Executive Summary

Costa Rica is the oldest continuous democracy in Latin America and the newest member of the Organization for Economic Cooperation and Development (OECD), with an established government institutional framework, and a diversified upper-middle-income economy. The country’s well-educated labor force, relatively low levels of corruption, geographic location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives all appeal to investors. Foreign direct investment inflow in 2022 as estimated by the Costa Rican Central Bank was USD 3.045 billion, or 4.45 percent of GDP, with the United States accounting for USD 2.23 billion (73 percent of total FDI). Costa Rica recorded 4.3 percent GDP growth in 2022 as it recovered from the effects of the Covid-19 pandemic.

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, with a plethora of smaller enterprises handling an 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 FTZ economy continued to expand during the pandemic, while the tourism sector did contract but is rebounding. Total 2022 tourist arrivals of 2,349,537 represent more than double the 2020 pandemic low of 1,011,912 but are still only 75% of the 2019 pre-pandemic high.

The Costa Rican investment climate is threatened by a persistent, although currently shrinking government fiscal deficit, high unemployment (Q422, 11.7%) and underemployment (9.7%), high energy costs, deterioration of basic infrastructure, and underperformance in some key areas of government service provision, notably security, health care, and education. Costa Rica is operating under a stabilizing agreement with the International Monetary Fund (IMF) and generally managed the Covid-19 crisis well. Moreover, Costa Rica’s accession in 2021 to the Organization for Co-operation and Development (OECD) has exerted a positive influence by pushing the country to address its economic weaknesses through executive decrees and legislative reforms in a process that began in 2015. The Ministry of Foreign Trade (COMEX) has protected the Free Trade Zones (FTZs) from new taxes by highlighting the benefits of the regime, promoting local supply chains, and using the FTZs as examples for other sectors of the economy. President Rodrigo Chaves, an economist and former Minister of Finance, took office in May 2022. His administration has continued to prioritize the attraction of foreign direct investment and pursued a free trade posture, signing a new trade agreement with Ecuador and launching other negotiations.

Nevertheless, Costa Rica’s political and economic leadership faces a difficult balancing act over the coming years as the country must simultaneously exercise budget discipline and respond to demands for improved government-provided infrastructure and services.

To access the full Costa Rica ICS, visit the U.S. Department of State Investment Climate Statements website.