The economy of Costa Rica is well balanced and diversified in comparison to its Central American neighboring countries. The country was traditionally dependent on agriculture, but over the last two decades Costa Rica's economy has expanded to include tourism and a strong technological sector. In spite of its small size and population, the economy of Costa Rica is fairly stable and attracts a lot of foreign investments.
Over the past 20 years, poverty in Costa Rica has been curbed and has remained at 20% approximately. The government of Costa Rica continues to struggle with its huge internal and external deficits and a substantial internal debt. Reducing deficit, inflation and improving public sector efficiency, continue to be major challenges to the government due to rising import prices, labor market rigidities, and fiscal deficits.
In order to enhance the economic potential of the country, the government has initiated the necessary reforms to implement the US-Central American Free Trade Agreement (CAFTA).