HomeReportsBureau of Economic and Business Affairs2018 Investment Climate Statements…Costa Rica

# 					2018 Investment Climate Statements: Costa Rica			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Costa Rica is the oldest continuous democracy in Latin America with moderate economic growth rates (3.2 percent in 2017) and fairly low inflation (2.6% in 2017) providing a stable investment climate. The country’s relatively well-educated labor force, relatively low levels of corruption, physical location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives also offer strong appeal to investors. Costa Rica’s continued popularity as an investment destination is well illustrated by strong yearly inflows of foreign direct investment (FDI) as recorded by the Costa Rican Central Bank, reaching an estimated USD 2.54 billion in 2016 (4.5 percent of GDP) and 3 billion in 2017 (5.2 percent of GDP), higher in per capita terms than many OECD countries. In recent decades, the Costa Rican government through its investment promotion agency CINDE focused on attracting relatively high-tech manufacturers, such as medical device makers, and service companies that demand skilled labor, introduce new technologies, and often run robust “responsible business conduct” programs. In addition, the Costa Rican Tourism Board (ICT) assists potential investors in the very dynamic tourism sector.

Costa Rica’s high-tech and tourism sectors serve as “clusters” of economic growth in which each new exporter, service provider, sector employee, or university course of study adds depth to the sector as a whole and makes it more attractive for new entrants. Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. A similar transformation took place in the tourism sector, now characterized by a plethora of smaller enterprises handling a steadily increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. Costa Rica is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness.

The current administration of Carlos Alvarado, beginning its four-year term May 8, 2018, belongs to the same political party as the previous administration of Luis Guillermo Solis. The Solis administration’s contributions to Costa Rica’s already-strong investment climate included strong government support for Costa Rica’s continuing export and investment promotion efforts, sustained and concerted effort in furthering Costa Rica’s aspiration to become an OECD member, near-completion of Costa Rica’s major new Atlantic Coast container terminal, completion of a new convention center for convention tourism, implementation of significant financial-sector laws and regulations against money laundering, and avoidance of major labor unrest. Nevertheless, the Costa Rican investment climate continues to be threatened by a high and persistent government fiscal deficit capable of squeezing domestic credit and forcing government budget cuts, a complex and often inefficient bureaucracy, and basic infrastructure – ports, roads, water systems – in need of major upgrading. Organized crime and drug trafficking are growing challenges, despite strong government efforts to counter these forces.

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