Costa Rica Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economical overview

The pillars of the economy are electronics exports, tourism and agriculture. For a long time, Costa Rica was a marked agricultural economy, but with the beginning of the 1960s, the state invested in industrialization and the economy became increasingly varied. During the 1990s, tourism passed through agriculture as the main source of foreign exchange, and electronic components went on bananas and coffee as the most important export products.

Costa Rica has since the end of the 20th century attracted foreign companies that benefit from the relatively well-educated workforce and the so-called free trade zones with favorable conditions (see also Industry). When the textile industry and then the high-tech industry were first promoted in the 1990s, the inflow of foreign capital increased and the economy got a huge boost.

Countryaah.com: Major imports by Costa Rica, covering a full list of top products imported by the country and trade value for each product category.

US microprocessor manufacturer Intel’s investment in Costa Rica was crucial. Intel established itself in 1997, giving a clear impression in the economy: exports rose and growth increased. Many other high-tech companies followed suit. Intel accounted for nearly 6 percent of the country’s GDP and the microprocessors produced for 20 percent of exports. When Intel closed its manufacturing facility in Costa Rica in 2014, that meant a major breakdown. However, the company remains in the country with facilities for research, development and service.

Varied exports

Electronic components and other industrial goods dominate exports, with particularly strong demand for microprocessors from China. Bananas, coffee, pineapples and other fruits and nuts still form a substantial part of exports. Imports largely consist of raw materials and components for the manufacturing industry.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including CRI which represents the country of Costa Rica. Check findjobdescriptions to learn more about Costa Rica.

Goods imports are larger than exports. The negative trade balance is offset to some extent by the extensive tourism, but also the current account balance (which includes service trade) is negative. Since the 1960s, Costa Rica has been part of a Central American common market. The country signed the DR-Cafta Free Trade Agreement in 2004, with four other Central American states as well as the United States and the Dominican Republic. However, the agreement was very contentious and caused a bitter domestic political conflict. It only came into force in January 2009, following a referendum and several legislative changes (see Modern History).

Costa Rica has bilateral agreements with several other Latin American countries. In 2011, a free trade agreement entered into force with China, which soon became Costa Rica’s second largest import country. China has contributed both aid money and investments in, among other things, infrastructure.

The United States is still by far the largest trading partner. The exchange is also great with neighboring countries in Central America and with EU countries.

Investment in ecotourism

In 2016, tourism was estimated to account for just over 5 percent of GDP. Costa Rica is one of the world’s leading eco-tourist destinations. The country has a varied nature with active volcanoes, rainforests, sandy beaches and a huge variety of animal and plant species (see Geography and climate). There is a well-developed system of national parks that contribute to easily accessible nature experiences. Political stability and relatively low crime make their efforts to attract visitors. The tourism sector has not least created many new jobs. The large number of tourists also causes problems, as fragile nature is subject to wear and tear and some sex tourism has arisen.

Growth has generally been good during the 2000s, thanks to robust domestic demand, increased tourism and a strong manufacturing industry.

Large budget deficit

However, a major problem is the budget deficit, which at the end of 2018 was 6 percent of GDP. All governments since the turn of the millennium have had tax increases and other measures on the agenda to deal with the deficit, but have largely failed because of lack of support in Parliament.

Costa Rica has previously served as a tax haven for foreigners. The European Cooperation Organization OECD removed the country from its “black list” in 2009 and from the “gray list” in 2011. Costa Rica had then signed several tax information exchanges with other states. In 2013, the country also signed such an agreement with the United States.