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Costa Rica Economy
 
 
 

Costa Rica is an agricultural country, although industry is being developed at a moderate pace. Industries include food processing and the manufacture of textiles and clothing, construction materials, fertiliser and electronics. Coffee, bananas, sugar, and beef are exported, as well as manufactured goods such as textiles. Petroleum, machinery, consumer durables, chemicals, and foodstuffs are imported. Tourism is the second biggest money-earner, after agriculture. High levels of education among its residents make the country an attractive investment location.

The economy has been expanding for Costa Rica in part because the Government had implemented a seven-year plan of expansion in the high tech industry. The central government offers tax exemptions for those who are willing to invest in the country. Several global high tech corporations have already started developing in the area exporting goods including chip manufacturer Intel, pharmaceutical company GlaxoSmithKline, and consumer products company Procter & Gamble. Trade with South East Asia and Russia has boomed during 2004 and 2005, and the country is expected to obtain full Asia-Pacific Economic Cooperation Forum (APEC) membership by 2007 (the country became an observer in 2004).

The unit of currency is the colón (CRC), which trades around 518 to the US dollar; currently about 675 to the euro. On October 16, 2006, a new currency exchange system was introduced, allowing the value of the CRC colón to float between two bands as done previously by Chile. The idea is that by doing so the Central Bank will be able to better tackle inflation and discourage the use of US dollars. Since that time, the value of the colon against the dollar has stabilised.

Costa Rica's location provides easy access to American markets as it has the same time zone as the central part of the United States and direct ocean access to Europe and Asia.

Overview

Economy - overview
Costa Rica's basically stable economy depends on tourism, agriculture and electronics exports. Poverty has remained at roughly 20% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans estimated to be in Costa Rica legally and illegally are an important source of (mostly unskilled) labor, but also place heavy demands on the social welfare system. Foreign investors remain attracted by the country's political stability and high education levels and tourism continues to bring in foreign exchange. The government continues to grapple with its large internal and external deficits and sizable internal debt. Reducing inflation remains a difficult problem because of rising import prices, labour market rigidities, and fiscal deficits. The country also needs to reform its tax system and its pattern of public expenditure. The current administration has made it a priority to pass the necessary reforms to implement the US-Central American Free Trade Agreement (CAFTA). CAFTA implementation would result in an improved investment climate.

GDP (purchasing power parity)
$50.89 billion (2006 est.)

GDP (official exchange rate)
$21.39 billion (2006 est.)

GDP - real growth rate
7.9% (2006 est.)

GDP - per capita (PPP)
$12,500 (2006 est.)

GDP - composition by sector
agriculture: 8.6%
industry: 31%
services: 60.4% (2006 est.)

Labour force
1.866 million
note: this official estimate excludes Nicaraguans living in Costa Rica legally and illegally (2006 est.)


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