:: An attractive and productive destination

Many internationally recognized companies have been operating in Costa Rica since 1980. A great number of factors have contributed so that Costa Rica can be an attractive and productive destination for their offshore operations.

• A strategic location in the center of the Americas.
• A reknowned history of political, social and economic stability.
• Preferential access to strategic markets.
• Foreign investment incentive regimes.
• International standard of business infrastructure.
• High quality of life.

:: Economy - overview:

Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Poverty has remained at roughly 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. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans estimated to be in Costa Rica legally and illegally are an important source of (mostly unskilled) labor, but also place heavy demands on the social welfare system.

Foreign investors remain attracted by the country's political stability and high education levels, and tourism continues to bring in foreign exchange. The government continues to grapple with its large internal and external deficits and sizable internal debt. Reducing inflation remains a difficult problem because of rising import prices, labor market rigidities, and fiscal deficits. The country also needs to reform its tax system and its pattern of public expenditure.

The current administration has made it a priority to pass the necessary reforms to implement the US-Central American Free Trade Agreement (CAFTA). CAFTA implementation would result in an improved investment climate. Two key factors have become critical to the country's educational strategy: science and technology.

Costa Rica's previous and current administrations believe that technical training, along with innovation and technology transfer, are crucial factors to achieve higher levels of productivity and a better competitiveness level in the global economy.

:: Foreign direct investment

Foreign direct investment in Costa Rica has grown considerably during the past 20 years. After the economic crisis that affected the majority of Latin American countries, including Costa Rica, in the early 80s the structural policies that were implemented locally accomplished a swift economic recovery. This fact, along with the establishment of new trade regimes such as the Free Trade Zones, served to attract a new wave of transnational companies, which then and now use the country as an export platform of goods and services to the world.

Foreign investments in the manufacturing industry have set the standard since the early nineties, followed by other sectors among which food products, financial services and tourism stand out. The change in the structure of foreign investments replicates the progress in the economic development of the country where the secondary and third sectors acquire greater importance as an economy grows; in fact, the services sector has increased its participation within the GDP to an astounding 50%.

This is also reflected in the structure of exports, where after being comprised of primary and textile products, they now include an important portion of products with a high technological component. In fact, currently traditional export products such as bananas and coffee have continued their growth in volume and value; however, their relative weight has shifted from 60% of exports to less than 20%. On the other hand, high-tech exports represent one fourth of the total, while tourism is now the main source of foreign exchange.

Traditionally, the United States accounts for more than half of the foreign direct investments that take place in Costa Rica, totaling 69,7%. Nevertheless, direct investments originating from Europe have been acquiring a growing importance due to the large investments carried out by Dutch and German corporations in both the tourist sector and the food and beverage industry during 2002 and 2003.

Costa Rica in numbers

GDP (purchasing power parity):

$48.77 billion (2006 est.)

GDP (official exchange rate):

$20.77 billion (2006 est.)

GDP - real growth rate:

4.7% (2006 est.)

GDP - per capita (PPP):

$12,000 (2006 est.)

GDP - composition by sector:

agriculture: 8.6%
industry: 31%
services: 60.4% (2006 est.)

Labor force:

1.866 million
note: this official estimate excludes Nicaraguans living in Costa Rica legally and illegally (2006 est.)

Labor force - by occupation:

agriculture: 20%
industry: 22%
services: 58% (1999 est.)

Unemployment rate:

6.6% (2006 est.)

Population below poverty line:

18% (2004 est.)

Inflation rate (consumer prices):

12.1% (2006 est.)

Investment (gross fixed):

19.4% of GDP (2006 est.)

Budget:

revenues: $3.134 billion
expenditures: $3.475 billion; including capital expenditures of $NA (2006 est.)

Public debt:

53.4% of GDP (2006 est.)

Agriculture - products:

bananas, pineapples, coffee, melons, ornamental plants, sugar, corn, rice, beans, potatoes; beef; timber

Industries:

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

Industrial production growth rate:

8.4% (2006 est.)

Current account balance:

-$1.176 billion (2006 est.)

Exports:

$7.931 billion (2006 est.)

Exports - commodities:

bananas, pineapples, coffee, melons, ornamental plants, sugar; textiles, electronic components, medical equipment

Exports - partners:

US 42.6%, Hong Kong 6.9%, Netherlands 6.4%, Guatemala 4.2% (2005)

Imports:

$10.88 billion (2006 est.)

Imports - commodities:

raw materials, consumer goods, capital equipment, petroleum

Imports - partners:

US 41.3%, Japan 5.6%, Venezuela 4.8%, Mexico 4.8%, Ireland 4.3%, Brazil 4.2%, China 4.2% (2005)

Reserves of foreign exchange and gold:

$2.5 billion (2006 est.)

Debt - external:

$6.42 billion (30 June 2006 est.)

Currency (code):

Costa Rican colon (CRC)

Additional Information

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Costa Rica Fishing There is a great fishing at Ocotal year round. Sailfish, marlin, roosterfish, dorado, tuna and over 15 other varieties of fish can be caught any month of the year.