LatinFinance - March/April 2013 - Costa Rica Supplement - 2
Costa Rica | Overview
Costa Rica is seen as a beacon of stability in a troubled region. But it must confront a
range of challenges if it’s to build on more than half a century of economic progress
Work in progress
D
rive through the congested streets of Costa Rica’s lively
capital, San José, and you get a feel for both the buoyancy
and vulnerabilities of the economy.
A rash of American malls and fast food joints rub shoulders with
makeshift street markets. Apartment blocks, many foreign-owned,
have sprung up in brand new suburbs, but still look down on gullies
populated by shanties. Car registrations have soared, reflecting
the strength of the emerging middle class, but the streets are often
gridlocked with congestion.
Costa Rica is a sterling success story in its challenging
neighborhood of Mesoamerica. Alongside Panama, it has long been
the darling of investors in Central America.
The country’s GDP growth has averaged 5% consistently over
the last 60 years, says its finance minister Edgar Ayales. There have
been only fleeting episodes of crisis, most notably in 1980 to 1981,
following a debt explosion, he adds.
The country has rock-solid democratic credentials. In a region
beset over the decades by militarism, it has no army. Moreover,
it has built a strong social welfare system that includes universal
healthcare and education, accounting for 10.9% and 8% of GDP
respectively, as well as sweeping environmental protections.
“Our strengths include Costa Rica’s geographical position,
stability and our free trade platform,” says Laura Chinchilla, Costa
Rica’s president. “The most important strength is human resources.”
Even more surprising is that the country has achieved its
success despite a low tax take. At just over 13% of GDP, the rate is
higher than Guatemala’s 10%. But for a state that makes so many
social promises, it is a paltry figure when compared to the more
than 50% rates seen in Sweden and Denmark.
Nevertheless, Costa Rica’s strengths have allowed it to capture
a level of foreign direct investment (FDI) disproportionate to its
diminutive size. FDI reached $2.17 billion while its growth has
averaged 12.7% per year since 2002, says Gabriela Llobet, director
at the Costa Rican Investment Promotion Agency (CINDE).
The country’s economic openness has proved foresighted and
today the country is reaping rich investment rewards. The free trade
agreement between Central America, the Dominican Republic and
the United States was ratified in 2007.
Costa Rica has signed a host of other free trade agreements
and is close to ratifying accords with the European Union and
Colombia, says Anabel González, Costa Rica’s trade minister. It was
the first Central American country to recognize China, cutting its
close ties to Taiwan in 2007, and is one of a handful of countries to
2
A Supplement
to
Powering development: construction in San José
run a trade surplus with the Asian nation.
The arrival of global technology firm Intel, today the fourth
largest company in the country and the biggest private investor,
served as a catalyst for an economic transformation. Costa Rica
has become a preferred location for value-added services and has
gained higher-paid and more sophisticated jobs.
Intel has expanded its operations multiple times, into areas such
as back and mid-office operations and advanced research and
development, thanks largely to the quality of Costa Rica’s workforce,
says Karla Blanco, the company’s manager of corporate affairs.
It’s not only the country’s stability and institutions that appeal to
investors; the underlying economics are also compelling. Free trade
zones provide generous breaks including income tax exemptions
that can be renewed multiple times. The country is also less prone
to disruptions and strikes than its neighbors and, in general,
companies and workers tend to have good relations. The World
Economic Forum ranks Costa Rica top in the region for cooperation
LatinFinance | March/April 2013
Table of Contents for the Digital Edition of LatinFinance - March/April 2013 - Costa Rica Supplement
Latin Finance - March/April 2013 - Costa Rica Supplement
Contents
Getting it right
Securing the future
Making the leap
Finding space
A hard currency
Trading up
Green credentials
LatinFinance - March/April 2013 - Costa Rica Supplement - Latin Finance - March/April 2013 - Costa Rica Supplement
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover2
LatinFinance - March/April 2013 - Costa Rica Supplement - Contents
LatinFinance - March/April 2013 - Costa Rica Supplement - Getting it right
LatinFinance - March/April 2013 - Costa Rica Supplement - 3
LatinFinance - March/April 2013 - Costa Rica Supplement - 4
LatinFinance - March/April 2013 - Costa Rica Supplement - 5
LatinFinance - March/April 2013 - Costa Rica Supplement - Securing the future
LatinFinance - March/April 2013 - Costa Rica Supplement - 7
LatinFinance - March/April 2013 - Costa Rica Supplement - Making the leap
LatinFinance - March/April 2013 - Costa Rica Supplement - 9
LatinFinance - March/April 2013 - Costa Rica Supplement - 10
LatinFinance - March/April 2013 - Costa Rica Supplement - 11
LatinFinance - March/April 2013 - Costa Rica Supplement - 12
LatinFinance - March/April 2013 - Costa Rica Supplement - 13
LatinFinance - March/April 2013 - Costa Rica Supplement - Finding space
LatinFinance - March/April 2013 - Costa Rica Supplement - 15
LatinFinance - March/April 2013 - Costa Rica Supplement - A hard currency
LatinFinance - March/April 2013 - Costa Rica Supplement - 17
LatinFinance - March/April 2013 - Costa Rica Supplement - Trading up
LatinFinance - March/April 2013 - Costa Rica Supplement - 19
LatinFinance - March/April 2013 - Costa Rica Supplement - 20
LatinFinance - March/April 2013 - Costa Rica Supplement - 21
LatinFinance - March/April 2013 - Costa Rica Supplement - 22
LatinFinance - March/April 2013 - Costa Rica Supplement - 23
LatinFinance - March/April 2013 - Costa Rica Supplement - Green credentials
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover3
LatinFinance - March/April 2013 - Costa Rica Supplement - Cover4
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