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Costa Rica Economy

Costa Rica’s economy is basically a stable one with the gross domestic product (GDP) depending on the three main pillars of tourism, agriculture and electronics export. Agriculture includes the production of coffee, bananas, and pineapples. In recent years, ecotourism, pharmaceuticals, financial outsourcing and software development have become major industries with significant contribution to the country’s GDP.

There has been a decline in poverty over the last decade, and the country has witnessed significant economic growth, rebounding from a -0.9 % in 1996. Inflation which stood at 22.5 % in 1995 has dropped significantly.

The quality of social service offered by the government have taken major beatings over the years, due to large government deficits, brought on by the interest payments on huge internal debt, and inefficient government administration. The main agendas of the government are still the curbing the rate of inflation, reducing the deficit, and making improvisations to the services offered by the public sector. Interest costs on the government’s accumulated debt are equivalent to 30% of the government’s total revenue.

This limits the resources available to the government to invest in the public infrastructure which has deteriorated. Liberalization efforts have been hampered due to the resistance put forward by the political parties of Costa Rica. Despite this, the government has tried to bring in foreign investment, technology and management into the telecommunications and electrical power sector, which are run by the state.

The country’s economy emerged from the red in 1997, and has shown strong aggregate growth since then. The country’s exports from the free trade zones and tourism sectors led to significant developments in the growth rate of the GDP. The apex bank of the country feels that significant growth soon after the recession of 1997 came from the production of Intel Corporation’s microprocessor assembly and testing plant. Intel employs 2000 people at its plant.

The location of the country in the isthmus of Central America makes it easier to access American markets, which have the same time zone as Central US and also has access to Europe and Asia via the Oceans.

Costa Rica has seen its economy expanding over the last few years, with the ambitious expansion plans of the government in the high tech industry. The increasingly high educated mass of the country make it an attractive investment destination, and the government now offers tax exemptions to those who invest in the country, thereby hiking up the number of people willing to invest.

There are a number of high tech companies which have sprung up in the area, including chip manufacturer Intel and Pharma companies like Procter & Gamble and Glaxo Smith Kline.

The country has developed extensive trade relations with South East Asia and Russia, and Costa Rica government expects to obtain full Asia Pacific Economic Cooperation Forum (APEC) membership by 2007.  

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