ECONOMY
After four years of slow economic growth, the Costa Rican economy grew at nearly 4% in 2004. Compared with its Central American neighbors, Costa Rica has achieved a high standard of living, with a per capita income of about U.S. $4,700, and an unemployment rate of 6.6%. The annual inflation rate hovers around 14% as the Costa Rican Government seeks to reduce a large fiscal deficit.
Controlling the budget deficit remains the single-biggest challenge for the country's economic policymakers, as interest costs on the accumulated central government consumed the equivalent of 32.1% in 2003 of the government's total revenues. About 18.9% of the national budget was financed by public borrowing. This limits the resources available for investments in the country's deteriorated public infrastructure.
Costa Rica's major economic resources are its fertile land and frequent 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. One-fourth of Costa Rica's land is dedicated to national forests, often adjoining picturesque beaches, which has made the country a popular destination for affluent retirees and eco-tourists.
Costa Rica used to be known principally as a producer of bananas and coffee, but pineapples have surpassed coffee as the number two agricultural export. In recent years, Costa Rica has successfully attracted important investments by such companies as Intel Corporation, which employs nearly 2,000 people at its $300 million microprocessor plant; Proctor and Gamble, which employs nearly 1,000 people in its administrative center for the Western Hemisphere; and Hospira and Baxter Healthcare from the health care products industry.
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 zone. Well over half of that investment has come from the United States. Dole and Chiquita have a large presence in the banana industry. Two-way trade exceeded U.S. $6.6 billion in 2004.
Costa Rica has oil deposits off its Atlantic Coast, but the Pacheco administration (2002-2006) decided not to develop the deposits for environmental reasons. The country’s mountainous terrain and abundant rainfall have permitted the construction of a dozen hydroelectric power plants, making it largely self-sufficient in electricity, but it is completely reliant on imports for liquid fuels. Costa Rica 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.
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. 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. Costa Rica has signed trade agreements with Canada, Chile, the Dominican Republic, and is negotiating trade agreements with Panama, and Trinidad and Tobago.
Costa Rica concluded negotiations with the U.S. to participate in the U.S.-Central America Free Trade Agreement (U.S.-CAFTA) in January 2004. CAFTA is expected to bring about the partial opening of the state telecommunications monopoly and a substantial opening of the state-run insurance sector. While CAFTA has been ratified by the U.S. and five other countries, the Costa Rican Legislative Assembly has not yet voted on it. Costa Rica is an active participant in the negotiation of the hemispheric Free Trade Area of the Americas as well as a member of the Cairns Group, which is pursuing global agricultural trade liberalization within the World Trade Organization.
Economic Stalistics
GDP (2004): $18.4 billion.
GDP PPP (2004 est.): $37.97 billion.
Inflation (2005 est.): 14%.
Real growth rate (2004 est.): 3.9%.
Per capita income (2004): $4,670. (PPP $9,600--2004 est.)
Unemployment (2004 est.): 6.6%.
Currency: Costa Rica Colon (CRC).
Natural resources: Hydroelectric power, forest products, fisheries products.
Agriculture (8.5% of GDP): Products--bananas, coffee, beef, sugarcane, rice, dairy products, vegetables, fruits and ornamental plants.
Industry (29.7% of GDP): Types--electronic components, food processing, textiles and apparel, construction materials, cement, fertilizer.
Commerce and tourism (61.8% of GDP): Hotels, restaurants, tourist services, banks, and insurance.
Trade (2004 est.): Exports--$6.18 billion: Integrated circuits, bananas, pineapples, optical/medical equipment, knit and woven apparel, coffee, fish and seafood. Major markets--U.S. 44.1%, Europe 21%, Central America 9%. Imports--$7.84 billion: electronic components, machinery, vehicles, consumer goods, raw materials, chemicals, petroleum products, foods, and fertilizer. Major suppliers--U.S. 45.9%, Europe 10%, Mexico 3.7% Central America 5%, Japan 4.8%, Venezuela 4%.
FOREIGN RELATIONS
Costa Rica is an active member of the international community and, in 1993, proclaimed its permanent neutrality. Its record on the environment, human rights, and advocacy of peaceful settlement of disputes give it a weight in world affairs far beyond its size. The country lobbied aggressively for the establishment of the UN High Commissioner for Human Rights and became the first nation to recognize the jurisdiction of the Inter-American Human Rights Court, based in San Jose.
During the tumultuous 1980s, then President Oscar Arias authored a regional peace plan in 1987 that served as the basis for the Esquipulas Peace Agreement. Arias' efforts earned him the 1987 Nobel Peace Prize. Subsequent agreements, supported by the United States, led to the Nicaraguan election of 1990 and the end of civil war in Nicaragua. Costa Rica also hosted several rounds of negotiations between the Salvadoran Government and the Farabundo Marti National Liberation Front (FMLN), aiding El Salvador's efforts to emerge from civil war and culminating in that country's 1994 free and fair elections. Costa Rica has been a strong proponent of regional arms limitation agreements.
U.S.-COSTA RICAN RELATIONS
The United States and Costa Rica have a history of close and friendly relations based on respect for democratic government, human freedoms, free trade, and other shared values. The country consistently supports the U.S. in international fora, especially in the areas of democracy and human rights. Costa Rica co-sponsored the Resolution on Cuba at the 60th session of the UN Commission on Human Rights. Law enforcement cooperation, particularly efforts to stem the flow of illegal drugs to the U.S., has been exemplary.
The United States is Costa Rica's most important trading partner. The U.S. accounts for over half of Costa Rica's exports, imports, and tourism, and more than two-thirds of its foreign investment. The two countries share growing concerns for the environment and want to preserve Costa Rica's important tropical resources and prevent environmental degradation.
The United States responded to Costa Rica's economic needs in the 1980s with significant economic and development assistance programs. Through provision of more than $1.1 billion in assistance, the U.S. Agency for International Development (USAID) supported Costa Rican efforts to stabilize its economy and broaden and accelerate economic growth through policy reforms and trade liberalization. Assistance initiatives in the 1990s concentrated on democratic policies, modernizing the administration of justice, and sustainable development.
For decades, Peace Corps Volunteers have provided technical assistance in the areas of environmental education, natural resources, management, small business development, basic business education, urban youth, and community education. USAID completed a $9 million project in 2000-01 to support refugees of Hurricane Mitch residing in Costa Rica.
Upwards of 20,000 private American citizens, including many retirees, reside in the country and more than 600,000 American citizens visit Costa Rica annually. There have been some vexing issues in the U.S.-Costa Rican relationship, principal among them longstanding expropriation and other U.S. citizen investment disputes, which have hurt Costa Rica's investment climate and produced bilateral tensions. Land invasions from organized squatter groups who target foreign landowners also have occurred, and some have turned violent. The U.S. Government has made clear to Costa Rica its concern that Costa Rican inattention to these issues has left U.S. citizens vulnerable to harm and loss of their property.
The United States and Costa Rica signed the bilateral Maritime Counter-Drug Agreement, the first of its kind in Central America, which entered into force in late 1999. The agreement permits bilateral cooperation on stopping drug trafficking through Costa Rican waters. The agreement has resulted in a growing number of narcotics seizures, illegal fishing cases, and search-and-rescue missions.
Principal U.S. Embassy Officials
Ambassador--Mark Langdale
Deputy Chief of Mission--Russell Frisbie
Political Counselor--David Henifin
Economic Officer--Whitney J. Witteman
Consul General--David Dreher
Management Counselor--Scott McAdoo
Public Affairs Officer--Laurie Weitzenkorn
Defense Representative--Chief-Commander Alwyn Young
Commercial Attaché--James McCarthy
Agricultural Attaché--Katherine Nishiura
APHIS--John Stewart
Environmental Hub--Bernard Link
Regional Security Officer--Michael Wilkins
Drug Enforcement Administration--Paul Knierim
Peace Corps Director--Terry Grumley The U.S. Embassy in Costa Rica is located in Pavas at Boulevard Pavas and Calle 120, San Jose, tel. (506) 519-2000 or (506) 220-3127.
Other Contact Information
U.S. Department of Commerce
Trade Information Center
International Trade Administration
14th and Constitution Avenue, NW
Washington, DC 20320
Tel: 800-USA-TRADE
www.trade.gov Costa Rican American Chamber of Commerce
c/o Aerocasillas
P.O. Box 025216, Dept 1576
Miami, Florida 33102-5216
Tel: 506-22-0-22-00
Fax: 506-22-0-23-00
Email: Amchamcr@sol.racsa.co.cr