Costa Rica - Economy
History According to the CIA World Factbook, Costa Rica's GDP per capita is US$13,500 PPP (2007 estimate); however, this developing country still faces the fourth highest inflation rate in Latin America, lack of maintenance and new investment in infrastructure, over 16% of the people were below the poverty line (2006 estimate) and a 5.5% unemployment rate (2007 estimate). The Costa Rican economy grew nearly 5% in 2006 after experiencing four years of slow economic growth. Costa Rica is also the Latin American pioneer in the implementation of a modern welfare state. Its welfare spending is as high as that of Scandinavian countries. 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. In 2006 Intel's microprocessor facility alone was responsible for 20% of Costa Rican exports and 4.9% of the country's GDP. 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). For the fiscal year 2005, the country showed a government deficit of 2.1%, internal revenue increased an 18%, and exports increased a 12.8%. Revised economic figures released by the Central Bank indicate that economic growth stood at 5%, nevertheless the country faced high inflation (14%) and a trade deficit of 5.2%. As of 2007, Costa Rica's inflation rate stands at 9.30%, Latin America's 4th highest inflation rate.
In recent times electronics, pharmaceuticals, financial outsourcing, software development, and ecotourism have become the prime industries in Costa Rica's economy. High levels of education among its residents make the country an attractive investing location. Since 1999, tourism earns more foreign exchange than the combined exports of the country's three main cash crops: bananas, pineapples and coffee. Coffee production has played a key role in Costa Rica's history and economy and by 2006 was the third cash crop export. The largest coffee growing areas are in the provinces of San José, Alajuela, Heredia, Puntarenas, and Cartago. Costa Rica is famous for its gourmet coffee beans, with Costa Rican Tarrazú among the finest Arabica coffee beans in the world used for making espresso coffee, together with Jamaican Blue Mountain, Guatemalan Antigua and Ethiopian Sidamo.
The unit of currency is the colón, which trades around 575 to the U.S. dollar; currently about 710 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 U.S. dollars. Since that time, the value of the colón against the dollar has stabilized.
Costa Rica's location provides 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. A countrywide referendum has approved a free trade agreement with the United States. In the referendum on October 7, 2007, the voters of Costa Rica narrowly backed the free trade agreement, with 51.6% of "Yes" votes.
Poás Volcano Crater is one of the country's main tourist attractions. With a $2.2 billion per year tourism industry, Costa Rica stands as the most visited nation in the Central American region, with 2.0 million foreign visitors in 2008, which translates into a relatively high expenditure per tourist of $1,100 per trip, and a rate of foreign tourists per capita of 0.46, one of the highest in the Caribbean Basin. Most of the tourists come from the U.S. and Canada (46%), and Europe (16%). In 2005, tourism contributed with 8.1% of the country's GNP and represented 13.3% of direct and indirect employment. Tourism now earns more foreign exchange than bananas and coffee combined.
Ecotourism is extremely popular with the many tourists visiting the extensive national parks and protected areas around the country. Costa Rica was a pioneer in this type of tourism, and the country is recognized as one of the few with real ecotourism. In the 2009 Travel and Tourism Competitiveness Index, Costa Rica ranked 42nd in the world and first among Latin American countries. Just considering the sub-index natural resources, Costa Rica ranks 6th worldwide in terms of the natural resources pillar, but 89th in terms of its cultural resources.