Today, Costa Rica is shaped by Spanish and Catholicism influences. However, Costa Rica has been inhabited as far back as 5000 years BC by people of the Aztecs, Mayas, and the Incas. The first natives in Costa Rica included hunters and gatherers and Costa Rica served as a middle region between Mesoamerican and Andean native cultures.
Costa Rica is a rain forest full Central American country with coastlines running 19,730 square miles with a population of 4.906 million citizens that was last reported in 2017. However, their population has significantly grown since the 1.59 million citizens that was reported in 1965. Costa Rica’s GDP is $57.06 billion which has also increased from $507.5 million in 1960, with an annual change of 3.2%. Their GDP per capita is $11,630.67 which has also increased from $380.72 also in 1960. A nation’s GDP at purchasing power parity exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States in the year noted and Costa Rica’s most recent GDP (purchasing power parity) is $85.2 billion.
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The largest percentage of exports from Costa Rica are in the manufacturing and agricultural sectors, with their main exports being coffee, bananas, pineapples, melons, ornamental plants, sugar, corn, rice, beans, potatoes, seafood, timber textiles, fertilizer, etc. Costa Rica exports about $8 billion worth of goods annually. Their main trade partners are the United States, El Salvador, Guatemala, China, Germany, Netherlands, United Kingdom, France, Italy, Mexico, and Canada.
Even though Costa Rica is a smaller country than some, they still import billions of dollars of goods into the country. They import over 40% of their goods from the United States, including machinery, chemicals, foods, appliances, etc.; but they also import from countries like Mexico, Guatemala, Venezuela, Germany, Japan, China, and Brazil. They heavily import raw materials, consumer goods, capital equipment, construction materials, and petroleum.
Following the Mexican War of Independence, Costa Rica became part of the Mexican Empire in 1821. Following that, Costa Rica became part of the Federal Republic of Central America in 1823 before gaining their full independence in 1838. After all of the chaos of the 1830’s, Costa Rica began normalizing its political institutions in the 1840’s, and in 1848 Costa Rica declared itself a republic and adopted a constitution establishing basic civil rights and abolished the army. Costa Rica scored 8.07 on the Economist Intelligence Unit’s 2018 Democracy Index and their regime type is considered to be full democracy.
Costa Rica’s current president is Carlos Alvarado Quesada. Costa Rica presidents govern for four years, and until 2005, they were banned from running for office again. Now, they can seek re-election, but they must wait at least eight years before running for re-election. Presidential candidates must be Costa Rican by birth, must be over 30 years of age, and they must not hold a religious office. Presidents are chosen by direct election by the Costa Rican citizens and they are accompanied in their duties by two vice-presidents. Costa Rican leaders are there to represent the nation in official acts, they exercise supreme control of public force, and they appoint and remove ministers. Some of their duties also include: sanctioning and regulating laws, collecting the national income in the form of taxes, receive foreign heads of state, and directing the republic's foreign relations.
Costa Rica is an active member of the international community and announced its permanent neutrality in 1993. 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. Costa Rica has been a strong supporter of regional arms limitation agreements, and in 2009, Costa Rica finished its third term as a non-permanent member of the United Nations Security Council. Costa Rica officially established diplomatic relations with Taiwan in 1959 and one of the previous administrations of a former president established relations with eight nations from 2006 to 2008 and those nations included: Egypt, Bahrain, Jordan, Kuwait, Lebanon, Oman, Yemen, and Palestine. In 2007, Costa Rica established ties with China and their relationship has grown significantly since they have established relations.
Although Costa Rica’s economy has been stable for quite some time now, their GDP continues to grow, and have moderate inflation, their unemployment rate is high at 8.2% reported in 2016. They have one of the highest standards of living in Central America. However, they are experiencing growing debt and budget deficits, which is the primary concern. Costa Rica was having difficulty paying obligations and the president promised dramatic changes to handle the ‘liquidity crisis’. Costa Rica also faces poor infrastructure and a need to improve public segment efficiency. The Central Bank of Costa Rica (also known as Banco Central de Costa Rica) is the central bank of Costa Rica and it is recognized by the Costa Rican society and the international community for its efficiency, transparency, and credibility in keeping inflation low and stable. The goals and operating objectives of the Central Bank of Costa Rica are: maintain internal stability of the national currency, seeking to turn the full employment of productive resources; maintain external stability of the national currency and ensure their free conversion to other currencies; promote a stable system of financial intermediation, efficient, and competitive. Similar to other Central Banks in the world, the functions of Central Bank of Costa Rica include providing banking services to the government of Costa Rica and financial institutions, issuing the domestic currency, regulating commercial banks and other financial institutions, providing economic advice to the government, conducting research and publishing information on monetary and other economic developments. Only notes and coins issued by the Central Bank are recognized as legal tender in Costa Rica.
Costa Rica’s score on the Index of Economic Freedom is 65.3 with an overall rank of 61. The overall score has decreased by 0.3 points, and has declines in fiscal health, judicial effectiveness, and trade freedom exceeding improvements in labor freedom and property rights. The new government is expected to continue the policy predictability, support for strong institutions, and favorable attitude toward trade and private foreign investment that have created a favorable business environment in Costa Rica. According to the United Nations Conference on Trade and Development World Investment Report 2018 Costa Rica’s, FDI flows increased by doubling from 2007 to 2014 and then have slightly been decreasing year after year. However, the FDI stock sky rocketed from 1995 to 2014 and has continued to grow year after year.
The Costa Rican legal system is based on the French civil law system as opposed to English common law that is used in England and the United States. The common law system relies more on case law which is generated by the judicial system and binding on lower courts. In the civil law system, the laws passed by the legislature are translated into codes which are then applied by the courts. Only the decisions of the Supreme Court of Costa Rica are binding on the lower courts. The court system is made up of: lower courts, trial level courts, appellate courts, and the supreme court.
Currently, there is a backlog of cases and the government does not have the financial resources to adequately staff and modernize the judicial system to handle those cases so there has been delays in processing claims through the legal system which has become a serious problem. The country has recently passed legislation which allows for private mediation and arbitration services in the hope that more cases will be resolved by way of alternative dispute. Foreign investors may also participate or invest in Costa Rica using any of the legal entities recognized by Costa Rican law.
The World Justice Project Rule of Law Index represents a portrait of the rule of law in countries by providing scores and rankings based on: constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice, and criminal justice. On the World Justice Project’s Rule of Law Index, Costa Rica is ranked number 24 in the world with a score of 0.68. Since the scores range from 0 to 1, with 1 indicating the strongest adherence to the rule of law, Costa Rica is a little over the halfway point to the country adhering to the law as a whole.
The Transparency International’s Corruption Perception Index ranks countries and territories by their perceived levels of public sector corruption. It uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean. Unfortunately, on this index, more than two-thirds of countries score below 50, with an average score of 43. Costa Rica’s score is 59 with a rank of 38/180 countries. While Costa Rica’s score is not the best, it is above average, and it has been increasing over the years as well.
Getting residency, opening a business, opening a bank account, real estate transfers – everything is a process in Costa Rica, which means even the simplest of tasks can take up the most time. This would be a huge constraint and challenge in Costa Rica being a business destination. For an expatriate to start a business in Costa Rica, they must: register their business using a qualified lawyer, the business must also be registered for paying taxes, and the expatriate will need a permit from the Ministry de Salud and Municipality. Expatriates starting a business, the workforce can consist of no more than 10% of foreign employees and those who are foreign must have legal residency and a work permit that entitles them to work in the country. Some advantages of business in Costa Rica: the country has ‘free trade zones’, where they will be exempt from taxes on imports, capital tax, income tax, and real estate tax. However, expatriates will need to deal with a lot more ‘red tape’ than what they are used to so they will ultimately wait longer for government agencies to complete their tasks.
Works Cited
- “Costa Rica Country Profile”. BBC News, BBC, 10 May 2018, www.bbc.com/news/world-latin-america-19414068.
- “Costa Rica GDP”. Kenya Government Debt to GDP | 1998-2018 | Data | Chart | Calendar, TRADING ECONOMICS, tradingeconomics.com/costa-rica/gdp.
- Costa Rica - History & Culture, 2006, http://www.geographia.com/costa-rica/history.htm.
- “Costa Rica History”. CostaRica.Org, 12 Feb. 2019, http://costarica.org/facts/history/.
- “Corruption Perceptions Index 2017”. http://www.transparency.org/news/feature/corruption_perceptions_index_2017.
- “Costa Rica”. The Heritage Foundation, http://www.heritage.org/index/country/costarica.
- “The Economist Intelligence Unit”. Democracy Index 2017, http://www.eiu.com/topic/democracy-index
- “Government Structure”. Government | Costa Rica Embassy, http://costaricaembassy.be/en/costa_rica/government/.
- “History of Costa Rica”. Costa Rica, http://www.costarica.com/travel/history-of-costa-rica.
- “History of Costa Rica”. Centralamerica, http://www.centralamerica.com/costa-rica/history/.
- “Starting A New Business In Costa Rica - A Guide For Expats”. Expat Focus, https://www.expatfocus.com/c/aid=4101/articles/costa-rica/starting-a-new-business-in-costa-rica---a-guide-for-expats/.
- UNCTAD | Investment Country Profiles, http://unctad.org/en/Pages/DIAE/World%20Investment%20Report/World_Investment_Report.aspx.
- “WJP Rule of Law Index 2017–2018”. World Justice Project, http://worldjusticeproject.org/our-work/research-and-data/wjp-rule-law-index-2017%E2%80%932018.
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