Updated June 13, 2019
Costa Rica: An Overview
Costa Rica, a Central American nation of 5.1 million
Economic and Social Conditions
people, historically has been an outpost of political and
Costa Rica pursued state-led development throughout much
economic stability in an often-turbulent region. The United
of the 20th century, but since the1980s, it has implemented
States has worked closely with the country to address
market-oriented economic policies. In the post-civil war
challenges in Central America and to advance shared
period, the Costa Rican government increased public-sector
values, such as democracy and human rights, worldwide.
employment, established one of the most comprehensive
social safety nets in Latin America, and supported local
Political Situation
producers with subsidies and trade barriers. Those policies
Costa Rica has sustained continuous civilian democratic
contributed to a rapid expansion of the economy; however,
governance since 1949, when the country adopted a new
a deep recession from 1980 to 1982 led Costa Rica to adopt
constitution in the aftermath of a short but violent civil war.
a new economic strategy. The country privatized the
The center-left (now centrist) National Liberation Party
majority of its state-owned enterprises, adopted free-trade
(PLN) and a center-right opposition that ultimately became
zones to attract investment, and gradually opened the
the Social Christian Unity Party (PUSC) dominated post-
domestic market to foreign competition.
war politics. The two-party system has collapsed over the
past 20 years, however, as many Costa Ricans have grown
Figure 1. Costa Rica at a Glance
disenchanted with the country’s political class and have
abandoned the traditional parties. This shift has allowed
newer political forces to contest power, such as the center-
left Citizens’ Action Party (PAC), which has won the past
two presidential elections. It also has made governance
more challenging, as party fragmentation in the Legislative
Assembly has led to increased gridlock.
Carlos Alvarado of the ruling PAC was elected president
with nearly 61% of the vote in a second-round runoff
election in April 2018. He defeated Fabricio Alvarado of
the conservative National Restoration Party (PRN), who
had surged to a first place finish in the first-round election
after he called for Costa Rica to withdraw from the Inter-
American Court of Human Rights in response to the court’s

Source: CRS Graphics, Instituto Nacional de Estadística y Censos;
advisory opinion that Costa Rica should legalize same-sex
Centro de Investigación y Estudios Políticos; International Monetary
marriage. President Alvarado, who is 39 years old,
Fund; Global Trade Atlas.
previously served as Minister of Human Development and
Social Inclusion and as Minister of Labor and Social
Costa Rica has experienced considerable growth since
Security under President Luis Guillermo Solís (2014-2018).
adopting the more outward-oriented economic strategy, but
many Costa Ricans are dissatisfied with the economy. The
Since his May 2018 inauguration to a four-year term,
country’s labor market has grown increasingly divided
President Alvarado has taken steps to stabilize Costa Rica’s
between those involved in newer sectors—such as high-
finances and improve citizen security; pushed for new
tech manufacturing, tourism, and business services—that
investments in infrastructure, education, and training; and
provide higher pay and rising wages, and those involved in
launched an ambitious plan to reduce Costa Rica’s net
traditional sectors that struggle to compete with imports and
carbon emissions to zero by 2050. Alvarado appointed a
provide lower pay and more precarious employment
multiparty cabinet but needs to forge ad hoc legislative
conditions. Government statistics indicate that about 11%
coalitions to pass each portion of his policy agenda. The
of Costa Ricans are unemployed and 46% lack job
PAC holds 10 of 57 seats in the unicameral Legislative
protections and benefits because they work in the untaxed
Assembly; the PLN holds 17 seats, the PUSC holds 9 seats,
and unregulated informal sector. Moreover, 21% of Costa
the PRN and a bloc of PRN dissidents each hold 7 seats,
Rican households live below the national poverty line.
and the remaining 7 seats are divided among several small
Costa Rica’s extensive social welfare expenditures—
parties. An April 2019 poll from the University of Costa
equivalent to nearly 24% of gross domestic product
Rica found that 27% of Costa Ricans rate Alvarado’s
(GDP)—have helped alleviate these challenges, but higher
performance “good” or “very good,” 50% rate it “bad” or
“very bad,”
levels of unemployment and informality have eroded the
and 22% rate it “average.”
tax base necessary to sustain the social safety net.
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Costa Rica: An Overview
President Alvarado has called for a variety of public
significantly increased security expenditures in response to
investments to foster economic growth and improve social
these challenges, allowing the country to hire additional
welfare in the rural and coastal regions of Costa Rica that
police officers and expand crime prevention programs.
have benefitted the least from changes in the economy.
Nevertheless, he spent most of his first year in office
The United States supports Costa Rica’s efforts to combat
pushing through a fiscal reform intended to narrow the
transnational crime and other security threats. In the
country’s budget deficit, which exceeded 6% of GDP in
Consolidated Appropriations Act, 2019 (P.L. 116-6), for
2017 and 2018 according to the International Monetary
example, Congress appropriated $40.7 million of security
Fund (IMF). Many economists think further tax and
assistance for Costa Rica. That total includes $8.2 million
expenditure changes will be necessary to put the country’s
in bilateral aid and $32.5 million through the Central
finances on a sustainable path. The IMF forecasts that the
America Regional Security Initiative (CARSI). U.S.
Costa Rican economy will accelerate slightly from 2.7%
assistance has helped Costa Rica acquire equipment,
growth in 2018 to 2.9% growth in 2019.
including boats, aircraft, and armored vehicles; train
security and justice-sector personnel; and establish a
U.S.-Costa Rican Relations
judicial wire intercept program.
Under President Alvarado, Costa Rica and the United States
have maintained strong commercial ties and bolstered
Costa Rica has had a counternarcotics cooperation
cooperation on regional security issues. Both countries also
agreement with the United States since 1999, which allows
have supported international efforts to resolve the political
the U.S. Coast Guard, working with Costa Rican officials,
and humanitarian crises in Venezuela and Nicaragua,
to carry out drug interdiction measures in Costa Rican
though they sometimes have differed on tactics.
waters. These operations occasionally have generated
controversy in Costa Rica's Legislative Assembly, which
Trade and Investment Ties
must grant permission to U.S. vessels to dock, refuel, and
The United States and Costa Rica were among the seven
resupply in Costa Rican territory. Many Costa Ricans are
countries that signed the Dominican Republic-Central
sensitive about the presence of foreign military personnel in
America-United States Free Trade Agreement (CAFTA-
the country, since Costa Rica abolished its standing military
DR) in 2004. The agreement did not enter into force for
in 1949. Nevertheless, the Legislative Assembly has voted
Costa Rica until January 2009, however, due to significant
repeatedly to provide the necessary authorizations. Close
domestic opposition. CAFTA-DR has eliminated tariffs on
cooperation with the United States helped Costa Rica seize
consumer and industrial goods and is scheduled to phase
a record-high 33.5 metric tons of cocaine in 2018.
out tariffs on most agricultural products by 2020.
Migration and Refugee Flows
U.S.-Costa Rican trade totaled $11.2 billion in 2018. U.S.
As a comparatively prosperous and stable country, Costa
exports to Costa Rica amounted to $6.3 billion while U.S.
Rica has long served as a destination for migrants and
imports from Costa Rica amounted to $4.9 billion, giving
asylum-seekers from other Latin American nations. The
the United States a $1.5 billion trade surplus. Top U.S.
country has experienced a recent surge in asylum requests,
exports to Costa Rica included refined oil products,
however, due to the ongoing political crisis in neighboring
machinery and parts, medical instruments and equipment,
Nicaragua. According to the U.N. High Commissioner for
and plastics. Top U.S. imports from Costa Rica included
Refugees (UNHCR), more than 55,000 Nicaraguans have
medical instruments and equipment, fruit, electric
sought refuge in Costa Rica over the past year. Nearly
machinery and parts, rubber, and coffee. The United States
26,000 Venezuelans have also fled to Costa Rica, 5,400 of
was Costa Rica’s largest trading partner, accounting for
whom have requested asylum. The Costa Rican government
more than 41% of the country’s total trade in 2018.
has sought to provide protection and humanitarian aid to
those in need, but has called on the international community
CAFTA-DR also includes a chapter on investment that is
for additional support. According to the U.S. Agency for
similar to a bilateral investment treaty. According to the
International Development, the United States has provided
U.S. Bureau of Economic Analysis, the accumulated stock
$3.2 million through UNHCR and other humanitarian
of U.S. foreign direct investment in Costa Rica was $1.6
organizations to assist Venezuelans in Costa Rica since
billion in 2017, with the manufacturing sector accounting
FY2018.
for nearly 86% of the total.
In addition to those who have sought refuge in Costa Rica,
Security Cooperation
many migrants pass through Costa Rican territory on their
Although Costa Rica’s institutions have proven more
way to the United States. In recent years, such transitory
resilient than those of its Central American neighbors, the
flows have included large numbers of Cubans and Haitians,
country has experienced an increase in organized crime and
as well as extra-regional migrants from Africa and Asia.
related violence in recent years. Government statistics
Costa Rican authorities, with U.S. support, have collected
indicate that homicides increased from 411 in 2013 to a
biometric data on more than 23,000 extra-regional
record-high 603 in 2017, before declining slightly to 586 in
migrants, leading to the identification, detention, and
2018 (a homicide rate of 11.7 per 100,000 residents). Costa
deportation of criminals, according to the State Department.
Rican authorities have linked much of the violence to drug
trafficking organizations, which use the country as a transit
Peter J. Meyer, Specialist in Latin American Affairs
and storage point for South American cocaine destined for
the U.S. market. The Costa Rican government has
IF10908
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Costa Rica: An Overview


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https://crsreports.congress.gov | IF10908 · VERSION 3 · UPDATED

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