Figure 1. Map of Costa RicaSource: Map Resources. Adapted by CRS Graphics. Costa Rica is a politically stable Central American country of 4.3 million people with a relatively well-developed economy. The country gained its independence from Spain in 1821 as a part of the Central American Union, and became a sovereign nation following the union's dissolution in 1838. Costa Rica has enjoyed continuous civilian democratic rule since the end of a 1948 civil war, the longest period of unbroken democracy in Latin America. The civil war led to the creation of a new constitution, the abolition of the military, and the foundation of one of the first welfare states in the region. Although Costa Rica pursued state-led development throughout much of the 20 th century, over the past several decades, it has implemented market-oriented economic policies designed to attract foreign direct investment (FDI), develop the country's export sector, and diversify what was once a predominantly agricultural economy. The World Bank now classifies Costa Rica as an upper-middle-income country with a 2008 per capita income of $6,060. Public fatigue with politics has grown in recent years as a result of corruption scandals that have implicated three former presidents from the two traditional ruling parties: Rafael Angel Calderón (1990-1994) and Miguel Angel Rodríguez (1998-2002) of the center-right Social Christian Unity Party (PUSC) and José María Figueres (1994-1998) of the traditionally center-left National Liberation Party (PLN). This disillusionment has contributed to a rise in voter abstention, from just 19% in 1994 to 35% in 2006. It has also contributed to a fragmentation of Costa Rica's political party system. The PUSC has collapsed and newer parties—such as the conservative Libertarian Movement (ML) and the center-left Citizen Action Party (PAC)—have grown considerably. Oscar Arias, a former president (1986-1990) and Nobel-laureate, was elected president in February 2006. Arias won 41% of the vote to narrowly defeat his closest rival, the PAC's Ottón Solís, who had served as Minister for National Planning and Economic Policy during Arias' first administration. Throughout his term, President Arias has advanced so-called "third-way" policies, embracing his party's traditional support for social welfare programs while rejecting state-led development in favor of market-oriented economic policies. Arias also has pursued an active foreign policy. Although Arias' PLN is the largest of the nine parties represented in the unicameral National Assembly, it holds just 25 of the 57 seats, which has made cross-party alliances necessary to pass legislation. President Arias has maintained the market-friendly economic policies that Costa Rican administrations from both traditional governing parties have pursued since the 1980s. Between 2006 and 2008, economic growth averaged 6.5%, fueled in large part by export growth and increased investment. Export earnings grew over 36% between 2005 and 2008 to $9.7 billion while FDI grew over 134% to $2 billion during the same time period. Much of the FDI has been invested in high technology sectors, often located in free trade zones. High-tech products—such as integrated circuits and medical equipment—now account for 45% of Costa Rican exports. Arias also has pursued a number of free trade agreements (FTAs) during his current term. He won ratification of CAFTA-DR through a national referendum in 2007 and secured its implementation in January 2009 despite strong opposition from the PAC and labor unions. Additionally, he concluded an agreement with Panama, has completed FTA negotiations with China and Singapore, and is engaged in ongoing FTA talks with the European Union along with the other member nations of the Central American Integration System (SICA). Arias has sought to complement Costa Rica's considerable economic growth with moderate social welfare programs. He has doubled welfare pensions, created new centers for primary healthcare services, and increased education funding. President Arias also introduced Avancemos , a conditional cash transfer program that provides monthly stipends to the families of 140,000 poor students as long as the children remain in school and receive annual medical care. Avancemos is modeled after successful social protection programs that have been implemented elsewhere in Latin America, such as Oportunidades in Mexico and Bolsa Familia in Brazil, and is designed to alleviate poverty in the near-term while fostering long-term reductions in the poverty rate through increased educational attainment. Costa Rica now invests the equivalent of 17.3% of its gross domestic product (GDP) in public health, education, and social welfare, the highest percentage of any nation in Central America and the fifth highest in all of Latin America. These social investments, combined with substantial economic growth, have provided Costa Rica's citizens with a relatively high standard of living. According to the United Nations' 2009 Human Development Report, Costa Rica has the highest level of human development in Central America with a life expectancy at birth of 79 years and an adult literacy rate of 96%. Economic and social conditions have deteriorated recently, however, as a result of the global financial crisis and U.S. recession. The Costa Rican economy grew by just 2.6% in 2008 and experienced its first contraction in 27 years in 2009. GDP contracted by 1.3% as investment, export demand, and tourism declined. Likewise, the poverty rate climbed nearly two points over the course of 2008 and 2009 to 18.5%, and unemployment increased almost three points in 2009 alone to 7.8%. President Arias has sought to counter the economic downturn with a $2.5 billion (8% of GDP) economic stimulus and social protection plan known as Plan Escudo . Among other provisions, the plan recapitalizes state banks, provides support to small and medium-sized enterprises, increases labor flexibility, invests in infrastructure projects, provides grants to workers in the worst-affected sectors, and increases the number of students eligible for the Avancemos program. The majority of Plan Escudo is financed through new loans from international financial institutions. Analysts assert that Costa Rica's economy showed signs of recovery in late 2009, and expect the country to rebound in 2010 with GDP growth of 3.3%. President Arias has pursued an active foreign policy throughout his term. He established diplomatic ties with China in 2007, ending Costa Rica's 60-year relationship with Taiwan. Arias also established formal ties with the Palestinians, recognizing Palestine as an independent state in February 2008. Costa Rica had previously moved its embassy in Israel from Jerusalem to Tel Aviv. In March 2009, Arias reestablished diplomatic relations with Cuba, 48 years after Costa Rica suspended ties with the nation. Costa Rica was one of the last countries in Latin America to reestablish ties with Cuba. Arias also has sought to reassume the leadership role that he held in Latin America during his first administration when he received the Nobel Peace Prize (1987) for his efforts to end the conflicts in Central America. Following the June 2009 ouster of Honduran President Manuel Zelaya, Arias offered to mediate between the parties involved. The so-called "San José Accord" that Arias proposed provided the framework for several rounds of negotiations to end the political crisis in Honduras, though it ultimately failed to restore Zelaya to office. Arias has seized on the Honduran crisis to reiterate his long-held belief that Latin America possesses a dangerous combination of powerful militaries and fragile democracies. He maintains that countries in the region should focus their resources on economic development and democratic institutions rather than military expenditures. Elections for the presidency and all 57 seats in the unicameral National Assembly were held in Costa Rica on February 7, 2010. Former Vice President and Minister of Justice Laura Chinchilla (2006-2008) of the ruling PLN was elected president with 46.9% of the vote, well above the 40% needed to avoid a second-round runoff. Chinchilla easily defeated her closest competitors Ottón Solís of the center-left PAC and Otto Guevara of the right-wing ML, who took 25.1% and 20.9% of the vote, respectively. In legislative elections, Chinchilla's PLN won a plurality with 23 seats. The PAC will be the principal opposition party with 12 seats, followed by the ML with 9 seats, the PUSC with 6 seats, and several smaller parties with a combined 7 seats. According to many analysts, Chinchilla benefitted the fragmentation of Costa Rica's political party system. They assert that Costa Ricans view the PLN as the country's only credible governing party due to the PUSC's effective collapse as a result of corruption scandals, the PAC's lack of direction after failing to block CAFTA-DR, and the ML's recent history outside the mainstream of Costa Rican politics. Consequently, Chinchilla won by over 20 points despite a considerable decline in public support for the Arias Administration and late polling that showed Guevara forcing Chinchilla into a close second-round runoff vote. Chinchilla is closely tied to President Arias' centrist faction of the PLN and is expected to largely continue the Arias Administration's policies. She will likely maintain Costa Rica's market-oriented economic policies, pushing for ratification of pending free trade agreements with China and Singapore, while strengthening the country's social welfare programs. Throughout much of the electoral campaign, Chinchilla focused on improving public security. Among other policies, she proposed increasing the size of the police force, improving protection and support for victims and witnesses, and increasing government security spending by as much as 50% (currently 0.6% of GDP).