International Trade in Costa Rica

News Related to International Trade in Costa Rica

Business outline for Costa Rica

Economic Overview

Costa Rica's economic showed a growth estimated at 3.5% in 2010. The country is trying to diversify its economy, offering manufactured products. Exports of high added-value, such as electornic components and medical equippment contribute to the better performance of foreign trade. Costa Rica is a country of impressive biodiversity and a desirable touristic destination.

In order to face the recession that the country is going through, the government has asked for aid from the IMF, and signed a stand-by arrangement in April 2009. The plan aims to stabilize the economy, limit the tax deficit and avoid too putting much pressure on the balance of payments.

Thanks to the establishment of a welfare state 60 years ago, the country has succeeded in strongly reducing poverty and has the best social indicators in the area. The extreme poverty rate is limited to 7%, life expectancy is at 79 years, the literacy level is 96%, per capita GDP is USD 5,627 and the social security system covers more than 80% of the population. Nevertheless, inequalities are deepening and the level of education at elementary level is insufficient. Fiscal reform and a lowering of taxes should again boost the country's revenues. The new presidency of Laura Chincilla is committed to working on the problems of security and drug trade. In 2020, the country aims to become the first zero-carbon economy.

FDI in Figures

The establishment of Free zones has encouraged FDI influx, making Costa Rica, together with neighboring Panama, the main FDI beneficiary in the isthmus. The US-Central American Free Trade Agreement came into effect in March 2008 and led to a real increase in investments. FDI stock, as a percentage of the GDP, increased from 17% in 2000 to 31.7% in 2006. However, because of the deterioration of the economic situation in investors countries, this influx has petered out and should remain limited in the coming years.

Costa Rica offers tax incentives to investors, has adequate transport infrastructures, better political stability than its neighbors and a skilled labor force. Still, the constant government interference in controlling certain sectors of the economy, in particular services, as well as the complex administrative procedures, are major inconveniences.

The industrial and real estate sectors attract most of the foreign investment. The United States, Canada and Mexico are the main investor countries.

Foreign Trade Overview

Costa Rica is open to international trade and except for the import of weapons and used tires, there are no other significant trade barriers in the country.

Customs duties are comparatively low and generally do not exceed 15%, except for dairy, livestock and agricultural products. Imports originating from Guatemala, Honduras, Salvador and Nicaragua are duty free. However, there is an export tax on bananas and coffee.

Costa Rica offers numerous incentive schemes, exports subsidies and tax exemptions to export companies. Greater transparency is expected as a result of a comprehensive and rational evaluation of the incentive policy, which could in the long term, promote foreign trade.

In 2010, the country had a trade balance deficit, a trend which is expected to continue for the coming years.

Costa Rica's main trading partners are the countries of the NAFTA (North American Free Trade Agreement), specifically USA, Canada and Mexico, as well as the European Union and China. Since 2009, the country also has a free-trade agreement with the USA, Central America and the Dominican Republic (Dr-CAFTA).