Costa Rica: An Overview




Updated September 29, 2022
Costa Rica: An Overview
Costa Rica historically has been a bastion of political and
Figure 1. Costa Rica at a Glance
economic stability in an often-turbulent region. The United
States has worked closely with Costa Rica to address
challenges in Central America and to advance shared
values, such as democracy and human rights, worldwide.
Political Situation
Costa Rica has sustained civilian democratic governance
since 1949, when the country adopted a new constitution in
the aftermath of a short civil war. The center-left (now
centrist) National Liberation Party (PLN) and a center-right
opposition that ultimately became the Social Christian
Unity Party (PUSC) dominated post-war politics. The two-
party system has collapsed over the past 20 years, however,
as many discontented Costa Ricans 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 won the 2014 and 2018
Sources: CRS Graphics, Instituto Nacional de Estadística y Censos;
presidential elections, and President Rodrigo Chaves’s
Universidad de Costa Rica, Centro de Investigación y Estudios
center-right Social Democratic Progress Party (PPSD). It
Políticos; International Monetary Fund; Trade Data Monitor.
also has contributed to legislative fragmentation, making
governance more challenging.
Economic and Social Conditions
Costa Rica pursued state-led economic development
Chaves, a former Costa Rican finance minister and World
throughout much of the 20th century but began to adopt a
Bank official, began his four-year presidential term in May
more market-oriented economic strategy in the 1980s. Since
2022. He surprised many observers by finishing second in
that time, Costa Rica has attracted a cluster of high-tech
Costa Rica’s February 2022 first-round election, with about
manufacturers, including medical device companies, and
17% of the vote, and defeating former President José María
has developed a dynamic tourism sector, contributing to the
Figueres (1994-1998) of the PLN, 53%-47%, in an April
diversification of the country’s once predominantly
2022 runoff. President Carlos Alvarado of the PAC (2018-
agricultural economy. These newer industries provide
2022) was constitutionally ineligible to seek reelection.
higher wages, but many Costa Ricans remain employed in
Some 43% of the population abstained from the runoff vote
traditional industries, which struggle to compete with
after an acrimonious campaign in which Chaves harshly
imports and provide lower pay and precarious working
criticized the traditional political class as corrupt and
conditions. This divergence has reinforced Costa Rica’s
ineffectual while personally facing allegations of sexual
relatively high level of income inequality. It also has
harassment and campaign finance irregularities.
contributed to rising levels of unemployment and informal
employment, eroding the tax base necessary to sustain
In his inauguration speech, Chaves promised to “rebuild”
Costa Rica’s extensive social welfare system.
the nation and laid out his major priorities, which include
reducing the cost of living, generating increased
Socioeconomic conditions deteriorated in Costa Rica in
employment, and combatting corruption and crime. To
2020 due to the Coronavirus Disease 2019 (COVID-19)
those ends, he has issued decrees to reduce import tariffs on
pandemic. Although the Costa Rican government enacted
rice, authorize the importation of medications approved for
emergency support measures for businesses and
use in certain other countries, and relax the country’s fiscal
households, the economy contracted by 4.1% and the
rule to allow increased expenditures on administration
poverty rate increased from 23.9% in 2019 to 30.0% in
priorities. He also has proposed a fuel price cap and the sale
2020. The pandemic-driven economic downturn also
of two public banks and a minority stake in the public
exacerbated Costa Rica’s fiscal challenges, as the budget
insurance company to reduce public debt. Some of those
deficit widened to 8.4% of GDP in 2020.
measures may face opposition in the unicameral Legislative
Assembly, in which Chaves’s PPSD holds 10 of 57 seats.
Costa Rica’s economy began to recover in 2021, registering
Chaves’s initial months in office included several
a 7.8% GDP growth rate and a four-percentage-point
confrontations with legislators and the press; nevertheless,
reduction in the poverty rate to 26.2%. The International
79% of Costa Ricans rated his performance as “good” or
Monetary Fund (IMF) forecasts 3.3% economic growth for
“very good” in an August 2022 University of Costa Rica
Costa Rica in 2022, aided by widespread COVID-19
poll.
vaccination and sustained exports. According to the Pan
American Health Organization, 81.8% of Costa Rica’s
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Costa Rica: An Overview
population was fully vaccinated as of September 23, 2022.
experienced an increase in organized crime and violence
Widespread vaccination also has reduced mortality rates,
over the past decade. Costa Rica recorded 588 homicides in
but Costa Rica has recorded more than 8,900 COVID-19
2021, giving it a homicide rate of 11.4 per 100,000
deaths (175 per 100,000 people) since the pandemic began.
residents. Costa Rican authorities have linked much of the
Costa Rica’s fiscal situation remains difficult, as
violence to drug trafficking organizations, which use the
gross
country as a transit and storage point for South American
public debt has risen to 69.9% of GDP and debt service
cocaine destined for the U.S. market. Drug trafficking
costs are equivalent to 71.8% of total central government
organizations also have sought to infiltrate Costa Rican
revenues, according to U.N. data. In 2021, the Alvarado
institutions, contributing to increased corruption in the
administration negotiated a three-year, $1.8 billion
justice sector, according to the U.S. State Department.
financing arrangement with the IMF intended to stabilize
the country’s debt burden while supporting Costa Rica’s
The United States provides foreign assistance to Costa Rica
economic recovery. Chaves is seeking to renegotiate the
to help the country combat transnational crime and other
terms of the IMF agreement to reflect his policy priorities
security threats. In the Consolidated Appropriations Act,
and respond to changing global dynamics.
2022 (P.L. 117-103), Congress appropriated $40.7 million
of security assistance for Costa Rica. That total includes
U.S.-Costa Rican Relations
$8.2 million in bilateral aid and $32.5 million provided
The Biden Administration has sought to bolster ties with
through the Central America Regional Security Initiative.
Costa Rica. In April 2022, the State Department
U.S. assistance has helped Costa Rica expand community-
congratulated Chaves on his election and expressed interest
based crime prevention programs, train security and justice
in working with the new government to advance common
sector personnel, and acquire equipment. The FY2023
interests, including humane migration management and
foreign aid appropriations bill reported in the House (H.R.
environmental protection. The Biden Administration also
8282/H.Rept. 117-401) would once again provide $40.7
has expressed support for the Alliance for Development in
million for Costa Rica; the bill introduced in the Senate (S.
Democracy (ADD)—an informal arrangement among Costa
4662) would not stipulate a specific amount for Costa Rica.
Rica, Panama, the Dominican Republic, and Ecuador
intended to accelerate post-pandemic economic recovery,
Migration and Refugee Flows
foster sustainable development, and defend democracy and
As a comparatively prosperous and stable country, Costa
human rights throughout the region.
Rica has long served as a destination for migrants and
asylum-seekers from other Latin American nations. The
Trade and Investment Ties
country has experienced a recent surge in asylum requests,
The United States and Costa Rica are parties to the
however, primarily due to the ongoing political crisis in
Dominican Republic-Central America-United States Free
neighboring Nicaragua. Costa Rica’s migration agency has
Trade Agreement (CAFTA-DR), which was signed in 2004
received more than 166,000 asylum applications from
and entered into force for Costa Rica in 2009. Bilateral
Nicaraguans since 2018. Costa Rica also has experienced
trade more than doubled between 2008 and 2012 but
increasing inflows of migrants and asylum-seekers from
declined 43% between 2012 and 2020, largely due to a
Venezuela, El Salvador, and Honduras.
steep drop in U.S. imports following Intel’s 2014 closure of
The Costa Rican government has sought to provide
a microprocessor manufacturing plant in Costa Rica. U.S.-
protection and humanitarian aid to those in need but has
Costa Rican trade totaled $13.8 billion in 2021, a 25%
called on the international community for additional
increase from 2020 levels. U.S. goods exports to Costa Rica
support. According to the U.S. Agency for International
amounted to $7.3 billion and U.S. goods imports from
Development, the United States provided nearly $14.2
Costa Rica amounted to $6.5 billion in 2021, giving the
million to humanitarian organizations in FY2021 to support
United States a $774 million trade surplus. Top U.S.
migrants, asylum-seekers, and refugees in Costa Rica.
exports to Costa Rica in 2021 included mineral fuels,
electronic machinery and parts, and medical equipment; top
In addition to those who have sought refuge in Costa Rica,
U.S. imports from Costa Rica in 2021 included medical
many migrants pass through Costa Rican territory on their
equipment, fruit, and electric machinery and parts.
way to the United States. In recent years, such transitory
flows have included large numbers of Cubans and Haitians,
CAFTA-DR includes a chapter on investment that is similar
as well as extra-regional migrants from Africa and Asia.
to a bilateral investment treaty. According to the U.S.
Costa Rica has worked with the U.S. government to
Bureau of Economic Analysis, the accumulated stock of
conduct background checks on those transiting the country
U.S. foreign direct investment in Costa Rica was $2.8
and to identify and respond to potential security threats
billion in 2021, with 59% invested in the manufacturing
before they reach the U.S. border. During a March 2022
sector. In July 2022, the United States, Costa Rica, and
visit by U.S. Secretary of Homeland Security Alejandro
other ADD members signed a memorandum of
Mayorkas, the United States and Costa Rica signed a
understanding to establish a Joint Consultative Dialogue on
migration collaboration agreement focused on combatting
Economic Growth and Supply Chain Partnerships. The
migrant smuggling and human trafficking and improving
agreement aims to advance supply chain resilience and
migrant integration and protection programs.
mutually beneficial trade and investment flows.
Peter J. Meyer, Specialist in Latin American and Canadian
Security Cooperation
Costa Rica’s institutions have proven more resilient than
Affairs
those of its Central American neighbors, but the country has
IF10908
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Costa Rica: An Overview


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https://crsreports.congress.gov | IF10908 · VERSION 9 · UPDATED