Costa Rica WT/TPR/S/83
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Since the previous review of Costa Rica, the structure of the Costa Rican economy has
changed significantly.  The manufacturing sector has appreciably increased its share in terms of
contribution to GDP and foreign trade.  This is mainly due to the strong growth of the electronic
components industry under the free zone regime, in particular investment by a single multinational
company.  The development of the manufacturing industry under special regimes such as the freezones has been considerable.  However, it has not proved possible to establish substantial links with
the rest of local industry.  With the notable exception of some agro-industrial activities, Costa Rica
has restricted the use of trade policy measures as instruments of industrial policy, and the level of
tariff protection to the manufacturing sector is relatively low.  Apart from the special regimes,
domestic industrial promotion measures are generally focussed on small- and medium-sized industryand include access to more concessional credit, research assistance and training programmes, fiscal
incentives and financing programmes.
2. The agricultural sector, despite a relative loss of share to the manufacturing sector, is still
important in terms of its contribution to added value and national employment, as well as the
generation of foreign exchange.  Since the previous review, the system of support to the sector has notfundamentally changed.  The State provides support in particular to certain products traditional to
domestic consumption such as dairy products, poultry products, sugar, rice and beans, through tariff
protection measures significantly higher than the av erage and, in the case of the two latter products,
special safeguard measures.  The sector receives tax incentives in the form of exemption from
payment of the general sales tax on inputs and equipment for use in productive agriculture, livestockand fisheries activities.  The two main agricultural export products, coffee and bananas, have been
exposed to adverse market conditions, including th e fall in international prices and the uncertainty
concerning conditions of access to the European Union market.
3. Since 1995, there have been no major changes in the services sector.  The State continues to
enjoy a monopoly in insurance, telecommunications, electricity supply and fuels.  Private sectorparticipation in financial intermediation, other than  insurance, has increased significantly since 1995,
but the State still has a predominant role.  Partly reflecting the privileges maintained by the State in
major service sectors, Costa Rica's list of specific commitments under the WTO General Agreement
on Trade in Services is quite limited.  In the last two years, the State has tried to introduce several
reforms, particularly in telecommunications and insurance, with the aim of improving the quality and
cost of services.  However, faced with opposition and finally rejection by Costa Rican society, the
reforms were postponed and commissions were set up to seek out options that would make forprogress in modernizing sectors crucial to the country's development.
(2) A
GRICULTURE
(i) Market structure and performance
4. The economic importance of the agriculture, livestock and agro-industrial sector has declined
since the previous review of Costa Rica, although the sector continues to exert considerable influencein terms of contribution to added value and national employment.  In 1998, the sector's contribution to
total GDP was 12.7 per cent (including forestry, timber, fisheries and agricultural improvements), or
20 per cent of total GDP with the inclusion of the agro-industrial sector (food, beverages and
tobacco).  In 1999, nearly 20 per cent of the economically active population was employed in the
agricultural sector, while the food industry employed  just over 4 per cent (Table IV.1).  Agricultural,WT/TPR/S/83 Trade Policy Review
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livestock and agro-industrial activities are also important in that over half the population lives in rural
areas, which account for the majority of poor households.
Table IV.1
Main indicators for the agriculture, livestock and agro-industrial sector
1995 1996 1997 1998 1999a
Share of GDP (%)b21.4 20.6 20.8 20.0 n.a.
-Agriculture, livestock and fisheries sector 13.9 13.0 13.2 12.7 9.8
- agricultural sector 10.5 9.5 9.8 9.3 n.a.
- livestock sector 2.4 2.4 2.2 2.3 n.a.
- forestry, timber and agricultural improvements 0.7 0.6 0.7 0.7 n.a.
- fisheries 0.4 0.5 0.5 0.5 n.a.
- food products, beverages and tobacco 7.5 7.6 7.6 7.3 n.a.
Share of the employed population
- Agriculture, livestock and fisheries 21.6 21.6 20.6 20.1 19.7
- Food, beverages and tobacco industry 3.9 4.2 3.9 4.1 4.1
Share of total exports
(millions of US dollars)
Total exports 3,421.6 3,703.8 4,193.2 5,508.7 6,691.8
- agricultural sector 1,397.3 1,375.1 1,429.4 1,588.9 1,424.9
- livestock and fisheries sector 154.8 263.4 331.6 350.8 166.8
- food industry 271.5 323.0 321.0 378.4 385.4
(% of total)
- agricultural sector 40.8 37.1 34.1 28.8 21.4
- livestock and fisheries sector 4.5 7.1 7.9 6.4 2.5
- food industry 7.9 8.7 7.7 6.9 5.8
Exports by main product
(millions of US dollars)
- Bananas 680.4 631.9 588.0 665.2 629.5
- Coffee 418.6 385.7 419.3 411.7 308.4
- Other fruit 119.2 139.5 184.6 188.6 212.8
- Seeds, flowers and ornamental plants 112.2 133.6 120.8 130.6 123.5
- Fresh fish 54.9 106.0 144.2 162.1 65.4
- Vegetables 66.0 74.5 79.3 88.6 53.4
- Oils 23.0 34.9 43.4 38.3 48.6
- Crustaceans and molluscs 33.0 63.6 82.6 65.2 27.9
- Dairy products 8.7 17.0 15.6 17.6 18.0
- Bovine meat 43.8 42.4 28.7 24.7 12.2
- Plantains 6.3 12.5 18.4 17.1 9.4
n.a. Not available.
a To date,  the GDP data for 1999 have not been broken down for each of these sectors.
b Based on GDP at base prices.
Source: WTO Secretariat, from data provided by the Costa Rican authorities.
5. Since 1995, the agricultural area set aside for traditional export crops, i.e. bananas, cocoa,
coffee and sugar cane, has fallen by 5 per cent.  This happened despite the fact that the areas used for
banana and coffee growing remained relatively stable between 1995 and 1999 (Table IV.2).  While
the area for sugar cane grew perceptibly, the area  under cocoa cultivation declined.  The total area
given over to traditional crops for domestic consumption (rice, maize, beans and sorghum) remained
relatively constant at some 121,000 hectares.  However, there have been distinct trends within thesecrops:  while rice cultivation increased considerably, the area of cultivation of beans contracted.
During the same period, fruit and vegetable growing, especially melons, palm hearts, pineapples and
plantains expanded considerably.Costa Rica WT/TPR/S/83
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Table IV.2
Area of cultivation of the main agricultural crops, 1995 and 1999(Hectares)
1995 1999
Traditional 214,904 204,200
- Bananas 52,165 50,000
- Cocoa 12,000 2,200
- Coffee 108,000 106,000
- Sugar cane 42,739 46,000
Basic grains 120,230 121,411
- Rice 49,934 67,794
- Beans 57,447 39,513
- Maize 12,849 14,104
Fruit 51,007 58,416
- Mangoes 7,796 9,269
- Melons 3,997 8,842
- Oranges 22,500 25,200
- Pineapples 6,064 9,900
Vegetables 14,134 26,652
- Palm hearts 4,200 11,005
- Plantains 6,500 10,047
Other 46,940 42,255
Total 447,215 452,934
Source: WTO Secretariat, from data provided by the Costa Rican authorities.
6. The agricultural sector remains an important generator of foreign exchange despite the
significant reduction in its relative share of exports (Table IV.1).  Banana production, in particular,continues to be the main agricultural export activity (see Annex IV.1).  Other fruit and coffee also
represent a high proportion of exports.  Exports of non-traditional agricultural products, such as
melons, pineapples, ornamental plants and foliage, mainly to the United States and the European
Union, have grown strongly since 1995.  On the other hand, the marked decline in the total value of
agricultural exports in 1999 was fundamentally due to the adverse pattern of international prices of themain agricultural export products, especially coffee.
7. The livestock and fisheries sector accounted for only 4.5 per cent of total exports of goods in
1995.  Exports from the sector increased considerably in subsequent years;  exports of shrimps, in
particular, surged in unprecedented fashion, reaching a peak 8 per cent share of exports in 1997.
However, foreign sales fell considerably in 1998 and 1999.
8. Exports of products from the food industry grew substantially between 1995 and 1999, when
they reached US$385 million.  This performance is due in particular to the growth in sales of products
such as various food preparations, fruit purees and pastes, and palm oil, and despite the sharp fall in
the value of agro-industrial products such as sugar, palm hearts and prepared or preserved fish, which
were affected by the decline in international prices.
(ii) Policy objectives and instruments
9. Since 1996, various changes have been introduced  in the legal and institutional framework of
agricultural, livestock and agro-industrial policy which, however, have not fundamentally changed the
system of support to the agriculture, livestock and agro-industrial sectors.  Development policies for
the sector focus on two strategic approaches:  agricultural competitiveness and rural development.
The first includes restructuring of production, strengthening human resources and modernization of
institutions, while the second addresses reinforcement and development of the rural environment,social organizations and co-management and modernization of rural development institutions.WT/TPR/S/83 Trade Policy Review
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10. The principal public bodies involved in agricultural, livestock and rural development are the
Ministry of Agriculture and Livestock, the Coun cil for National Production, the Rural Development
Programme, the Costa Rican Fisheries and Aquaculture Institute, the Agrarian Development Institute,
the National Seeds Office, the National Irrigation and Water Supply Department and the Integrated
Agriculture and Livestock Marketing Institute.  In addition, several non-governmental bodies play an
important role in the sector, such as the National Banana Corporation, the Coffee Institute or the
Agro-Industrial Sugar Cane League.
11. In 1996, the Agricultural Restructuring Board for the agricultural and livestock sector
(Executive Decree No. 25121-MAG of 10 May 1996) was set up as the supreme body responsible for
overseeing the process of restructuring the agricultural sector.  The Board, which comes under the
Ministry of Agriculture and Livestock, took over the actions being carried out by various institutions
so as to give them an overall integrated view and financial support.  In addition, under ExecutiveDecree No. 25122-MAG of 10 May 1996, the Integr ated Agriculture and Livestock Marketing
Programme (PIMA) was provided with the legal framework necessary for administering financial
resources channelled to support the process.  Finally, under Law No. 7742 of 15 January 1998, the
Productive Restructuring Programme was set up and reforms were made to the Organizational Law on
the National Production Council (CNP) giving higher legal status to the Productive RestructuringBoard created in 1996 and transferring management of the PIMA process to the CNP.
12. Law No. 7742 defines the purpose of the CNP as the comprehensive transformation and
modernization of the productive activities of the agricultural sector, and creating a vertical structure to
make it more efficient and competitive.  The CNP must also facilitate the integration of these
activities in the international market, with emphasi s on small- and medium-sized producers, to secure
a fair distribution of the benefits from, inter alia , training and transfer of technology schemes.  The
CNP is also responsible for maintaining a fair balance in the relationship between agricultural
producers and consumers, for which purpose it has the power to intervene in supply and demand in
the domestic market to guarantee the country's food security.  In addition, the CNP has powers to
promote the production, industrialization and marketing of agricultural products, directly or throughenterprises formed by organized agricultural producers.  The authorities pointed out that these powers
are exercised provided they do not conflict with the country's international commitments.
13. To achieve the specific objectives described above, Law No. 7742 assigns very wide
responsibilities to the CNP, as shown in Table IV .1.  However, some of the activities set out in the
CNP's organizational law are not being carried out.  Such, for example, is the case with exporting and
importing, after a review of the domestic supply of agricultural products or through producers'
organizations guaranteed or backed by the CNP.  The CNP's responsibilities include the execution and
development of the Productive Restructuring Programme mentioned above, elements of which
implemented between 1999 and 2000 are detailed in Table IV.3.  The Productive Restructuring
Programme's assets may be increased without limit, through government funding and donations, or
through credits or loans sought by the Programme for that purpose.  The Programme's resources are
intended to fulfil its objectives and to allocate funds, both reimbursable and non-reimbursable, toprojects approved by the CNP.  In the case of reimbursable resources,  preferential grace periods,
terms and interest rates may be set.  The authorities pointed out that these resources are allocated as a
matter of priority to reconstruction projects which enhance the competitiveness of productive
activities and marketing of products by groups of producers.
14. The CNP also coordinates the activities of and collaborates with all the credit, agricultural
extension, technical assistance and other institutions which seek to promote domestic production and
price stability.  The CNP can provide human and technical resources for organizations of small- and
medium-seized agricultural producers, free of charge or for a fee.Costa Rica WT/TPR/S/83
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15. The CNP is entitled to contract loans directly to carry out its activities and, with the State's
guarantee, raise such loans from the public as its operations require from domestic or from foreign
sources, in the latter case subject to the approval by the Legislative Assembly.  In the case of domestic
financing, the Central Bank must provide the CNP with loans for its price stabilization measures at an
interest rate of not more than 2 per cent per annum.  Under the Organizational Law of the National
Banking System (Law No. 1644 of 27 September 1953),  the Ministry of Finance provides the CNP
with the sums necessary to cover losses on realizatio n of proceeds or shortfalls in resources for price
regulation.  Law No. 7742 allows the CNP to intervene in the market as a price stabilization body,
although the authorities noted that it is not performing this function because of Costa Rica's
international commitments and macroeconomic policies.
Box IV.1
Activities of the National Production Council (CNP)
The ordinary activities of the National Production Council (CNP), as defined in Law No. 7742, include:
- Promoting, facilitating and creating favourable conditions for national and regional organizational
processes and cooperation between organizations and groups of national producers.
- Operating the agricultural infrastructure that it possesses (such as silos, dryers, refrigeration chambers
and processing plants).  This infrastructure may be provided in the form of a lease, interest-free or
interest-bearing loan or under administration for organizations of small- and medium-sized agricultural
producers.
- Stimulating and promoting industrialization of agricultural and livestock production in certain areas.
- Coordinating its activities with State bodies and institutions which help to promote domestic
production.
- Implementing assistance and inter-institutional cooperation programmes under the direction of the
Ministry of Agriculture and Livestock, and in conjunction with the other institutions in the agricultural
sector.
- Providing guarantees to State financial institutions for legally constituted organizations of small- and
medium-sized agricultural producers.
- Exporting and importing agricultural products directly, after a review of the domestic supply, or
through producers' organizations guaranteed or backed by the CNP.  These operations may be
conducted only when the country's food security is guaranteed.
- Coordinating certification of the quality of agricultural products and industrial metrology with other
public bodies or private organizations.
- Promoting the regulation of all types of markets for the sale of products of agricultural origin for public
consumption, and promoting or controlling the establishment of markets.
- Using its revenues to subscribe capital investment certi ficates or shares in organizations of small- and
medium-sized agricultural producers whose activities are directly related to the objectives of the Law.
- Establishing, in its own right or in coordination with the Ministry of Agriculture and Livestock or other
institutions, research, training and transfer of tech nology programmes relating to agricultural products,
in the field of industrialization and marketing, directly or by contracting with public or private, nationalor foreign natural or legal persons.
- Meeting the priority needs of the productive sector, with emphasis on small- and medium-sized
production units and their organizations.
- Intervening as an economic agent in the seed and agricultural products market to encourage production
and availability.
- Creating and developing programmes in keeping with the needs of rural women and their
organizations, guaranteeing them access to resources to carry out their projects.
- Promoting agro-industrial, agricultural and conservationist programmes.
- Buying or selling agricultural products at  agricultural or commodity exchanges.
- Promoting programmes for the integration in the national production plan of experts and professionals
in agricultural sciences and allowing them access to the resources of the Productive Restructuring
Programme.
- Participating in social assistance and emergency aid programmes.
Source:  Law No. 7742 of 15 January 1998.WT/TPR/S/83 Trade Policy Review
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Table IV.3
Agricultural and livestock productive restructuring programmes implemented between 1999 and 2000
Programme field and description ObjectiveResources
(millions of
colones)
Marketing
International marketing:
- Establishment of an office in Miami To provide services especially to small- and medium-sized
producer organizations in matters such as customs procedures,commercial contacts and dealing with rejectionsn.a.
- Participation in international fairs To promote agro-industrial products and natural foods n.a.
- Analytical studies of the effect on
competitiveness of the tariff level applied to
sugar and on the productive chain of basic
grains and inputs for animal feeds.To support the productive sector in analysing its competitiveness n.a.
- Negotiations with the Government of Chinese
Taipei for the export of products of animal
origin.To increase exports n.a.
Border measures:
- Special safeguards for black beans and rice in
the husk, pounded and semi-milled riceProtection of domestic production n.a.
Domestic marketing:
- National Collection Centre Programme Development of infrastructure 164
- Purchase of equipment, material, lorries and
ancillary worksStrengthening of producer organizations 76
- Provision of  storage and equipment Improving quality control in potatoes and onions n.a.
- Promotion of agricultural fairs Promotion of products n.a.
- Construction and operation of several markets Promotion of products and development of infrastructure 278
- Administration of the National Refrigeration
SystemReduction of costs to producers n.a.
- Market research (palm hearts, mini-
vegetables, wood and onions)Determining strategies for the development of such products 50
Agricultural credit
Credit for small- and medium-sized agricultural
and fisheries producers:
- Programme of Rural Credit Boards (National
Bank of Costa Rica, BNCR)Development credits 9,000
- Micro-finance programme (BNCR) Development credits 5,500
- Banco Popular Credits for production 12,500
- Central-American Bank for Economic
Integration (BCIE) resources channelledthrough private banks or the StateRenovation of coffee plantations 15,000
- Productive Restructuring Programme Financing of 64 projects in various activities 4,577
- MAG-PIPA/BANCREDITO Trust Financing of productive activities of organizations of small- and
medium-scale farmers600
- Private Technical Assistance Fund MAG –
BNCRFinancing of marketing, agricultural economy, organic farming
and communal credit projects139
- INFOCOOP Credits for agricultural activities channelled through
cooperatives699
- Other credit measures Contributing to fair and sustainable development of small- and
medium-sized agricultural and forestry producersn.a.
Support to agriculture and agro-industry
- Elimination of taxes on assets, exports and
elimination of income tax discrimination for
coffee producersReduction of distortions n.a.
- Productive Restructuring Programme for agro-
industrial productsStrengthening of various agro-industrial activities, in particular
oil palms.979
- Other support Various international technical cooperation projects 1,953
Agricultural information
- Establishment of 260 Rural Information
Centres through INFOAGRODissemination of information on domestic and international
pricesn.a.
- Distribution of information bulletins Dissemination of information on agricultural products n.a.
Table IV.3 (cont'd)Costa Rica WT/TPR/S/83
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Programme field and description ObjectiveResources
(millions of
colones)
Research and transfer of technology
- Research Produce and develop new varieties of products and crops n.a.
Agricultural extension
- Support for productive organizations    Training for pests and diseases, and new production methods n.a.
Irrigation and drainage
- Extension of irrigation areas;   programme of
small irrigation and drainage systems;
construction of drainage systems;  floodprotection works.Development and maintenance of irrigation and drainage
infrastructuren.a.
- Irrigation infrastructure works for sugar
productionDevelopment and maintenance of irrigation infrastructure 855
- Construction of the South Canal (financed by
the Italian Government)Development and maintenance of irrigation infrastructure 4,275
Animal and plant health
- Pest control and eradication programmes Protection against pests and diseases n.a.
- Production of insects for biological pest
controlProtection against pests and diseases n.a.
- Border inspections Protection against pests and diseases n.a.
Fisheries and fish-farming
- Extension of the Multi-Service Fishing
Terminal at PuntarenasProvision of a service area for small-scale fishing n.a.
- Fisheries Trust between INCOPESCA and the
Banco PopularFinancing of small-scale fishing, especially purchase of engines
and boats255
- Framework Agreement with Spain Support for fisheries infrastructure, establishment of markets and
strengthening the fishing fleet.n.a.
- Agreement for the construction of a fisheries
terminal at LimónCreation of infrastructure n.a.
- Agreement between the Costa Rican Insurance
Fund and INCOPESCAInsurance for fishermen n.a.
Conservation and management of natural
resources
- MAG- FAO project Promotion and application of conservation measures and land
management in Costa Rica45
n.a. Not available.
Source: Secretariat for Agricultural Planning, Performance Report on the Agricultural Sector, May1999 to May 2000 .
16. With respect to domestic marketing measures, support has been stepped up for producers'
organizations in developing new marketing outlets to facilitate market access and supply information
to productive organizations through the Market Information System (MERCANET).
17. In addition, since 1999, agricultural price regulation has applied only to rice (see
Chapter III.4.(ii)).  According to the authorities,  this regulation is justified by the existence of
oligopolistic conditions in rice production, import and distribution.  In order to guarantee a fair price
to the grower and prevent industrial buyers distorting the market, the price of qualities of rice with up
to 80 per cent whole grain and the remainder crushed grain is controlled.  Other categories of rice arenot regulated, either by the whole grain content or the processing (e.g. pre-cooked rice).   Regulation
covers the dry production phase (rice in the husk produced without irrigation, accounting for some
75 per cent of the area under cultivation), the processing phase (hulled rice) and the various marketing
phases (wholesale, retail and consumer).  The price to be paid by the industrial processor to the
producer for rice in the husk and subsequently the prices to the consumer are fixed.  The pricing isbased on a cost model developed by the Ministry of the Economy, Industry and Trade, which
incorporates the costs of growing and processing rice.  Price levels are updated at least once a year
based on information supplied by the Rice Board.  The prices fixed are generally higher than those of
the international market.  The price of imports is not regulated.WT/TPR/S/83 Trade Policy Review
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18. Early in 2001, the authorities did not envisage the elimination of the regulatory measures
applied to the rice market.  However, through the Agricultural Commodities Exchange (BOLPRO),
alternative mechanisms are being promoted to enhance transparency in the negotiation of imports and
the marketing of rice.  The planned alternative mechanisms, which were already in use in 1999, are
similar to the system of administering tariff quot as for dairy and poultry pr oducts (Chapter III (2)(iv)).
This means that import quotas are determined on the basis of the quantity that cannot be supplied
from domestic production.  These quotas are subject to a tariff lower than the MFN tariff and areavailable to anyone interested in importing them  through the BOLPRO exchange mechanism.  The
authorities pointed out that there is no restriction on imports in excess of the quota provided that the
relevant MFN tariff is paid and phytosanitary requirements are satisfied.
19. The authorities said that the production of alcohol is no longer the exclusive preserve of the
State.  However, all alcohol produced in Costa Rica is still marketed through the National SpirituousBeverages Factory (FANAL).  The CNP is responsible for managing FANAL and participates in
setting the prices for the sale of its products.
20. The State provides support to the productive sector for international marketing and the
establishment of mechanisms to limit the exposure of  local producers to international competition and
fluctuations.  The authorities pointed out that these mechanisms are established provided they do notconflict with Costa Rica's international commitmen ts.  Furthermore, to cope with the fall in
international banana prices, the Government has established a price compensation fund (see Annex
IV.1).  Through the Costa Rican Coffee Institute (ICAFE), Costa Rica is operating a retention
mechanism for part of its production with the objec tive of maintaining the international price of the
product.  In addition, the Agro-Industrial Sugar Cane League (LAICA) fixes the annual quota forproduction of sugar and controls exports of that product (see Chapter III.4. iii.).
21. With respect to mechanisms designed to lim it the exposure of the sector to international
competition, tariff quotas are maintained for imports of various dairy and poultry products (Chapter
III.2.iv).  In addition, the tariffs on various agricultural products, in particular products traditionally
destined for domestic consumption such as rice or beans, are still significantly higher than the averagetariff for the sector.  As well as tariff protection, at the end of 2000, both products were subject to
special safeguards measures (Chapter III.2.ix).
22. Costa Rica maintains an export assistance system involving exemption from income tax, and
up to September 1999 by the Tax Credit Certificate (see Chapter III.3.vi.)  The system applies to all
products with the exception of traditional export products (bananas, coffee, sugar and meat) and
traditional products for domestic consumption (cereals and staple grains).  In addition, the agricultural
sector receives fiscal incentives through exemption from payment of the general sales tax on inputsand equipment for use in agriculture and fishing (C hapter III.4.iv).  Again, banana exports are subject
to an export tax and various levies (see Chapter III.4.ii and Annex IV.1).
23. Credit for the agricultural sector has grown considerably in recent years, with a total of
88,276 million colones by the end of 2000, broken down between agriculture, 70,394 million,
livestock 17,532 million and fisheries, 530 million.  In June 2000, placements from private banksaccounted for 30 per cent of all credit to agricultural activities and only 5 per cent of credit to
livestock and fishing activities.
1  Interest rates applied by the State banks are generally lower than
those applied by private banks (Section 5.ii).  Despite a considerable fall since 1995, interest rate
differentials are still large.  In 1998, average rates applied by the State banks to agricultural activities
were 24 per cent lower than those applied by the private banks.  The differential was slightly lower forlivestock and agro-industrial activities (nearly 20 per cent).
                                                     
1 See Table IV.8.Costa Rica WT/TPR/S/83
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24. Apart from the credits channelled through the banks in the national financial system, the
agricultural and agro-industrial sector also benefit from productive restructuring funds.  These funds,
intended for small- and medium-sized producers, are in principle partly reimbursable (for example, 40
per cent of financing granted in the period 1997-1998 was reimbursable).  However, as indicated
above, preferential grace periods, terms and interest rates can be granted.
(iii) Assistance indicators
25. Costa Rica's notifications to the Committee on Agriculture indicate that since 1995
agricultural producers have benefited primarily from domestic support measures under the green box
and special and differential treatment.  By their nature, such measures are exempt from reduction
commitments.  However, between 1995 and 1998 the total amount of domestic measures was reduced
by some US$200 million to a little under US$30 million (Table IV.4).  The Costa Rican authorities
indicated that the reason for the marked fall in assistance notified in 1998 was that the previous yearsincluded a heading called "Agricultural Financing Service" which consisted of a series of preferential
sources of credit for agricultural producers.  These headings ceased to be notified because the
transactions, although they involved preferential conditions for access to credit and payment terms,
did not entail transfers of resources and were reimbursable in full.
Table IV.4
Domestic assistance measures notified, 1995-1998
(millions of US dollars)
1995 1996 1997 1998
"Green Box" measures 67.0 30.2 40.0 21.9
Agricultural research services 2.9 2.6 2.8 2.1
Agricultural protection 1.8 2.2 4.3 3.5
Extension and training n.a. 6.6 14.0 5.4
Irrigation and drainage service 8.3 4.9 6.2 3.6
Seed certification service 0.1 0.3 0.3 n.a.
Technical assistance and agricultural extension 8.8 n.a. n.a. n.a.
Support for foreign marketing 6.0 n.a. n.a. n.a.
Insurance services 28.9 7.3 6.2 0.6
Agro-industrial promotion and development 1.0 0.6 n.a. 5.3
Agricultural marketing 1.4 0.8 0.5 1.4
Investment programmes 2.0 n.a. 0.7 n.a.
Food security and social compensation n.a. 4.7 4.8 0.0
Certification and quality control 0.3 0.1 0.2 n.a.
Training service 0.1 n.a. n.a. n.a.
Strategic supply 5.5 n.a. n.a. n.a.
Measures notified under "Special and differential treatment" 132.9 15.1 14.1 6.8
Agricultural financing services 132.9 15.1 14.1 6.8
Investment programmes n.a. 0.0 0.0 0.0
Total Assistance Measures n.a. n.a. n.a. 0.0
n.a. Not applicable
Source: WTO Secretariat, based on Costa Rica's notifications to the Committee on Agriculture (documents G/AG/N/CRI/6 of
17 November 1999 and G/AG/N/CRI/7 of 11 October  2000).
26. Since 1995, Costa Rica's notifications indicate that no assistance has been granted to specific
products.  However, under the commitments set out in its Schedule, it has reserved the right to apply
Amber Box measures if it considers it appropriate.2  In 1998, budget disbursements not relating to
specific products totalled US$80 million.3
                                                     
2 WTO document G/AG/R/22 of 25 April 2000.
3 WTO document G/AG/N/CRI/7 of 11 October 2000.WT/TPR/S/83 Trade Policy Review
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27. With respect to export subsidies, Costa Rica undertook in its Schedule of Commitments to
reduce the average percentage of the Tax Credit Certificate (CAT) to 24 per cent over 10 years, and to
eliminate the income tax exemption at the end of the period of 10 years (see ii above).  Costa Rica
indicated in its Schedule that the nature of such mechanisms, based on a percentage of the value of
exports or a tax credit on the value of the income, precluded a monetary commitment to reduce State
disbursements.
28. In principle, subsidies, whether through the CAT or exemption from income tax, were totally
eliminated at 30 September 1999.  The authorities indicated that the approximate amounts of export
subsidies through the CAT amounted in millions of US dollars to:  94 in 1995, 115 in 1996, 105 in
1997, 122 in 1998 and 20 in 1999.4
29. The amounts of subsidy granted as exemption from income tax were not notified.  Although
in principle export subsidies in the form of income tax exemption were eliminated in September 1996,they were re-introduced as the result of an appeal by a group of businessmen for companies that had
signed production contracts with the State before they were abolished (see Chapter III.4.iv).  The
authorities pointed out that none of the companies is in the agricultural sector and hence subsidies for
agricultural exports through income tax exemption did indeed end in September 1996.
30. There are no other indicators, such as estimates of equivalents in producer subsidies, to allow
an assessment of the overall impact of the various protection and promotion measures on the sector or
on specific products.  From 1995 to 2000, the average tariff on agricultural products (as defined in
Annex I of the WTO Agreement on Agriculture) fell perceptibly, from 17.1 per cent to 14.8 per cent,
yet the tariff protection granted to such products remains significantly higher than that for industrial
products (Chapter III.2.iii).
(3) E
LECTRIC POWER
31. Total production of electric power in 1999 was 6,189 GWh, of which 73 per cent came from
hydro-electric power stations, 19 per cent from thermal power stations, 5 per cent from geothermal
power stations, 3 per cent from wind power and th e remainder from solar power generators.  That
year, electricity consumption was 5,435 GWh.  The Costa Rican electricity grid is interconnected withthe grids of the neighbouring countries of Nicaragua and Panama.  In 1999, Costa Rica exchanged
electric power with both of those countries and with Honduras.  In the period 1990 to 1999, electricity
generation by the National Electric Power System grew by an average 6.4 per cent, while total sales of
electric power over the same period rose by an av erage of 5.7 per cent.  Growth in demand over the
next ten years is estimated at an average of 5.5 per cent, thus requiring substantial investment in
additional capacity, generation, transmission and distribution.
32. The Costa Rican Electricity Institute (ICE), a State corporation, controls the transmission,
distribution and marketing of the bulk of electric  power produced in Costa Rica and much of its
generation.  The ICE continues to enjoy a monopoly on transmission of electric power.  Also involved
in power generation, as well as the ICE, are the National Power and Light Company (CNFL), a
member of the ICE Group,  the Heredia Public Utilities Company (ESPH), the Cartago Electricity
Board (JASEC), several cooperatives and private generators.  Since 1990, private companies havebeen authorized to generate electricity independently or in parallel under concessions designed to
operate limited-capacity power stations (up to 20 MW) for a maximum period of 20 years.
5  Initially,
                                                     
4 WTO documents G/AG/N/CRI/4 of 10 March 1998, G/AG/N/CRI/10 of 20 July 2000,
G/AG/N/CRI/4/Add.1 of 26 February 2001.  The figures for 1999 were supplied by the Costa Rican authoritiesin the context of the present review.
5 Law on independent or parallel electric power generation, Law No. 7200 of 28 April 1990.Costa Rica WT/TPR/S/83
Page 91
a limit of 35 per cent was set on foreign investment in power generating companies.  However, in
May 1995, this limit was raised to 65 per cent of the total share capital.
33. Since then, there have been proposals to liberalize the sector, promote the participation of
private investors and increase competition with the dominant State operator.  Nevertheless, bills to
restructure the ICE met with considerable public opposition and failed to pass the Legislative
Assembly.  Consequently, a Joint Commission was created to examine the various draft reforms and
propose solutions to break the deadlock.  At the beginning of 2001, there was no specific bill on theelectricity sector in the current legislature.
34. The ICE is entitled by law to buy surplus electricity in blocks of not more than 50MW from
producers which have satisfied their own needs or from producers who are only generators.  The
purchases must be made subject to tendering pro cedures, with sales price competition and evaluation
of the technical, economic and financial capacity of the bidder and the characteristics of the source ofenergy.  The assets of the electricity generating plant must be transferred to the ICE free of costs and
encumbrances at the end of the contract term. Independent and parallel electric power generating
companies enjoy the same exemptions as the ICE on imports of machinery and equipment for their
production activities.
35. The Public Services Regulatory Author ity (ARESEP) fixes the power generation,
transmission and distribution tariffs.  As part of this process, ARESEP evaluates the tariff proposals of
the ICE and distributing companies and makes such technical adjustments as it considers appropriate.
The distribution tariffs are differentiated by consumption sector, namely residential, industrial and
public lighting.  ARESEP is also responsible for setting the price paid by the ICE to buy energy
generated by the independent producers.  The purchase and sales contracts are valid for a maximum of20 years.
(4) M
ANUFACTURING SECTOR
36. Since the previous review of Costa Rica, the share of the manufacturing sector in the Costa
Rican economy has increased significantly, rising from 22.1 per cent of GDP in 1995 to 29.6 per cent
in 1999.  The sector as a whole has played a key role in generating foreign exchange.  Manufacturingexports rose from US$1,870 million in 1995 to US$5,100 million in 1999.  It has also made a major
contribution to employment, with some 14 per cent of employed workers in 2000.  There is also a
very significant informal component in the sector.  In 1998, the number of informal businesses
accounted for some 57 per cent of all industrial enterprises.
6  The industrial informal sector is
dominated by the food, furniture and electrical engineering industries.
37. The share in GDP of non-food manufactures (i.e. the entire manufacturing sector excluding
the food, drink and tobacco industries) came to 16.2 per cent of total GDP in 1998.  That year, thefollowing non-food manufacturing industries produced the greatest added value:  inward processing
and free zones;  manufacture of chemicals;  small industry and self-employed
7;  the paper industry;
and the textiles, clothing and leather industry (Table IV.5).  In terms of the percentage of total
manpower employed, the main activities in 1998 were the food industry, the textiles, clothing and
leather industry, metal products, the wood industry and chemicals.
                                                     
6 Figure published on the Internet by the Costa Rica Chamber of Industry:  http://www.cicr.com.
7 The heading small industry and self-employed includes enterprises that employ twenty workers or
less, among which the most important are bakery, manufacture of furniture and articles of wood, production of
animal feed, and manufacture of other non-metallic mineral products.WT/TPR/S/83 Trade Policy Review
Page 92
38. In recent years, the non-food manufacturing sector has been one of the mainstays of growth,
in particular because of the development of the electronic components industry.  This industry
developed in Costa Rica mainly as the result of foreign direct investment in electronic in-bond
assembly processes.  Investment in this sector was basically in three stages.  Between the mid-
seventies and the early eighties, several firms assembling electrical products and making electronic
components were set up.  A second stage, the late eighties and early nineties, saw the arrival of new
electronic components companies, mainly energy processor components and manufacturers ofelectronic sensors for industrial or medical equipment.  From 1994, with the arrival of new
companies, the sector producing energy processor components and electronic sensors was
consolidated and more sophisticated components began to be produced.  The third stage also saw the
setting up of companies producing components for telecommunications equipment.  In terms of
employment, at the end of 1999, the enterprises in free zones were generating some 31,000 jobs.
39. The existence of a fairly sophisticated electronic assembly industry was probably a major
factor in the decision of the electronic components manufacturer INTEL to set up in Costa Rica.
INTEL's initial investment in 1997 was some US$300 million, for the construction of an assembly
and testing plant which was employing 2,300 people by the end of 1998.  In 1999, INTEL's exports
accounted for 38 per cent of total exports of Costa Ri can goods.   INTEL's presence in Costa Rica has
in turn encouraged the arrival of other internat ional companies which supply INTEL with goods and
services.  However, the electronic components industry, like other industries subject to special export
regimes, still has few links with local businesses.  In 1998, only just over 4 per cent of total purchases
by companies in free zones were from local businesses.
40. With the objective of helping to increase domestic added value in the domestic production of
the high technology multinational companies established in Costa Rica under the free zone regime,
the development project for suppliers to high te chnology multinational companies started operating in
July 2000.  The project, which is financed by the Inter-American Development Bank and local
organizations, is mainly aimed at small- and medium-sized enterprises (SMEs).  By the end of 2000,
seven link projects were in progress and one had been successfully finalized between the hightechnology multinational companies and local SMEs.  The authorities were hoping to finalize the
implementation of 45 projects during the next three years.
41. In 1999, based on their relative contribution to added value, the most labour-intensive
manufactures were in the textiles, leather and w ood industries, where about three quarters of added
value went to employee remuneration (Table IV.5).  It should be noted that, with the arrival of
INTEL, manufacturing production under the free zone  and inward processing regime reached a major
turning point in terms of the relative intensity of labour use, with employee remuneration as apercentage of added value falling from 71 per cent in 1997 to just over 16 per cent in 1999.
42. Between 1995 and 1999, manufacturing exports grew at an average annual rate of 31 per cent.
In 1999, the two main products exported by the non-food manufacturing industry were parts for
modular circuits (52 per cent of the total for the manufacturing industry) and textiles (17 per cent).
Exports of textile products came both from companies subject to special regimes, either free zones orinward processing, and companies outside such regimes.  In recent years, exports by textile companies
under the free zone regime have expanded faster than those of companies outside the regime or under
the inward processing regime.  Other significant exports were medicines, equipment for transfusion
and infusion of serums, and hairdryers.  While the latter products all come from companies in the free
zone regime, medicines, mainly destined for the Central American market and some South American
countries, were produced by companies which do not enjoy any kind of special export regime.Costa Rica WT/TPR/S/83
Page 93
Table IV.5
Contribution of the industrial sector to gross added value at base prices and breakdown of gross added valuea
(percentage and millions of colones)
1995 1996 1997 1998 1999
Total gross added value  (millions of colones) 1,899,165  2,206,843 2,691,436 3,263,354 3,999,283
Manufacturing industry 22.1       22.3  22.5       23.5 29.6
Food products, beverages and tobacco              7.5              7.6              7.6             7.3 6.6
Employee remuneration 32.9 34.0 35.0 37.2 40.0
Taxes on production 2.7 2.6 2.7 2.8 3.0
Gross operating profit 64.4 63.4 62.3 60.0 57.0
Textiles and leather industries              1.6          1.5        1.3         1.3 1.0
Employee remuneration 74.5 75.5 76.4 78.2 76.6
Taxes on production 5.3 5.2 5.5 5.3 3.1
Gross operating profit 20.2 19.3 18.1 16.5 20.3
Wood industry       0.3      0.4      0.4       0.4 0.3
Employee remuneration 66.4 66.3 67.1 68.1 74.0
Taxes on production 3.1 2.9 3.0 3.0 3.4
Gross operating profit 30.5 30.8 29.8 28.9 22.7
Paper industry       1.6      1.5      1.4           1.3 1.3
Employee remuneration 37.7 41.7 45.0 46.1 45.6
Taxes on production 2.2 2.4 2.3 2.3 2.4
Gross operating profit 60.1 55.9 52.7 51.6 52.0
Chemical industries       3.2         3.3         3.2           2.9 2.7
Employee remuneration 43.4 42.0 45.2 46.6 45.2
Taxes on production 3.7 3.2 3.6 3.6 3.4
Gross operating profit 53.0 54.8 51.2 49.8 51.4
Non-metallic mineral productsb             0.7    0.6      0.7     0.7 0.7
Employee remuneration 46.6 48.6 54.5 52.7 50.1
Taxes on production 3.1 3.1 3.2 3.1 3.1
Gross operating profit 50.3 48.3 42.3 44.2 46.8
Basic metal industries      0.2        0.2       0.2        0.2 0.1
Employee remuneration 33.4 33.4 39.4 42.4 55.2
Taxes on production 2.6 2.5 3.1 3.3 4.1
Gross operating profit 64.0 64.1 57.5 54.3 40.7
Manufacture of metal productsc      0.6      0.5     0.5       0.5 0.5
Employee remuneration 40.4 41.3 44.3 45.4 47.7
Taxes on production 8.0 7.7 8.5 8.3 7.9
Gross operating profit 51.5 51.0 47.2 46.3 44.5
Other manufacturing industries      1.5      1.4      1.4      1.2 0.1
Employee remuneration 54.0 58.2 62.9 62.5 52.9
Taxes on production 3.7 3.8 4.1 3.8 3.8
Gross operating profit 42.3 37.9 33.0 33.8 43.3
Small industry and self-employed       2.6     2.6   2.6     2.4 2.1
Employee remuneration 42.9 42.9 44.0 44.5 47.0
Taxes on production 1.6 1.6 1.7 1.6 2.0
Gross operating profit 55.5 55.4 54.3 54.0 51.0
Inward processing and free zones    2.4    2.7   3.3   5.3 13.4
Employee remuneration 74.4 74.3 70.9 46.3 16.1
Taxes on production 4.7 4.7 3.7 2.4 0.9
Gross operating profit 21.0 21.0 25.4 51.3 83.0
a The breakdown of gross added value is given as a pe rcentage of gross added value in each of the sectors.
b Except petroleum and coal derivatives
c Except plant and machinery
Source: WTO Secretariat, based on Central Bank Production Accounts.Costa Rica WT/TPR/S/83
Page 95
training programmes, fiscal incentives or fina ncing programmes (Chapter III.4.iv).  In addition,
through the National Standards and Units of Measure Bureau (ONNUM), the Costa Rican authorities
provide support to the industrial sector in the form of advice, technical support and training in the
areas of standardization, technical regulation, homologation and metrology (Chapter III.2.x).
(5) SERVICES
(i) Principal characteristics
46. Since the Secretariat's previous report there have been no major changes in the services
sector.  The State still has retained a high degree of involvement in the sector.  The State enjoys a
monopoly on insurance, telecommunications, electricity supply and fuel supplies.   Private sector
involvement in financial intermediation activities, apart from insurance, has increased significantly
since 1995.
47. In 1999, the services sector's contribution to GDP was some 6.7 per cent, while its
contribution to overall employment was almost 64 per cent (Table IV.6).  According to the breakdown
in the national accounts of the Central Bank of Costa Rica, the principal services subsectors in terms
of their contribution to total added value in 1998 were, in descending order of magnitude, commerce
and real estate, business and rental activities, followed by transport and housing, education, hotels and
restaurants, construction and health.
48. Partly a reflection of the privileges retained by the State in major service sectors, Costa Rica's
Schedule of Specific Commitments under the WTO General Agreement on Services in Trade is rather
limited.9
49. Costa Rica has been participating in the negotiations on financial services and has put forward
an offer which, in particular, contains commitments for various banking services subsectors and otherfinancial services relating to market access and national treatment for the commercial presence mode
of supply.
10  Costa Rica accepted the Fifth Protocol annexed to the General Agreement on Trade in
Services, and incorporated it in its legislation under Law No. 7897 of 18 August 1999.  Furthermore,
Costa Rica took part as observer in the Negoti ating Group on Basic Telecommunications.  However,
due to the fact that the law gives the State a monopoly on most basic telecommunications services,Costa Rica did not submit a Schedule of Commitments for market access in these negotiations.
50. The Costa Rican Schedule of Commitments includes services in only five of the 12 categories
of services (Table IV.7).  Generally services are bound only for the mode of supply involving
consumption abroad.  A notable exception is banking services for which national treatment has been
bound for the mode of supply involving co mmercial presence (mode of supply 3).
51. In the horizontal commitments in the Schedule of Specific Commitments, it is mentioned that
for the mode of supply involving commercial presence, Costa Rica does not maintain limitations onmarket access for any of the sectors included in the Schedule.  However, under the specific
commitments, the Schedule does contain such limitations.  In the context of this review, the Costa
Rican authorities pointed out that, despite the statement in the horizontal commitments, in no case
should it be considered that market access through commercial presence is bound for all the sectors
contained in its Schedule.
                                                     
9 WTO document GATS/SC/22 of 15 April 1994.
10 WTO document GATS/SC/22/Suppl.1 of 26 February 1998.WT/TPR/S/83 Trade Policy Review
Page 96
Table IV.6
Added value and employment in service activities(per cent)
GDPaEmployment b
ContributioncAnnual
GrowthdContributionAnnual
Growthd
Sector 1995 1999 1995-1999 1995 1999 1995-1999
Construction 4.3 3.4 2.0 6.3 6.4 3.0
Electricity 2.3 1.8 5.3 0.8 0.8 4.4
Water supply 0.4 0.3 5.7 0.3 0.2 -6.0
Commerce 14.0 13.1 3.5 14.7 15.7 4.4
Hotels and restaurants 3.9 4.0 5.7 4.7 5.0 4.5
Transport and housing 6.4 5.7 5.0 4.7 5.1 5.0
Post and telecommunications 1.5 1.3 13.7 0.6 0.6 1.7
Financial intermediation 3.6 3.2 6.3 1.6 1.3 -2.2
Financing of insurance and pension plansf0.7 0.8 2.7 0.4 0.3 -7.3
Real estate, business and rental activities 6.9 6.3 3.6 2.3 3.5 14.0
Public administration;  compulsory social security schemes 3.8 3.3 -0.3 4.4 4.1 1.3
Sanitation and similar services 0.0 0.0 2.8 0.2 0.1 -10.1
Education 4.5 4.7 2.7 4.9 5.1 3.5
Health 3.9 3.8 2.6 3.1 2.8 -0.4
Social services and other communal services 0.5 0.5 3.5 1.4 1.5 5.6
Personal and household services 1.6 2.4 4.2 8.9 9.9 5.7
Entertainment, leisure and cultural services 3.2 3.4 4.9 1.5 1.4 0.4
Total 61.5 58.1 5.4 60.6 63.7 4.0
a Includes indirect financial intermediation services.
b Employed population by branch of activity.c Based on nominal values.
d Average annual growth in real terms at 1991 prices.
e Except financing of insurance and pension plans.f Except compulsory social security schemes.
Source: WTO Secretariat based on information supplied by the Costa Rican authorities.
52. For all sectors in the Schedule, both with respect to market access and national treatment,
Costa Rica bound measures affecting the entry and temporary stay of managers, administrative
directors, supervisors and general executives of companies, guaranteeing a minimum of two such
administrators in each company.
53. Costa Rica's Schedule of Specific Commitments includes exemptions from MFN treatment
for professional services, advertising services and land transport services.11  In general, the Schedule
indicates that for a foreign professional to become a member of the relevant professional body, a
reciprocity agreement with his country of origin must be in force.  Furthermore, in some cases
foreigners must demonstrate that in their country of origin Costa Ricans may exercise the professionin comparable circumstances (see Section v below).  Professionals of the member countries of the
Central American Common Market (CACM) are exempted from the residence requirement necessary
for admission to the relevant professional body.
54. The Schedule of Specific Commitments guarantees permission to provide an international
passenger transport service for reward only to Costa Rican companies or companies whose capital isat least 60 per cent owned by Central American persons.  Costa Rican companies are defined as those
in which at least 60 per cent of the capital is owned by Costa Ricans.  The Schedule makes the
granting of licences to provide international passenger  transport services for reward conditional on the
principle of reciprocity.   Foreign vehicles, trailers, containers and chassis originating outside the
CACM may only transport goods that Costa Rica im ports or exports outside that area.  Another
                                                     
11 WTO Document GATS/EL/22 of 15 April 1994.Costa Rica WT/TPR/S/83
Page 97
exemption from MFN treatment contained in the Schedule refers to bilateral promotion and protection
treaties.
Table IV.7
Summary of Costa Rica's commitments under the GATSa
Market access National treatment
Modes of supply:
Cross border supply 1 1
Consumption abroad 2 2
Commercial presence 3 3
Presence of natural persons 4 4
Commitments (■ full;  ◨ partial;  □ no commitment;  - not appearing in Schedule)
Horizontalb□□■◨□□□ ◨
Commitments in specific sectors
1. Services to companies
A. Professional services−−−−−−− −
B. Computer and related services exclusively:
a.Consultants installing equipment □■□◨□■□ □
b. Applications programmes □■□◨□■□ □
c.Data processing □■□◨□■□ □
d. Databases □■□◨□■□ □
C. Research and development services −−−−−−− −
D. Real estate services −−−−−−− −
E. Leasing or rental services without operators −−−−−−− −
F. Other services to companies −−−−−−− −
2. Communications services −−−−−−− −
3. Construction services −−−−−−− −
4. Distribution services −−−−−−− −
5. Education services
A. Primary education □■□□□■□ □
B. Secondary education □■□□□■□ □
C. Higher education □□◨◨□□□ ◨
D. Adult education −−−−−−− −
C. Other −−−−−−− −
6. Services related to the environment −−−−−−− −
7. Financial services
A. Insurance and related services −−−−−−− −
B. Banking and other financial services, exclusively:
a. Acceptance of deposits and other funds □□◨□□□■ □
b. Loans of all kinds □□◨□□□■ □
c. Credit card services □□◨□□□■ □
d. Supply and transfer of financial information ■■◨□■■■ □
e. Financial leasing services □□◨□□□■ □
C. Other −−−−−−− −
8. Social and health services
A. Hospital services □■□□□■□ □
B. Other human health services □■□◨□■□ ◨
C. Social services −−−−−−− −
D. Other −−−−−−− −
9. Tourism and travel services
A. Hotels and restaurants
a. Hostelry and lodging □■□□□□■ □
b. Catering □■□□□□■ □
B. Travel agencies and tour operators □□◨□□□◨ □
C. Tourist guide services □■□□□■□ □
Table IV.7 (cont'd)WT/TPR/S/83 Trade Policy Review
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Market access National treatment
Modes of supply:
Cross border supply 1 1
Consumption abroad 2 2
Commercial presence 3 3
Presence of natural persons 4 4
D. Others, exclusively:
a. Car hire or leasing □■□□□□■ □
b. Hire of tourist boats □■□□□□■ □
c. Computerized reservations □■□□□□■ □
10. Leisure and sports services −−−−−−− −
11. Transport services −−−−−−− −
12. Other services −−−−−−− −
a The only authentic source of information on these commitments is Costa Rica's Schedule of Specific Commitments contained in
documents  GATS/SC/22 (15 April 1994) and GATS/SC/22/Suppl.1 (26 February 1998).
b Only applicable to services included in Costa Rica's Schedule of Commitments.
Source: WTO Secretariat.
(ii) Financial services
(a) Banking and financial services
Market structure and performance
55. In 1998, financial intermediation activities accounted for 3.6 per cent of Costa Rican GDP
(Table IV.6).  The National Financial System (SFH), which is subject to supervision by the General
Superintendency of Financial Institutions ( Superintendencia General de Entidades Financieras ,
SUGEF), consists of the State banks, private banks, banks created by special law (Banco Popular andBANVHI), the ANDE Savings and Credit Bank, non-banking financial institutions, cooperative
savings and credit organizations and mutual housing savings and loan societies.  In addition, the stock
market is subject to control by the General Superintendency of Financial Institutions (SUGEF).  The
pensions sector, made up of the general pensions scheme (disability, old age and death), special public
sector schemes, statutory contributory and supple mentary pension schemes and voluntary contributory
schemes, are supervised by the Superintendency of Pensions ( Superintendencia de Pensiones ,
SUPEN).
56. The total assets of the National Financial System (SFN) at 30 June 2000 stood at
2,210,917 million colones (some US$7,173 million), an increase of 6.5 per cent in real terms over the
previous year.  Despite the stringent conditions imposed on private banks in attracting resources, their
share of the domestic market has gradually increased since 1988, when the monopoly of the State
banks was ended.  In June 2000, assets of private banks represented 25.7 per cent of the SFN's totalassets (Table IV.8).  There is no published information on foreign capital in the Costa Rican financial
system, or on the number of foreign-controlled banks.  The authorities indicated that this information
is classified as confidential by the National Council for Supervision of the Financial System ( Consejo
Nacional de Supervisión del Sistema Financiero ).
57. The private banks, whether owned by foreigners or nationals, must fulfil the same
requirements.  With respect to ownership of individual investments, a financial entity must be formed
in accordance with the legal requirements for the formation of a joint stock company, which requires
at least two shareholders.  There are no formal requirements concerning percentages owned by
investors in a joint stock company.  A bill on fina ncial entities is currently being reviewed by the
financial sector in an attempt to reform certain aspects of the National Financial System (SFN).
58. The main component of the SFN's assets is issued credit, which at the end of June 2000
accounted for just over 47 per cent of total assets.  Most of the credit issued between June 1999 andCosta Rica WT/TPR/S/83
Page 99
June 2000 was in foreign currency, mainly because th e cost of credit in US dollars is lower than in
colones.  The bulk of the SFN's credit portfolio is held by the State banks, with about 42 per cent,
followed by the private banks (33 per cent) and the banks created by special law (11 per cent).
59. In June 2000, almost 75 per cent of equity investments were held by the State banks, followed
by the private banks and the banks created by special law (Table IV.8).  Term deposits by the public
continue to be the main source of SFN resources, (some 46 per cent of total liabilities), followed in
order of importance by current account deposits (17 per cent) and demand deposits (almost 12 percent).
Table IV.8
Structure of the financial system regulated by the SUGEF, June 2000
Total regulated
National
Financial
System
State banksOther public
banksPrivate and
cooperative
banksNon-
banking
financial
companiesCooperative
savings and
credit
organizationsEntities
authorized under
the National
Housing Finance
System(millions of
colones)
Total assets (% of total) 54.1 12.0 25.7 1.1 2.8 4.2 2,210,917
 - Credits on demand or with up
to 90 day term 41.9 13.3 33.5 1.4 3.8 6.1 1,009,627
 - Credits with terms over 90
days 49.7 20.8 17.5 1.3 4.1 6.7 33,893
 - Net investments in shares and
securities 74.8 9.1 11.6 0.7 2.3 1.5 624,987
Total liabilities  (% of total)
 - Demand deposits 67.0 13.4 7.0 - 4.1 8.5 201,740
 - Public term deposits 63.2 6.8 19.6 1.5 2.3 6.6 890,858
 - Liabilities to external
financial entities 7.6 0.6 91.7 0.0 0.0 - 112,226
 - Current account deposits 73.8 - 26.2 - - - 198,668
Arrears over 90 days/directportfolio (%) 3.8 5.0 1.7 3.2 3.5 3.6 3.2c
Portfolio (A + B)/Total
portfolio (%) 92.3 93.5 97.9 95.5 96.0 96.5 94.9c
Deferred placements/Total (%) 17.7 30.7 5.6 13.0 16.0 32.8 15.8c
Placements by sector (% del
total) 40.9 13.0 35.2 1.5 3.7 5.6 1,104,191
 - Livestock, hunting and fishing 79.7 6.6 4.9 0.2 8.6 - 18,493
 - Agriculture 64.4 2.0 30.5 0.5 2.6 - 61,413
 - Industry 49.1 0.5 49.6 0.5 0.2 - 127,495
 - Commerce 32.4 0.6 64.0 2.3 0.6 - 186,685
 - Services 44.3 3.3 48.8 2.2 1.4 - 164,409
 - Personal credit 28.8 29.9 22.9 2.6 12.1 3.7 270,726
 - Other 45.0 19.4 16.0 0.4 0.3 18.9 274,970
Number of institutionsb3 3 22 16 27 4 75
a Includes the banks created by special law (the Housing Bank ( Banco de la Vivienda ) and the People's and Communal
Development Bank ( Banco Popular y de Desarrollo Comunal ) and the ANDE Savings and Loan Fund.
b Does not include other exchange market firms, financial groups with offshore activities and groups supervised by the General
Superintendency of Securities ( Superintendcia General de Valores ).
c Percentage.
Source: SUGEF, Financial Bulletin, June 2000.
60. The State and private bank sectors continue to show the greater share of total liabilities, with
some 58 and 26 per cent.  The levels of risk apparent in the portfolios of the public banks are
markedly higher than those of the private banks.  Fu rthermore, the portfolio of arrears over 90 days is
concentrated in the public banks.WT/TPR/S/83 Trade Policy Review
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61. The lack of depth in the Costa Rican banking system, in particular the limited development of
competitive financial services, has encouraged the growth of financial activities through entities
belonging to Costa Rican financial groups legally established abroad (Bahamas, Cayman Islands,
Montserrat and Panama).  The assets of Costa Rican banks domiciled abroad were estimated in 2000
to be 1.4 times higher than the assets of banks legally established in Costa Rica.  The requirements for
foreign banks domiciled abroad to form part of a national financial group include the presentation of
accounts subject to audit (under Article 147(d) of Law No.7558), which must be submitted withinthree months of the close of the financial reporting period.  These reports are required for the purposes
of supervision of the national financial group and are not published.
Regulatory framework
62. The principal regulations governing the Costa Rican financial system, the stock market and
pension schemes are listed in Table IV.9.
63. Until the end of 1995, the Auditor General of Financial Entities ( Auditoría General de
Entidades Financieras , AGEF) was responsible for monitori ng the operation of all the banks,
including the Central Bank, non-banking financial companies and other public and private entities
involved in providing other banking services. The new Organizational Law of  the Central Bank (Law
No. 7558) created the SUGEF in place of AGEF.   Like its predecessor, SUGEF is a body linked tothe Central Bank, but has greater powers and administrative autonomy through its own Executive
Board.  In addition, the new Organizational Law of the Central Bank amended the ex post  system of
regulation which had hitherto been the practice, to encourage a prudential ex ante  supervisory
approach, which seeks to ensure transparency and to strengthen and promote the development of the
financial system.
Table IV.9
Principal laws governing the financial sector, including insurance
Name of law Number Date
National Insurance Bank ( Banco Nacional de Seguros ) 12 30 October 1924
Organizational Law of the National Banking System 1644 26 September 1953
Law on Cooperative Associations and creation of the National Institute for the
Promotion of Cooperatives ( Instituto Nacional de Fomento Cooperativo )4179 22 August 1968
Organizational Law of the People's and Communal Development Bank 4351 11 July 1969
Net profits on auctions of goods 4631 8 August 1970
Law Regulating Financial Investment Companies and Special Non-Banking Credit
Companies5044 7 September 1972
Law on the State Monopoly of Reinsurance 6082 30 August 1977
Law on the National Housing Finance System 7052 13 November 1986
Law on Modernization of the National Financial System 7107 4 November 1988
Law Regulating Financial Intermediation by Cooperative Organizations 7391 27 May 1994
Private Supplementary Pensions Scheme and reform of the Law Regulating the Stock
Exchange and the Commercial Code7523 7 July 1995
Organizational Law of the Central Bank of Costa Rica 7558 3 November 1995
Related regulations
Regulations on the formation, transfer, registration and operation of financial groups 29 January 1998
Regulations on Exchange Operations 10 October 1998
Regulations on Monetary Policy 1 June 1998
Regulations on additional supervision by the Housing Mortgage Bank ( Banco
Hipotecario de la Vivienda )27 August 1998
Law Regulating the Stock Market 7732 17 December 1997
Law on Worker Protection 7983 16 February 2000
Source: WTO Secretariat.
64. Subsequently, the Law Regulating the Stock Market (Law No. 7732) introduced changes in
the financial stock market system.  The functions exercised by the Executive Board of SUGEF wereCosta Rica WT/TPR/S/83
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transferred to the National Supervisory Council for the Financial System ( Consejo Nacional de
Supervisión del Sistema Financiero , CONASSIF), which covers the three superintendencies
responsible for the supervision and control of financial intermediaries, the stock market and pension
funds, namely the General Superintendency of Financial Entities, the General Superintendency of
Securities and the Superintendency of Pensions.
65. The Organizational Law of the Central Bank empowers SUGEF, inter alia , to perform the
following functions:  ensuring the stability, soundness and efficient operation of the financial system;monitoring the operations of the entities subject  to its control;  issuing general rules for the
establishment of sound banking practice;  establishing categories of financial intermediaries based on
the type, size and level of risk;  advising entities under its supervision;  and reporting on its
supervisory and control activities to the Executive Board of the Central Bank.  Public and private
banks, non-banking financial companies, savings and loan mutual societies, savings and creditcooperatives and community associations, and any other entities authorized by law to engage in
financial intermediation, are subject to control both by SUGEF and the Central Bank's monetary
control.
66. SUGEF is also responsible for monitoring any financial group that has at least one company
engaged in financial intermediation and domiciled in Costa Rica.  Where the financial group does notpossess companies engaged in financial intermediation, it is monitored by the body which supervises
the group's company domiciled in Costa Rica that holds the majority of the assets.  Where the
financial entities that form part of the group are not monitored by any of the established monitoring
bodies, CONASSIF decides which of those bodies shall exercise supervision.  CONASSIF may also
take qualitative aspects into account in assigning control to one or other of the supervisory bodies.
12
Apparently, despite these arrangements, supervision of operations undertaken by financial entities
through their offices abroad continues to be deficient.  Seeking to eliminate this shortcoming,
CONASSIF has held consultations with the financial intermediaries on a bill designed to strengthen
supervision of financial intermediaries and the authorities hope to submit it to the Legislative
Assembly during the first quarter of 2001.  The auth orities indicated that the bill takes into account
the Basel Recommendations regarding capital adequacy  rules and follows the "block" model (which is
one of the models recommended by the Basel Committee).
67. The State banks enjoy advantages over their private competitors since they have the guarantee
and fullest cooperation of the State and all its departments and institutions.  The Executive Board in
each case is appointed by the Government Cabinet and their capital may be increased by law or by
capitalization.  Public deposits in the State banks are fully guaranteed by the State, while private
banks do not have any kind of insurance to protect public deposits.  The authorities indicated that theywere looking at the possibility of creating deposit insurance for private banks.
68. The Organizational Law of the National Banking System (Law No. 1644 and amendments
thereto) stipulates that private banks, with Costa Rican or foreign capital, must be formed as joint
stock companies or cooperative unions or federations.  This therefore precludes the possibility of
establishing foreign branches inasmuch as they are regarded as part of the parent company.  Thecapital of each bank cannot be less than 100 million colones (some US$300,000).  This limit may be
increased at the discretion of the Central Bank's Executive Board.  The law also prescribes how the
profits of such banks may be distributed, stipulating in particular that 10 per cent of the net profits
must be used to form and increase the net reserve, and a further 10 per cent to form or increase the
bank employees' guarantee and pension fund.
                                                     
12 Law No. 7558, Regulating the Formation, Transfer, Registration and Operation of Financial Groups,
of 4 November 1997.WT/TPR/S/83 Trade Policy Review
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69. Only banks, public and private, are authorized to accept deposits and take deposits in current
accounts.  However, private banks may only accept deposits in current accounts if they satisfy the
requirements under one of the two schemes.  Under the first, private banks must maintain a minimum
balance of loans to the State bank equivalent to 17 per cent, after deducting the related reserve, of its
total acceptances with terms of 30 days or less, in both national and foreign currency.  The State
banks compensate private entities for the use of these resources paying a rate of interest equal to
50 per cent of the basic borrowing rate set by the Central Bank or the monthly LIBOR rate.
70. Alternatively, private banks must establish at least four agencies or branches providing basic
banking services, both lending and borrowing, in the regions of Chorotega, Pacífico Central, Brunca,
Huetar Atlántico and Huetar Norte.  In this case too, it is necessary to maintain a balance equivalent to
at least 10 per cent of deposits, after deducting the reserve relating to total deposits with a 30-day term
or less, in local or foreign currency, in credit s for development programmes determined by the
Executive Power.  These credits must be placed at a rate not higher than the basic borrowing rate of
the Central Bank for its placements in colons or the monthly LIBOR for resources in foreign currency.
71. Commercial banks, State or private, may unde rtake credit operations and make investments
for the following purposes inter alia :
- Financing operations related to agricultural, livestock and industrial production, or
national tourist, transport or information media companies when it can be shown that
the majority holding is Costa Rican;
- Financing storage of agricultural, livestock and industrial products, or marketing of
imports and exports, provided that such products are insured to the satisfaction of thebank and are not luxury goods;
- Conducting normal operations based on the financial needs of the State and other
public law entities up to an amount that may not exceed, for each State bank, 6 per cent
of its capital and reserves, and 25 per cent for each private bank, where its capital and
reserves do not exceed the amount equivalent to the commercial department of the
smallest State bank, in which case the private banks must comply with the requirements
for State banks;
- Financing companies which contract with the State or individuals, when they need
credit support to compete with foreign compan ies, provided that they show that their
capital is owned by Costa Rican nationals.
72. Along with their commercial activities, the State banks play a role as development banks,
being authorized to maintain departments to provide agricultural credit and economic and social
improvements for small farmers.  In addition, each bank may maintain an industrial section with the
task of promoting the creation of new branches of industry and extending those already in existence.The State banks must also promote family craft businesses through loans not exceeding
50,000 colones to strengthen small-scale industry in Costa Rica.  The interest rates applied to the
various sectors by the State banks are generally lower than those applied by the private banks
(Table IV.10).
(a) Insurance services
73. The main regulations on insurance activity in Costa Rica are the Law on Monopolies and on
the National Insurance Institute (Law No.12) and the Law on the Monopoly of Reinsurance (Law
No. 6082).  Since 1924, Costa Rica has maintained a state monopoly, through the National Insurance
Institute ( Instituto Nacional de Seguros , INS) for all types of insurance, including reinsurance andCosta Rica WT/TPR/S/83
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insurance for import and export activities, with the sole exception of contracts concluded by life
insurance companies constituted as cooperative or mutual societies.  Unlike other financial services
activities, insurance does not have a specific monitoring body.  This lack of supervision was justified
by the fact that the INS is a State institution.  However, other State activities are subject to controls,
for example, banking activity by SUGEF or pub lic services by ARESEP (see Chapter III.4.ii).
Table IV.10
Real lending and borrowing interest rates by sector, 1995-99
Sector 1995 1996 1997 1998 1999
Real lending rates by sector
Agriculture
   State banks 12.4 10.6 11.1 11.9 15.9
   Private banks 26.4 28.1 17.1 19.9 20.9
Livestock
   State banks 12.4 12.6 11.5 11.9 16.1
   Private banks 28.4 28.1 17.8 19.9 20.2
Industry
   State banks 14.4 12.6 11.3 12.2 15.9
   Private banks 26.4 28.1 17.0 19.9 20.2
Housing
   State banks 7.4 10.1 8.3 12.4 14.8
   Private banks 26.4 26.1 16.1 20.3 20.2
Other activities
   State banks 16.9 17.1 13.2 15.1 21.2
   Private banks 29.4 28.1 17.6 20.4 21.6
Source: State of the Nation Project (1999), State of the Nation in Sustainable Human Development , Vth report, San José.
74. In 1999, financing of insurance and pension plans, other than compulsory social security
plans, accounted for 0.8 per cent of total GDP (Table IV.6).13  In November 2000, the total assets of
the INS stood at 228 billion colones (some US$720 mill ion), of which 114 billion related to short-
term investments and 28 billion to investment in housing.  Technical reserves stood at 123 billion
colones.  In 2000, total profits reached 6,129 million colones, of which 1,186 related to insuranceactivity and 5,085 to short-term investments.  Occupational risk and personal insurance were the main
source of profits in 2000.  Reinsurance produced losses of some 17 million colones, while agricultural
insurance overall lost 81 million colones.
75. The distribution of insurance has changed sign ificantly in the last six years, with the
considerable increase in brokers.  In 2000, the share of intermediaries in the placement of the variousINS products was as follows:  insurance firms, 69 per cent;  independent agents, 23 per cent;  State
insurance agencies, 5 per cent and direct sales by the INS, 3 per cent.
76. According to the authorities, the insurance market in Costa Rica is affected by a number of
problems, including the high cost and narrow range of services compared with those available in more
competitive markets, the lack of a specialized monitoring mechanism and external audit of financialresults, the poor development of insurance as an instrument for promoting national savings, and the
distortions caused by the INS investments, which meet the needs of public sector financing rather than
profitability criteria.  Furthermore, undermini ng the State monopoly, several foreign private
companies operate in Costa Rica, informally sell ing life, health and personal accident insurance.
These products are sold, not as insurance, but as health services and suchlike.  The INS endeavours toinform the public about the risks of taking out contracts with companies not based in Costa Rica and
thus outside Costa Rican jurisdiction.
                                                     
13 This percentage would increase to 4.6 per cent with the inclusion of compulsory insurance and
pension plans.WT/TPR/S/83 Trade Policy Review
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77. The Government has undertaken a process of national consultation with a view to diagnosing
the state of the insurance market and proposing reforms.  The draft reforms are now before the
Parliamentary Commission on Economic Affairs ( Comisión Legislativa de Asuntos Económicos ).
Moreover, the INS is making approaches to the national authorities to acquaint them with aspects
related to the creation of a proposed high-ranking body to structure and regulate the insurance market.
(iii) Communications services
(a) Telecommunications
Market structure
78. In 1999, the telecommunications sector accounted for 1.9 per cent of total GDP and employed
0.6 per cent of the total active population (Table IV.6).  In December 2000, the installed capacity of
the national telecommunications system was 983,358 fixed lines, a density of 26 fixed lines per
100 inhabitants.  The digitization of these lines was 78 per cent.  In addition, Costa Rica had twocellular systems and the density of operational cellular services was 5.5 per 100 inhabitants.  With
respect to public telephones, the country had 13,868 units, a rate of 3.6 per 1000 inhabitants.  The
telephone density of the so-called Greater Metropolitan Area was 34 fixed lines installed per
100 inhabitants, and 15 fixed lines per 100 inhabitants in the rest of the country.
79. As for as the range of services offered, the State company, the Costa Rican Electricity
Institute (ICE), through its subsidiaries, is res ponsible for providing telecommunications services,
along with new carrier services.  Fax services are provided by Radiográfica Costarricense S.A.
(RACSA).  In recent years the telephone infrastructure has seen accelerated development of the use of
digital technology, reaching over 67 per cent of installed lines in 1998.
80. However, the expansion of telephone line installations in recent years has not been enough to
meet the demand.  In December 2000, the waiting list for conventional services already paid for by
customers was 25,000 applications.  A further 89,000 had expressed interest in obtaining a telephone
line.  There was similarly an unsatisfied demand for cellular phones.
81. Service quality is also a problem, since on average only 52 per cent of national calls are
completed, 51 per cent of cellular phones and 60 per cent of international calls.  In 2000, the numberof breakdowns repaired for every 100 telephone lines installed was 73.2.  The number of breakdowns
dealt with in less than 24 hours was 69 per cent.
Regulatory framework
82. The establishment and operation of national and international telecommunications services is
the responsibility of the ICE, which is an autonomous State institution.  The ICE was created by
Decree Law No. 449 of 8 April 1949 for the purpose of developing energy producing sources and
channelling the use of hydroelectric power (see Section 3).  In 1963, Law No. 3226 was enacted andthe ICE was empowered to establish and operate telecommunications services.  The highest authority
in the ICE is its Executive Board, consisting of seven members appointed by the Executive Power for
a term of eight years.  The ICE enjoys exclusive rights for both national and international
telecommunications services.  There are no private networks in Costa Rica with concessions to
provide public telecommunications services.
83. In addition to the ICE itself, the ICE Group includes RACSA and the National Power and
Light Company ( Compañía Nacional de Fuerza y Luz S.A ., CNFL).  Initially RACSA concentrated its
operations on telegraph and telex services, before becoming increasingly involved in solving
customers' needs in keeping with  technological advances and market demand.  Thus, in addition toCosta Rica WT/TPR/S/83
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written telecommunications and added value services, it encompasses services in the fields of
communications and information technology (Internet).
84. The charges are subject to approval and control by the Public Services Regulatory Authority
(ARESEP, see Chapter III.4.ii).  In giving its ap proval, ARESEP takes into account the productive
structure of the model for each public service, the technology used, the activity concerned and the size
of the company.  The criteria of social justice, environmental sustainability, energy conservation and
economic efficiency are core elements in setting charges, prices and rates for public services.  Thecost of local calls is defined in terms of pulses, while the cost of international calls is calculated on the
basis of the duration in minutes of each call.  For both types of call there are differential rates based
on the time of the call, such that prices are lower if calls are made at the weekend or at night from
Monday to Friday.  Apparently, considerable use is made in practice of cross-subsidies, including
subsidising of local calls by international calls.  The authorities pointed out that the charges for
international calls continue to be relatively high in comparison with other countries.  At the end of
2000, the average charge for international calls was US$0.54 per minute.
85. In early 2000, the authorities tried to push through proposals for opening up the
telecommunications sector, more particularly in the form of a draft general telecommunications law.
However, in the face of opposition and ultimately rejection by a section of Costa Rican society, the
bill had to be withdrawn and instead a Commission was set up to examine the various options for
reforming both sectors.  The Commission is made up of representatives of trade unions, civil society
and the various political parties.  The bill included the establishment of an autonomous regulatory
body (IRETEL)  intended in particular to regulate and supervise the interconnection between
telecommunications operators, reorganize the radio spectrum by granting concessions for the use offrequencies for specific purposes, and create a universal telecommunications service fund to promote
development and the operation of telecommunications services on the principle of universal access to
services
86. The draft general telecommunications law envisaged opening up the telecommunications
market in stages:  (i) starting with the entry into force of the law, free competition for the sale and
acquisition of terminal equipment and added value services;  (ii) eighteen months after the entry into
force of the law, tendering for the concession of a mobile cellular telephony band;  (iii) 24 months
after the entry into force of the law, tendering for the concession of local end telephony services to
different operators;  and (iv), from 31 December 2002, IRETEL was to have initiated the tendering
procedures for international services, carrier services and personal telephone services.
(a) Audio-visual services
87. Audio-visual services in Costa Rica are regulated by the Radio and Television Law (Law
No. 1758 of 19 June 1954), the Regulations on Approv al of Television Broadcasting Companies of
29 October 1958 and the Regulations on Wireless Stations of 11 December 1956, as amended in
12 May 1981.
88. Costa Rican legislation envisages important limitations on the principle of national treatment.
Only Costa Rican citizens, or companies in which Costa Ricans hold at least 65 per cent of the capital,may establish, manage and operate wireless service companies.  However, the right to establish and
operate amateur radio stations may be granted to foreigners resident in Costa Rica provided their
country of origin grants the same right to Costa Rican citizens.  Radio broadcasting licences are issued
by the Radio Control Department of the Ministry of the Interior.
89. The restrictions applied to radio, television and cinema programmes include the following;
only advertisements recorded or dubbed by Costa Rican citizens may be broadcast;  jingles recordedWT/TPR/S/83 Trade Policy Review
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abroad are subject to a tax of 1000 colones for each one that is broadcast;  only 30 per cent of filmed
commercial advertisements played daily in each television station or cinema may be of foreign origin;
the import of short commercials from outside the Central American Common Market (CACM) is
subject to a tax of 100 per cent of their value, which may in no case be less than 10,000 thousand
colones or greater than 50,000 thousand colones (short radio, cinema or television commercials made
in any of the other CACM countries where there is reciprocity are deemed to be national);  the
number of radio plays and radio serials recorded abroad and broadcast daily by each broadcastingstation may not exceed 50 per cent;  the number of film or video-recorded programmes made abroad
may not exceed 60 per cent of the total daily programmes shown.
(iv) Transport
(a) Air transport
Market structure and performance90. The airport network in Costa Rica consists of four international airports and 113 aerodromes,
of which 80 are in public use and 33 as private.  The airports classified as international are the Juan
Santamaría International Airport, the Daniel Oduber Quirós International Airport, the Limón
International Airport and the Tobias Bolaños Palma International Airport.   The Juan Santamaría
International Airport, situated a few minutes from the capital, is the largest and the main one forinternational tourism.  In 1999, 84 per cent of domestic passenger traffic and 97 per cent of
international passenger traffic was concentrated in this airport.  It was also the main channel for
freight traffic, with 33,389 tonnes of goods landed and 46,745 tonnes exported in 1999.   The Daniel
Oduber Quirós International Airport in the province  of Guanacaste is the main port of entry for
tourists to the Pacific Coast, while the Tobias Bolaños Palma International Airport, on the outskirts ofthe capital, in practice actually only serves local traffic,  Between 1995 and 1999, domestic passenger
traffic increased at an annual average of 12.7 per cent, while international passenger traffic rose by 6.5
per cent.  During the same period, the total volume of freight handled declined by an annual average
of some 1.7 per cent.
91. By the end of 2000, seventeen airlines were offering international passenger, freight and
postal services, mainly from the United States, Central America and Europe.  In addition, tourist
charter flights play an important role in the high season from November to April.  They come mainly
from Europe, Canada, the United States and Mexico.  These flights are operated by eight companies.
Regulatory framework
92. Civil aviation in Costa Rica is governed by the General Law on Civil Aviation (Law No. 5150
of 14 May 1973) and by the international treaties and conventions in force in Costa Rica.  The Civil
Aviation Technical Council and the Directorate General of Civil Aviation, under the Ministry ofPublic Works and Transport, are the competent bodies in all matters relating to the regulation and
control of civil aviation within the territory of the Republic.  Inspection, supervision and air traffic
control, and the Costa Rican Aeronautical Regist er come under the auspices of the Directorate
General of Civil Aviation (DGAC).  In addition, all civil airports and aerodromes in the country are
subject to control, inspection and supervision by the DGAC.  Any civil aircraft registered in thenational aircraft register has Costa Rican nationality.  Aircraft for passenger transport or any other
aeronautical activity for reward may only be registered in the name of Costa Rican natural or legal
persons.  Foreigners resident in Costa Rica may only register aircraft for private use.
93. The DGAC's powers include control of auxiliary air navigation services.  When it is in the
public interest, the Civil Aviation Technical Counci l may contract directly for the supply of such
services or grant permits to non-profit Costa Rican companies.Costa Rica WT/TPR/S/83
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94. Only Costa Rican natural or legal persons may register aircraft for paid public transport
services or airborne work with the Costa Rican Aeronautical Register.  There is a company with the
status of national international transport air line,  Líneas Aéreas Costarricenses S.A. (LACSA), which
is governed by the General Law on Civil Aviation the Regulations thereto.  When a foreign company
applies for an operating licence, the national flag-carrying airline must be taken into account.  Article
179 of the General Law on Civil Aviation provides that companies bearing the national flag are those
in which 51 per cent of the capital is Costa Rican.
95. Foreign providers are not issued licences to operate public air services if the applicant's State
of origin has not granted the relevant authorization to operate the proposed international services, or
Costa Rican companies are not subject to reciprocity.  Nor are such licences issued to foreign
companies when authorization of the service is contrary to national interests or international
conventions signed by Costa Rica.  At the end of 2000, no foreign company was providing any kindof air service in Costa Rica, apart from those operating routes to international destinations.
96. The rates for air passengers or goods transport, within or outside the country, must be notified
to and approved by the Civil Aviation Technical Council.  No company operating in Costa Rica may
charge amounts or sums different from those approved in their official rates.  In fixing and applying
rates, the Council takes into consideration, inter alia , the public interest in ensuring adequate and
efficient transport with the maximum safety possible, the best value for money consistent with the
advantages and conditions of the service, the effects on the volume of traffic, the nature and quality of
the service, the profit margin to be allowed to  the companies, and differences in the economic
capacity of companies that provide international services.  Rates offered by an underdeveloped
company may vary by up to 20 per cent from those of a company that is fully economicallydeveloped, with rates 20 per cent higher for jet aircraft.  However, the authorities pointed out that the
Department of Air Transport makes no distinction in practice between underdeveloped companies and
those that are fully developed economically and thus has not defined any criteria in that respect.
97. The rates for agricultural aviation, and those for services supplied by private owners or
operators of any air service, must also be notified to and approved by the Civil Aviation TechnicalCouncil.  In addition, rates, rentals or charges applicable to all classes of services and airport facilities
owned by the State, supplied dire ctly by State agencies and admi nistered by the DGAC, are fixed
directly by the Civil Aviation Technical Council and approved by the Executive Power.
98. Only Costa Rican natural and legal persons have the right to operate local public air services,
whether regular services or otherwise.  They must also meet the following conditions:  at least 51 per
cent of their capital must be owned by Costa Ricans;  effective control of the company and its
management must also be in the hands of Costa Ricans, and no foreigner may be a member of the
Executive Board.
99. Foreign international air transport companies operating in Costa Rica must at all times
maintain an accredited representative with gene ral powers sufficient to deal with the company's
business.  Furthermore, the General Law on Civil Aviation specifies in Article 145 that, where a
foreign company applies for an air transport operating licence, it must expressly acknowledge that itbecomes subject to the provisions of the law and th e jurisdiction of the Costa Rican authorities in the
event of injury to fare-paying passengers, cargo or crew, or persons or goods of third parties on the
ground, expressly renouncing recourse to diplomatic channels.
100. Costa Rica has engaged in a fast-track process of developing commercial air traffic with other
countries, which led directly to the signing of an open skies agreement with the United States,including a clause on code-sharing by which it is hoped to achieve greater openness in air transport
services.  The Government has also begun negotiations for other open skies agreements with countriesWT/TPR/S/83 Trade Policy Review
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in the Caribbean and South America.  Other air transport agreements, but not so broad, have been
signed with Germany, Spain, the Netherlands and the United Kingdom, from which airlines operate,
although Costa Rica has been unable to give real effect to the principle of reciprocity because it does
not have the aircraft to make transatlantic flights.
101. Costa Rica has also negotiated air transport agreements with several South American
countries, such as Argentina, Bolivia, Brazil, Colombia, Ecuador and Venezuela;  with North
American countries, such as Mexico and Canada as well as the United States;  and countries in theCaribbean, such as Aruba, Cuba and the Dominican Republic.  In Asia, it has done so only with
Chinese Taipei.
102. As to the privatization of airports, in early 2000, Costa Rica was in the process of awarding
concessions for the airport services in the Juan  Santamaría International Airport, through a
management company.  Under this scheme, it is intended to contract out the administration, operationand development of the air terminal, area, including financing and construction of the works required
to satisfy current and future demand under the master plan for this airport.
(a) Maritime transport
103. The country's port infrastructure is split along geographical lines, the ports of the Pacific coast
under the Costa Rican Pacific Ports Institute ( Instituto Costarricense de Puertos del Pacífico,  INCOP)
and those of the Atlantic seaboard under the Atlantic Coast Port Administration and Economic
Development Board ( Junta de Administración Portuaria y de Desarrollo Económico de la Vertiente
Atlántica , JAPDEVA).  The port of Punto Morales, on the Pacific Coast, which is used for loading
sugar and alcohol products is administered by th e Agro-Industrial Sugar Cane League (LAICA).  The
Limón-Moín port complex, administered by JAPDEVA, is the largest in the country.  In 1998, thetotal cargo exported and imported through this complex was 6.7 million tonnes.
104. JAPDEVA is an autonomous public sector institution constituted as a public utility.  The
Board is the port authority responsible for constructing, administering, maintaining and operating the
existing port of Limón and its extension at Cieneguita, as well as other sea and river ports on the
Atlantic Coast.  As the port authority for this coast, it is responsible for planning and constructing portworks and facilities, improving, operating and administering its services and facilities, receiving and
directly controlling ships entering and leaving the po rts, receiving, transhipping, storing, guarding and
delivering within the port area goods that are load ed and unloaded there, cooperating with the fiscal,
immigration and health authorities in carrying out their respective functions, coordinating port
activities and related transport, and processing applications for concessions.
105. In order to operate a coastal shipping service on a regular and permanent basis, it is necessary
to obtain a route licence from the Ministry of Public Safety.  Extraordinary or exceptional services,such as specific cargo or passenger voyages and excursions are exempted and may be freely
undertaken, following prior notification to the harbourmaster's office.  Concessions for coastal
shipping services are only granted to Costa Rican citizens or to companies formed in Costa Rica with
capital controlled by Costa Ricans holding at least 60 per cent of the shares.  These concessions are
granted for periods of six years.
106. Registration of ships is compulsory.  Ships may only be registered by Costa Rican citizens,
national public bodies, companies formed and domiciled in Costa Rica and representatives of
shipowners.  Registration of a ship in Costa Rica requires the submission, inter alia , of documents
showing ownership of the vessel;  the names, titles and address of the owner;  certificates issued by
the ship classification society (for ocean-going ship s or those over 50 tonnes);  certificate of safety
equipment and number of passengers;  date and place of construction of the ship;  class;  service forCosta Rica WT/TPR/S/83
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which it is to be used;  and any other information or document that may be deemed relevant by the
Department and the Harbourmasters.
107. Ships registered in Costa Rica have rights depending on the class in which they are registered,
i.e. coastal, tourism or leisure.  The authorities i ndicated that all ships are entitled to navigate freely
within national waters provided they meet the safety and protection life requirements.  They also
pointed out that the law does not specify that the principle of reciprocity applies.  Costa Rica has
signed several international maritime conventions (Table IV.11).
108. The ports may not be owned by private and/or foreign companies.  The Public Services
Regulatory Authority is responsible for setting the charges for all services in the national ports (see
Chapter III.4.ii).
109. According to the authorities, the port infrastructure in Costa Rica is facing serious problems,
chiefly operations and warehouse clearance costs much higher than international standards, profitsinsufficient to generate funds for investment in infrastructure, charges which do not reflect operating
costs, increased port administration costs linked  to JAPDEVA's obligation to engage in matters
related to regional development and very long unloading times due to the fact that berth waiting time
is over 40 per cent of the total period of stay in port.
Table IV.11
Maritime Conventions signed by Costa Rica
Convention of the International Maritime Organization Law 6478 of 25 September 1980
Code of Conduct for Liner Conferences Law 6074  of 12 July 1977
Convention 145, Continuity of Employment (Seafarers) Convention Law 6548 of 18 March 1981
Convention 134, Prevention of Accidents (Seafarers) Convention Law 5851 of 9 December 1975
Convention 112, Minimum Age (Fishermen) Convention Law 3344 of 5 August 1964
Convention 147, Merchant Shipping (Minimum Standards) Convention Law 6549 of 18 March 1981
International Convention for the Unification of Certain Rules relating to the Arrest of
Sea-going ShipsLaw 1800 of 30 September 1954
International Convention on Civil Liability for Oil Pollution Damage Law 7627 of 26 September 1996
International Convention on the Prevention of Marine Pollution by Dumping of Wastes
and other MatterLaw 5566 of 26 August 1974
Source: WTO Secretariat based on information supplied by the Costa Rican authorities.
110. In 1995 the authorities drew up a National Port Development Plan setting out a range of
proposals on port management and underlying development of infrastructure with mechanisms such
as concession of public works and services.   A plan was also proposed to restructure port
organization by simplifying structures and establishing the use of terminal operators and portcompanies providing cargo handling and other services under licence.  As a result, cargo handling
services in the port of Limón-Moín were contracted out under concessions to private operators.
Concession arrangements were also introduced for container terminals and/or BOT (Build Operate
Transfer) projects for new ports which had not been implemented by the end of 2000. The main
investments continue to be those by the State and attempts to attract foreign capital and foreign portoperators have not been successful.
111. In 1999, the National Ports Council ( Consejo Portuario Nacional ) was set up as a body
within the Ministry of Public Works and Transport which groups together all the national port
authorities, and a Port Modernization Programme was launched with the support of the World Bank.
The programme is based on promoting private participation and investment.WT/TPR/S/83 Trade Policy Review
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(v) Professional services
112. Some professions are totally or partly reserved for members of the relevant professional
bodies.  Foreigners may become members of these bodies, although in general they have to satisfy
additional requirements to those applied to Costa Ricans.  It is important to note that some of the
discrimination established in these regulations could be considered unconstitutional.  However, until
each has been the subject of an appeal in the Consti tutional Court, they may continue to be applied
(see Chapter II.3).  The principal limitations on the principle of national treatment applicable tocertain professions are listed below.
113. Journalism is reserved for members of the Costa Rica College of Journalists.  As well as
meeting the requirements applicable to Costa Rican s, foreigners seeking membership of the College
must demonstrate the reciprocal nature of the treaties and laws in force in the applicant's country and
Costa Rica, they must have been legally resident in Costa Rica continuously for the past five years,they must obtain a work permit issued by the relevant Costa Rican authorities, submit a letter to the
National Employment Service stating that the employee concerned has satisfied all the requirements
of that Service, and provide any other information that the Executive Board of the College deems
relevant.  When events of international importance o ccur in the country, in the opinion of the College,
it may authorize non-resident foreign journalists to cover such events for the foreign media that theyrepresent.  These authorizations last a maximum of one month.  The immigration authorities at the
points of entry into the country must notify the College, within 24 hours, of any entry into the country
of persons identified as journalists.
114. To become members of the College of Dental Surgeons, foreigners must satisfy the
requirements applied to Costa Ricans and also show that they have been continuously andpermanently resident in the country for five years or more, before or after their professional studies.
Foreign dentists married to Costa Ricans for two years or more do not need to satisfy this
requirement.  In addition to the above requirements, foreign odontologists must demonstrate, by up to
date certification, that in their country of origin Costa Ricans may practise their profession in
comparable circumstances.
115. To be a public accountant, foreign citizens must have been permanently resident in Costa
Rica for the five years before they submit evidence of the other requirements demanded of Costa
Rican citizens.  Furthermore, only citizens of countries with which Costa Rica maintains a reciprocal
agreement on the practice of public accountancy may engage in this profession, provided that within
two years of their admission to the College they obtain Costa Rican nationality.
116. To become a member of the College of Physicians and Surgeons, Costa Ricans and foreigners
must, among other things, show that they have been resident in the country for five years or morebefore or after completing their professional studies, and must have worked in the country's health
service for a year.  As well as satisfying the requirements applicable to Costa Ricans, foreign doctors
must show that in their country of origin Costa Ricans may practise the profession in comparable
circumstances.  However, foreign doctors who have  been married for two years to Costa Ricans and
reside in the country may be admitted to membership of the College by fulfilling the requirementsdemanded of Costa Ricans, apart from that of five years' residence in Costa Rica.
117. To be an optometrist, it is necessary to become a member of the professional college
concerned.  Foreigners, as well as satisfying the requirements applicable to Costa Ricans, must show
that in their country of origin Costa Ricans may practise in comparable circumstances.Costa Rica WT/TPR/S/83
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118. Chemists or chemical engineers who enter the country to work temporarily as consultants in
bodies governed by public or private law may become temporary members of the Federal College of
Chemists and Chemical Engineers of Costa Rica.  However, they may only engage in their
professional activity in the establishment expressly authorized by the Governing Body of the College.WT/TPR/S/83 Trade Policy Review
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Annex IV.1 The banana industry in Costa Rica
1. The banana industry has for many years been the main source of foreign exchange revenues
for Costa Rica, but its relative share of total exports has declined as manufacturing exports havedeveloped.  In 1999, banana exports totalled 116,559,677 crates (of 18.14 kg.) for a total f.o.b. value
of US$631.8 million, or rather less than 10 per cent of total exports of goods.  In 1999, the banana
industry employed some 32,700 workers.  Three main companies market Costa Rican banana
production:  the Banana Development Co. (BANDECO), which in 1999 marketed 32.4 per cent of
total exports;  the Standard Fruit Co., with a share of 30.2 per cent and the Compañía BananeraAtlántica (COBAL), whos e exports came to 18.4 per cent of the total.  The remaining production is
shared between small marketing companies, mostly Costa Rican owned.
2. In Costa Rica, banana plantations are classifi ed as "own" or independent, depending on the
make-up of their share capital.  "Own" estates are those where a majority of the capital is in the hand
of foreign marketing companies, while independent estates are those whose capital is held by Costa
Ricans or foreigners with over five years resi dence in Costa Rica.  In 1999, exports from "own"
estates accounted for 41.4 per cent of total exports, while exports from independent estates were 58.6
per cent.  In 1999, the United States absorbed 56 per cent of total banana exports, while exports to the
European Union (EU) amounted to nearly 38 per cent.
3. Costa Rican banana exports to the EU are subject to import quotas agreed with the Union
(Chapter III.3.x).  From January 1995, the total EU import quota was divided into country quotas,
with Costa Rica initially receiving 23.4 per cent of that total.  Under the agreement of the time with
the EU authorities, Costa Rica acquired the right to administer 70 per cent of its country quota, which
it did by issuing banana export certificates, w ithout which the EU customs would not admit Costa
Rican fruit.  In Costa Rica, the award of banana e xport certificates was regulated by Decree No.23971
COMEX-MAG of 28 December 1994, which delegated to the National Banana Corporation
(CORBANA), the banana industry supervisory body, responsibility for issuing them and establishedthat only banana producers could receive them.  The amount allocated to each producer was
proportional to this share of total exports in the preceding two years.
4. The Costa Rican authorities indicated that the above arrangement lasted until March 1998,
when the European Commission decided to abolish it on the recommendation of the WTO Appellate
Body of August 1997.
1  Since then, the EU customs have not required the presentation of banana
export certificates and Costa Rica thus lost the power to administer the quotas granted under its
country quota.  At the beginning of 2001, these quotas were governed by the availability of import
licences held by EU importers.  The authorities underlined that banana export certificates continued to
be issued in Costa Rica, but they had no purpose or use in international trade.  Indeed, the commercial
value that the export certificates possessed, as vehicles for converting the higher prices paid by EUconsumers into profits for the producers, was switch ed to the holders of the import licences in the EU.
5. The authorities pointed out that, despite the foregoing, Costa Rica continues to benefit from
its country quota, which ensures it a stable share of the EU market without the need to engage in price
wars with competitor countries.  This last is of particular importance for Costa Rica, which is not one
of the lower cost producers in the world market despite being one of the most efficient from atechnical point of view.  This is largely due to the costs imposed on banana producers under the Costa
Rican framework of worker and environmental protection.
6. At the beginning of 2001, banana exports were subject to two direct taxes.  The first, known
as the export tax, imposed a tax of US$0.10 on every crate of bananas exported.  The second was a tax
                                                     
1 WTO document WT/DS/27/ABR of 9 September 1997Costa Rica WT/TPR/S/83
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of 1.50 colones on each crate exported.  These taxes were equivalent to 82.69 and 5.51 colones per net
metric tonne of bananas.  The first tax was generic while the second was specifically intended for
research, development of better environmental practices and worker safety security.  In 1999, the
Government collected US$17.5 million under the first tax.  Various other levies and marginal taxes
also apply to this activity, such as a specific tax pe r tonne of bananas loaded in the port to pay benefits
to redundant port workers.  Exports are also subject to a minimum price per crate of US$6.  However,due to the fact that for several years the contract ual relationship between producers and exporters was
to sell by consignment, there has been no need to implement this regulation (see Chapter III.3.iii).
7. The Costa Rican banana sector is going through a difficult period caused by the greater
competition on world markets and the fall in banana prices, as well as the uncertainty hanging over
the EU banana importation regime.  If the Union abolishes country quotas, Costa Rican exports tothese markets could fall, even though in the long term the liberalization of the market should benefit a
producer with generally competitive costs, such as Costa Rica.  The estimated cost of production in a
Costa Rican estate that produces 2,500 crates a year per hectare is US$4.6 per crate.  This is well
below the cost of production typical of the majority  of producers in the Caribbean or Africa, although
higher than the estimated cost in Ecuador.  According to representatives of the three main Costa Ricanmarketing companies, Costa Rica could compete on the world market at a price of US$4.5 per crate
f.o.b., provided that the various agents involved in the banana industry (producers, Government and
service providers) make an effort to reduce costs.  Chief among the measures sought by the marketing
companies are reduction of the area under cultivation by a quarter, abolition of taxes on banana
exports and reduction of port services charges.
8. In order to deal with the fall in world prices, the Government established the Price
Compensation Fund for Banana Producers (Executive Decree No. 28299-MAG-H-COMEX of24 November 1999).  This Fund, partly financed from the tax on banana exports, has the following
objectives:  to provide financial support to banana producers;  to support all productive units that do
not achieve the average yield for the previous year;  to provide resources to all banana producers to
carry out the necessary works and tasks to combat black sigatoka, moko and other diseases that affect
the plantations;  to provide resources to allow a return  to the levels of efficiency that obtained in 1990
and earlier years;  and to try and maintain  export volumes, as far as possible avoiding the
abandonment of areas of cultivation because of the socio-economic consequences that would ensue.
Under the Decree, up to December 2000, the total sum for distribution was US$10.34.  The Fund
allowed a grant to the producer of about US$0.12 per crate to help maintain plantations.Costa Rica WT/TPR/S/83
Page 115
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