Commercial Magazine

Costa Rica

By Victor Whitman

Although slightly smaller in area than the state of Virginia, Costa Rica’s diverse geography includes rugged mountains dotted with volcanoes, swampy mangroves and arid plains, and more than 900 miles of combined coastline along the Pacific Ocean and Caribbean Sea.

Nearly 5 percent of all known plant and animal species can be found in Costa Rica’s national parks and protected refuges. Strong protectionist environmental policies have made it the only tropical country in the world that has reversed deforestation, according to the World Bank. It also has long been a popular destination for birdwatchers and ecotourists, drawing around 3 million visitors annually, government statistics suggest.

The Central American nation is home to 5 million people. Politically, Costa Rica is a multiparty democracy led by President Carlos Alvarado Quesada. A former novelist, Quesada won the presidential election in April 2018 at age 38 on a progressive agenda to support gay marriage, mitigate poverty, boost employment and end the use of fossil fuels in Costa Rica. The nation also abolished its army in 1948.

Economically, Costa Rica has had solid growth and foreign investment over the past two decades, but without significant improvement to the poverty rate. In the 1990s, the nation established free-trade zones and tax incentives for foreign companies to produce and export goods. Intel opened a microchip assembly plant in the late 1990s. That plant was closed in 2014, but the company has expanded other operations within the country.

Other technological, pharmaceutical and service-based companies followed Intel in the 2000s, the Cato Institute reported. The nation also reduced or eliminated numerous tariffs on consumer goods and privatized most state-owned enterprises. Costa Rica has free-trade agreements with numerous countries, including the U.S.

The poverty rate in Costa Rica has remained in the 20 percent range for the past two decades, according to the CIA World Factbook. About 9 percent of the population is foreign born, with neighboring Nicaragua comprising about 75 percent of immigrants. Costa Rica also has experienced a recent economic slowdown driven in part by ballooning debt. In 2018, multiple credit-ratings services downgraded Costa Rica’s bond rating and assigned it a negative outlook. In a move to control the fiscal deficit, the government passed a tax-reform package that put a cap on government spending. The International Monetary Fund (IMF) said the government may need to enact more measures to improve public-spending efficiency and manage the debt.

Gross domestic product (GDP) growth cooled from 4.3 percent annually in early 2016 to 1.9 percent as of this past January. The unemployment rate rose more than 3 percentage points in the last six months of 2018 to reach 12 percent, according to Trading Economics. The IMF said the slowdown reflected multiple shocks that included a three-month public-sector strike over proposed tax reforms, a political crisis in neighboring Nicaragua and rising global interest rates.


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