Hacienda Okhra Project

COSTA RICA’S ECONOMY

ECONOMY

Main exports: Electronic components, textiles, bananas, coffee, sugar, beef, medical devices, pineapples, foliage and ornamentals, fish and seafood, processed foods.
Main industries: Microprocessors, software, food processing, textiles and clothing, construction materials, fertilizer, plastic products.

Main income generating activity: Tourism.

After experiencing positive growth over the previous several years, the Costa Rican economy shrank slightly in 2009 (-2.5%) due to the global economic crisis. The services sector was the most affected, with tourism falling by 8%. Services account for nearly 70% of GDP. The economy experienced a rebound in 2010, with a 4.2% and 4.0% GDP growth rate in 2010 and 2011 respectively. Costa Rica enjoys the region’s highest standard of living, with purchasing power parity per capita income of about U.S. $11,500. The unemployment rate is 6.5%.

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. Costa Rica is known worldwide for its conservation efforts with more than 26% of its land under protection, thus safeguarding more than 5% of the entire world’s biodiversity. The country’s top economic priorities include passing fiscal reform, pursuing responsible monetary policy, and creating opportunities for inclusive economic growth.

Coffee was first planted in Costa Rica in the early 19th century, and was first shipped to Europe in 1843, soon becoming Costa Rica’s first major export. Coffee production would remain Costa Rica’s principal source of wealth well into the 20th century and by 2006, was the third cash crop export. Most of the coffee exported was grown around the main centers of population in the Central Plateau and then transported by oxcart to the Pacific port of Puntarenas. The largest coffee growing areas are in the provinces of San José, Alajuela, Heredia, Puntarenas, and Cartago. Costa Rica is famous for its gourmet coffee beans, with Costa Rican Tarrazú among the finest arabica coffee beans in the world used for making espresso coffee, together with Jamaican Blue Mountain, Guatemalan Antigua and Ethiopian Sidamo.

Manufacturing and industry’s contribution to GDP overtook agriculture in 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. Del Monte, Dole, and Chiquita have a large presence in the banana and pineapple industries. Costa Rica has sought to widen its economic and trade ties within and outside the region. The country signed a bilateral trade agreement with Mexico in 1994, which was later amended to cover a wider range of products. Costa Rica also has signed trade agreements with Canada, Chile, the Dominican Republic, Panama, and several Caribbean Community countries. In recent years, Costa Rica has successfully attracted important investments by such companies as Intel Corporation, which employs 3,200 people at its $1.996 billion microprocessor plant; Procter and Gamble, which employs about 1,200 people in its administrative center for the Western Hemisphere; and Boston Scientific, Allergan, Hospira, and Baxter Healthcare from the healthcare products industry. Two-way trade between the U.S. and Costa Rica exceeded $16.2 billion in 2011. Costa Rica was the United States’ 40th-largest goods export market in 2010.

With a $2.2 billion per year tourism industry, Costa Rica is the most visited nation in the Central American region, with two million foreign visitors in 2008, which translates into a high expenditure per tourist of $1,077 per trip, one of the highest in the Caribbean Basin. In 2008, most visitors came from the United States (38.6%), neighboring Nicaragua (21.8%), Europe (11.3%) and Canada (5.2%). In 2005, tourism contributed 8.1% of the country’s GNP, and represented 13.3% of direct and indirect employment. Tourism now earns more foreign exchange than bananas and coffee combined

The U.S. accounts for almost half of Costa Rica’s exports, imports, and tourism, and more than two-thirds of its foreign investment. Over 130,000 private American citizens, including many retirees, reside in the country and more than 700,000 American citizens visit Costa Rica annually
In recent times, 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. Since 1999, tourism earns more foreign exchange than the combined exports of the country’s three main cash crops: bananas, pineapples and coffee.

The country is rich with renewable energy. It gets about 99% of all its electrical energy from clean sources, and it is aiming to become carbon neutral by 2021. 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 Arias administration (2006-2010) reaffirmed this policy. 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. Its 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.

Ecotourism draws many tourists to visit the extensive national parks and protected areas around the country. Costa Rica was a pioneer in this type of tourism, and the country is recognized as one of the few with true ecotourism. In terms of the 2011 Travel and Tourism Competitiveness Index, Costa Rica ranked 44th in the world and second among Latin American countries after Mexico. Considering its sub index natural resources, Costa Rica ranks sixth worldwide in the natural resources pillar, but 104th in terms of its cultural resources due to the country’s limited number of cultural sites.

Costa Rica has also developed a system of payments for environmental services. Similarly, Costa Rica has a tax on water pollution to penalize businesses and homeowners that dump sewage, agricultural chemicals, and other pollutants into waterways. In May 2007, the Costa Rican government announced its intentions to become 100% carbon neutral by 2021. As of 2012, Costa Rica produces more than 90% of its electricity through renewable sources.

In 1996, the Forest Law was enacted to provide direct financial incentives to landowners for the provision of environmental services. This helped reorient the forestry sector away from commercial timber production and the resulting deforestation, and helped create awareness of the services it provides for the economy and society (i.e. carbon fixation, hydrological services such as producing fresh drinking water, biodiversity protection, and provision of scenic beauty)

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