Economy of Costa Rica

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).

Major Economic Sectors
Currently the major economic sectors of Costa Rica are agriculture, tourism and electronics. Estimates from the year 2006 show that agriculture contributed 8.6% to the country's GDP, while the industrial sector contributed 31% of GDP. The services sector was the highest and accounted for 60.4% of the country's GDP.

Agriculture
Traditionally, Costa Rica was an agricultural society. In the mid 19th century, coffee had become the biggest and most lucrative export commodity in the agricultural sector. The two most important agricultural products in Costa Rica are coffee and banana. The other major agricultural products in the economy of Costa Rica are meat and sugar.

Tourism
Tourism is the primary source of foreign exchange in Costa Rica and in the 1990s it took off in a big way as a major industry of the country. By the mid 1990s, revenues from the tourist industry surpassed those of coffee and banana. The Caribbean coast with its sandy beaches is a major tourist attraction along with the tropical forests which is the sanctuary of an abundance of flora and fauna. Millions of tourists from Europe, US and other Latin American countries visit Costa Rica every year.

Electronics
In the late 1990s, the electronics sector had become a major contributor in the economy of Costa Rica. The opening of a large computer chip plant by Intel, a multinational company, contributed greatly to the growth of the electronic sector in Costa Rica. In recent years, due to the decreased demand for microchips in the world market, the electronics sector has slowed down.

 

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