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World > North America > Costa Rica > Economy (Notes)

Costa Rica - Economy (Notes)


ECONOMY
After four years of slow economic growth, the Costa Rican economy grew at nearly 5% in 2006. Compared with its Central American neighbors, Costa Rica has achieved a high standard of living, with a per capita income of about U.S. $5,100, and an unemployment rate of 6.6%. During 2006 the annual inflation rate dropped into the single digits (9.43%) for only the third time in the last 28 years; proof that the Costa Rican Government is seriously trying to reduce its large fiscal deficit.

Implementing CAFTA-DR, passing fiscal reform, and creating an effective concessions process are the biggest challenges for the country's economic policymakers. Costa Rica ranks 105th out of 175 countries in the World Bank?s 2006 Doing Business Index. This hampers the flow of investment and resources badly needed to repair and rebuild 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 and pineapple industries. Two-way trade between the U.S. and Costa Rica exceeded $7.9 billion in 2006.


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 public 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 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, Mexico, and Trinidad and Tobago. It is negotiating a trade agreement with Panama and is poised to begin negotiating a regional Central American-EU trade agreement in 2007. Costa Rica was an active participant in the negotiation of the hemispheric Free Trade Area of the Americas and is active in the Cairns Group, which is pursuing global agricultural trade liberalization within the World Trade Organization.

Costa Rica concluded negotiations with the U.S. to participate in CAFTA-DR in January 2004. The Legislative Assembly began debate in October 2005, but Costa Rica is the only CAFTA-DR partner not to have yet entered the agreement into force. Ratification and implementation are pending the 2007 referendum. Once implemented, CAFTA would bring about the partial opening of the state telecommunications monopoly and a substantial opening of the state-run insurance sector.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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