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Originally published:
Apr-22-2004
Legal System
Based on Spanish civil law system; judicial review of legislative acts in the Supreme Court; has accepted compulsory ICJ jurisdiction.
Economy
Currency: Costa Rican Colones (CRC)
Inflation: 10% (1999), 11% (2000), 11.3% (2001), 10% (2002), 9.4% (2003) 8.9% (2004 projected)
Real GDP Growth Rate: 8.2% (1999), 1.8% (2000), 1.1% (2001), 2.8% (2002), 3.0% (2003)
GDP Per Capita: $4,582 (1999), $4,527 (2000), $4,450 (2001), $4,130 (2002), $3,665 (2003), $3,817 (2004 projected), $3,977 (2005 projected)
Leading Markets (2002): United States, European Union, Central America, Puerto Rico, Venezuela
Leading Suppliers (2002): United States (53.5%), Mexico (5.8%), Venezuela (4.6%), Japan (3.5%), Colombia (2.4%)
Costa Rican colones per US dollar: 430.18 (as of 04/21/2004)
Top Industries: Microprocessors, food processing, textiles and clothing, construction materials, fertilizer, plastic products
General Economic Situation
Costa Rica has a market economy that is supported by one of the most stable democracies in Latin America. Although it is still considered an agricultural country, the economy has expanded to include strong technology and tourism sectors. Low coffee prices and an overabundance of bananas have hurt the agricultural sector, creating more of a dependence on exporting high technology products.
During the last decade, the government’s economic programs have improved the standard of living, pushing the poverty line below 5.6% and raising the average life expectancy above 74.9 years. Currently, Costa Rica has one of the highest standards of education in Latin America with a 95% literacy rate. This comparatively high level of literacy translates into a large number of academic and professional Internet users and ensures substantive growth.
Chronic current account deficits have generally been offset by inflows of foreign direct investment, permitting Costa Rica to maintain adequate international reserves and an absence of capital controls. Curbing inflation, reducing the deficit, and improving public sector efficiency remain key challenges to the government.
Business Climate
Costa Rica’s highly educated, computer literate, and disciplined workforce makes it a welcoming environment for foreign investment. As Costa Rica integrates itself into a modern world economy, the companies which are currently invested there will sustain a competitive advantage.
Costa Rica actively supports continental free trade, and has entered into agreements with Mexico and other countries in the region. The numerous free trade zones and tax holiday opportunities within the country remain extremely enticing for foreign multinationals.
Costa Rica’s export oriented infrastructure, reliable power and advanced telecommunications has made it a strong and reliable place to conduct business.
Credit and Collections
- Collection Experience: Fair-Good
- Exchange Delays: 3 months
- Preferred Credit Terms: Unconfirmed L/C
- Minimum Credit Terms: Sight Draft
Risk Assessment
Tourism and a revival of demand for high technology products have spurred an economic recovery in 2003. Costa Rica has remained attractive to investors with enviable social indicators, a good level of education, and political stability offsetting a certain resistance to change by the population.
The public financial situation has remained the country’s Achilles heel with the slowdown of recent years accompanied by a substantial worsening of macroeconomic imbalances and an increase in public sector debt. High interest rate levels, inflation, and substantial government financing needs have also been responsible for a sharp increase in dollar-denominated deposits and loans. Although foreign debt has been rising, it has nonetheless remained relatively moderate in relation to export earnings.
Sources for further information on doing business in Costa Rica
Costa Rican Investment Board: Includes information on investment in Costa Rica, facts about Costa Rica and assists foreign investors in establishing their operations in Costa Rica.
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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Costa Rica. For further information, contact info@abc-amega.com.
This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, the U.S. Commercial Service, CIA World Factbook and Coface North America Country Risk Assessment.
Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," December 2003.
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