La Nación. Retrieved 2008-04-13.
  27. ↑ Altés, Carmen (2006). "El Turismo en América Latina y el Caribe y la experiencia del BID". Inter-American Development Bank; Sustainable Development Department, Technical Paper Series ENV-149, Washington, D.C. available at http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=984876. p. 9 and 47. External link in |publisher= (help);
  28. ↑ Transparency International. "Global Corruption Report 2007". Retrieved 2008-03-11. Costa Rica ranks 3rd among Latin American countries, and the 55th position worldwide.
  29. ↑ "Canada-Costa Rica Free Trade Agreement". Retrieved 11 June 2015.
  30. ↑ INEC. Encuesta Continua de Empleo (ECE), 2015.
  31. ↑ "Banco Central de Costa Rica". Retrieved 11 June 2015.
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