Capital - San José (GMT-6) Largest City - San José Population - 4,133,884 est. Languages - Spanish, English Demonyn - Costa Rican Currency - Costa Rican Colón (CRC) GDP per capita - $12,000 est. Calling Code - +506 Internet TLD - .cr
Costa Rica (literally "Rich Coast"), officially the Republic of Costa Rica (Spanish: Costa Rica or República de Costa Rica), is a country in Central America, bordered by Nicaragua to the north, Panama to the south-southeast, the Pacific Ocean to the west and south, and the Caribbean Sea to the east. Costa Rica was the first country in the world to constitutionally abolish its army. In recent times electronics, pharmaceuticals, financial outsourcing, software development and ecotourism, have become the prime industries in Costa Rica's economy. High levels of education among its residents make the country an attractive investing location.
Economy
The economy has been expanding for Costa Rica in part because the Government had implemented a seven-year plan of expansion in the high tech industry. The central government offers tax exemptions for those who are willing to invest in the country. Several global high tech corporations have already started developing in the area exporting goods including chip manufacturer Intel, pharmaceutical company GlaxoSmithKline, and consumer products company Procter & Gamble. Trade with South East Asia and Russia has boomed during 2004 and 2005, and the country is expected to obtain full Asia-Pacific Economic Cooperation Forum (APEC) membership by 2007 (the country became an observer in 2004). For the fiscal year 2005, the country showed a government deficit of 2.1%, internal revenue increased an 18%, exports increased a 12.8% and the number of visiting tourists increased a 19%, reaching 1.5 million people. Revised economic figures released by the Central Bank indicate that economic growth stood at 5%, nevertheless the country faced high inflation (14%) and a trade deficit of 5.2%. For 2006 the economy is expected to grow a 6.8%.
The unit of currency is the colón (CRC), which trades around 518 to the U.S. dollar; currently about 675 to the euro. On October 16, 2006, a new currency exchange system was introduced, allowing the value of the CRC colón to float between two bands as done previously by Chile. The idea is that by doing so the Central Bank will be able to better tackle inflation and discourage the use of US dollars. Since that time, the value of the colon against the dollar has stabilized. Costa Rica's location provides easy access to American markets as it has the same time zone as the central part of the United States and direct ocean access to Europe and Asia.
Market Overview
The United States is Costa Rica’s leading trading partner, accounting for about half of Costa Rica’s total imports. According to U.S. Census Bureau trade data, the U.S. had a trade surplus of US$ 288 million in the trade of goods with Costa Rica in 2006. This compares to a surplus of US$183 million in 2005 and a US$27.4 million deficit in 2004.
Total investment into the country amounted to $653 million in 2005. The United States accounted for about two-thirds of the total. U.S. companies like Intel, Hewlett-Packard, Procter & Gamble and a number of franchising and service companies have established facilities here, due, in many cases to country’s political stability, proximity to the U.S., and number o f personnel who can combine technical executive with the capability to speak English.
Inflation declined to just under ten percent in 2006, and marked drop of 13-14 percent of previous years.
The Costa Rican economy grew dramatically in 2006, with GDP rising 8.6 percent compared to about four percent in 2005. Forecasts are for lower but still steady growth in the coming years.
Market Challenges
Costa Rica remains the only country not to have formally approved and implemented CAFTA-DR. A national referendum will be held in October on whether to approve the agreement.
Although private sector continues to grow, the Costa Rican Government has not enjoyed great success with many of its concession schemes for its public works projects, including the Juan Santamaria Airport, the Pococi prison facility, the Port of Caldera, and various road improvement programs. As a result, infrastructure in many instances has deteriorated and will need to be improved if Costa Rica is to remain competitive in the regional and world economy. Nevertheless, the Arias administration is committed to taking steps to improve various facets of Costa Rica’s infrastructure.
Although Costa Rica’s IP laws are considered to be adequate, enforcement of intellectual property laws has been lacking in many cases, due to insufficient resources and training and weaknesses in the country’s criminal code. The legal process in general is often sluggish, making binding arbitration an attractive option.
Market Opportunities
Market prospects are excellent in the following sectors: Kraft paper, paperboard, and other paper products; information and communication technology; auto parts; medical equipment; plastics and resins; construction equipment; food processing equipment; franchising; and other industry sectors and services.
Future prospects in these and other sectors are likely to improve with Costa Rican participation in the CAFTA-DR. More than 80 percent of all nonagricultural goods, and more than 50 percent of agricultural products, will be duty-free immediately upon accession.
Over time, the agreement will open the cellular and Internet service markets as well as insurance. In addition, CAFTA-DR will strengthen Costa Rica’s IPR protection regime, eliminate the dealer protection requirements, allow nondiscriminatory treatment for U.S. firms in government procurement bids, and provide stronger protection for investors.
