Costa Rica is a comparatively little Cardinal American state located in between the Atlantic and Pacific oceans every bit good as the states of Panama and Nicaragua. Independence was won from Spain in 1821 but the current fundamental law was non ratified until 1949. From that point on, Costa Rica has been one of the most politically and economically stable states in all of Latin America ( CIA World Factbook ) . Over the past few old ages, Costa Rica has weathered the economic storm reasonably good compared with many other states in the Latin American part. As our study will reason, we recommend that Costa Rica be strongly considered by any corporation looking at puting and spread outing their operations overseas.
While carry oning research and analysis, our squad took a comprehensive attack related to all facets of the Costa Rican economic system. We did an in deepness analysis on Costa Rican society in respects to the authorities, the environment and demographics. We so dissected their gross domestic merchandise in order to find what the edifice blocks of their economic system are. After that we analyzed other economic indexs, such as unemployment and labour productiveness every bit good as detailing comparative indexes. In the terminal, we took information sing the political, societal, economic and technological state of affairss and did a complete analysis over Costa Rica ‘s comparative strengths and failings, every bit good as their chances for growing and possible menaces.
Part I: General Demographics and Information
Costa Rica is a democratic democracy with their capital located in the cardinal metropolis of San Jose. As a democracy, they have the typical three subdivisions of authorities. First is the Executive Branch which consists of the President, Vice President and their cabinet. The office of president is considered both the head of province and caput of authorities and is elected every four old ages in national elections. Next, the Legislative Branch comprises of the unicameral Legislative Assembly where members are voted in for four twelvemonth footings straight by their components. Last the Judicial Branch is the Supreme Court which has 22 Justices who are elected to 8 twelvemonth footings voted on by the Legislative Assembly. Their authorities is considered to be really stable with few known menaces to their peace and stableness. ( CIA World Factbook )
Resources and Environment
The greatest plus to Costa Rica is their natural resources. They lack mineral resources but have the idyllic fertile lands and clime for turning tropical nutrients such as bananas, Ananas comosuss and java. These are among Costa Rica ‘s top exports. They besides have an copiousness of beaches, mountains, caves, waterfalls and rain forests. Costa Rica ‘s rain forests contain about 5 % of the full Earth ‘s biodiversity, therefore doing it one of the most biologically diverse states in the universe. These natural resources and pristine natural environment are the chief engine of Costa Rica ‘s ecotourism which now accounts for XX % of their GDP.
Over the past few decennaries, the Costa Rican authorities has recognized that the environment and ecotourism is their competitory advantage and the hereafter of their state ‘s economic system. Therefore, with aid from international organisations such as the IMF and World Bank, heavy investings have been made in the touristry industry. At this clip there are important revenue enhancement inducements geared towards hotels, air hoses, auto leases and others in a big graduated table attempt to convey more people and companies into the state. One complication from this ecotourism push is that most of the inducements have been focused on foreign investings. It has been comparatively hard for the local population ( called Ticos ) to bring forth the capital needed to make the feasibleness surveies and environmental impact surveies needed to measure up for these authorities inducements.
The population of Costa Rica is 4,646,348 ( July 2012 est. ) , and ranks 121st in the universe. Approximately 1.416 million people live in capital metropolis San Jose. Costa Rica has a reasonably immature population with 43.4 % of the whole population being between the ages of 25 and 54. The average age of males is 28.7 and 29.6 for females. The population has continued to turn in recent old ages with a growing rate of 1.288 % , ranking 91st in the universe. This is due to there being 16.4 births/1000 population and 4.38 deceases /1000 population. The male to female ratio of the entire population is 1.0. More than 95 % of the population lives in urban countries. The literacy rate is 96 % due to immense investings in instruction, which is 6.3 % of Costa Rica ‘s GDP, and ranks 24th in the universe while wellness outgos comprise of 10.5 % of their GDP. The major infective diseases are intermediate, bacterial diarrhoea and dandy fever febrility. Deaths related to HIV/AIDS are fewer than 500 per twelvemonth, and ranks 83rd in the universe. ( CIA )
After the transition of the 1949 fundamental law, the Costa Rican armed forces was officially disbanded. Because of this, the Costa Rican authorities has been able to put much more into societal countries than all of their Latin American neighbours. The biggest country of societal investing has been instruction. Costa Rica has one of the most progressive and highest quality instruction systems. Harmonizing to Costa Rican jurisprudence, every citizen is required to have an instruction. It is mandatory for kid between the ages of 6 and 13 to go to primary school. After which, each pupil has the pick to go to either a 5 twelvemonth academic plan or a 6 twelvemonth proficient school. Either option consequences in a high school sheepskin and allows them to go to university or college. Because there is no defence disbursement, most instruction is free. Their literacy rate is about 96 % .
There has late been major encouragement by the authorities for all of its citizens to larn English as a 2nd linguistic communication. The ground for this is to maintain Ticos at or above international criterions and remain competitory in the international work force. The authorities would wish 25 % of high school alumnuss to accomplish the ESL ( English as a Second Language ) position of C1 and all others to hold at least a basic degree of understanding in the old ages to come. This ties in straight with the of all time increasing ecotourism and Costa Rica ‘s desire to convey in foreign tourers, most of which who speak English. ( http: //www.internations.org/costa-rica-expats/guide/living-in-costa-rica-15466/education-in-costa-rica-2 )
All Ticos are portion of a national pension planaˆ¦
Costa Rica besides boasts one of the best wellness attention systems in the part with wellness and a life anticipation of 78 old ages old which is equal to that of more developed states. This is due to cosmopolitan wellness insurance and first-class public and private infirmaries. The public universal insurance, known as Caja Costarricense de Seguro Social, is merely referred to by Ticos as the Caja. The Caja is available to all citizens and legal abode and gives them entree to ten major public infirmaries. A service known as EBAIS is portion of the Caja and designed for for non-emergencies and mundane medical attention. These are located in merely about every community throughout Costa Rica.
Costa Rica besides has an extended private medical system. For about $ 60- $ 130 per month, people are able to buy their ain private insurance programs. Those that are available through INS which is the government-owned insurance company include coverage for alveolar consonant, optometry, and general check-ups. Another advantage is that most prescription drugs, medical tests, physician visits and hospitalization are covered at 80 % their original cost. The low cost of medical attention every bit good as the nature has led Costa Rica to go a popular finish for medical touristry. Peoples travel to Costa Rica in order to acquire processs done cheaply and so loosen up and retrieve surrounded by the environment.
Due to the high degrees of instruction and a by and large healthy population, Costa Rica has a ample population of extremely capable and competitory employees. Many companies, such as the US based engineering corporation Intel, are puting straight into Costa Rica because of their extremely talented workers. This investing leads to more money being spent on the about 95 proficient schools and 60 universities which in bend leads to flush higher quality employees.
In respects to substructure, Costa Rica is by and large missing.
Part II: GDP
A recognition evaluation analysis is used by the autonomous wealth financess, pension financess and other investors about the recognition worthiness of Costa Rica because it has a large impact on the state ‘s adoption costs. Harmonizing to Standard & A ; Poor ‘s recognition evaluations Costa Rica is a BB rated state, which means that is a economically stable state.
Government Spending and Budget
The World Bank studies about the authorities Budget in Costa Rica. From 1991 up until 2011, Costa Rica Government Budget averaged -2.7 Percent of GDP making an all clip high of 0.6 Percentage of GDP in December of 2007 and a record depression of -5.5 Percent of GDP in December of 1994. In the twelvemonth of 2011 Costa Rica recorded a Government Budget shortage of 4.14 per centum out of the state ‘s Gross Domestic Product. Government Spending in Costa Rica decreased to 48018.60 CRC Million in the 3rd one-fourth of 2012 from 48398.50 CRC Million in the 2nd one-fourth of 2012.
The Central Bank of Costa Rica reports authorities Spending in Costa Rica. From 1991 until 2012, Costa Rica Government Spending averaged 37213.95 CRC Million making an all clip high of 48398.50 CRC Million in May of 2012 and a record depression of 28890 CRC Million in February of 1991.
Government Debt to GDP
Investors use the Government debt as a per centum of GDP to mensurate a state ‘s ability to do future payments on its debt, impacting the state adoption costs and authorities bond outputs.
The IMF studies authorities Debt To GDP in Costa Rica. In 2011 Costa Rica recorded a Government Debt to GDP of 30.76 per centum of the state ‘s GDP. Historically, from 2000 until 2011, Costa Rica Government Debt To GDP norm was 33.9 per centum, making a high 41.0 per centum in December of 2004 and a depression of 24.8 per centum in December of 2008COSTA RICA
In Costa Rica, the external debt is a portion of the entire debt that is owed to creditors outside the state. The Central Bank of Costa Rica reports external Debt in Costa Rica. External Debt of 11546.60 USD Million was reported in Costa Rica in the 3rd one-fourth of 2012 from 11007.30 USD Million in the 2nd one-fourth of 2012. Costa Rica External Debt averaged from 8339.78 USD Million in 2004 until 2012, making an 11546.60 USD Million in September of 2012 and a depression of 5763.40 USD Million in March of 2005.
Current Account to GDP
The Current history balance as a per centum of GDP provides an indicant on the degree of international fight of a state. The Consejo Monetario Centroamericano studies Current Account to GDP in Costa Rica. A Current Account shortage of 5.35 per centum of the state ‘s Gross Domestic Product was recorded in 2011. From 1977 until 2011, Costa Rica Current Account to GDP averaged -5.5 per centum.
When a state records a strong current history excess it means that has an economic system with high nest eggs evaluations but weak domestic demand, and is to a great extent dependent on exports grosss. In our instance of Costa Rica entering a current history shortage it means that the state have strong imports, a low economy rates and high personal ingestion rates as a per centum of disposable incomes.
Exports minus imports of goods and services give us the amount of Current Account, or are the amount of the balance of trade, net factor income, as involvement and dividends and net transportation payments like foreign assistance. The Central Bank of Costa Rica reports Current Account in Costa Rica. Costa Rica reported Current Account shortage of 624.14 USD Million in the 3rd one-fourth of 2012. From 1999 until 2012, Costa Rica Current Account norm was -301.92 USD Million making a high of 80.98 USD Million in February of 2009 and a low record of -924.07 USD Million in May of 2008.
Costa Rica provides investors with a first environment for concern and competitory revenue enhancement inducement governments, and high-value fabrication, so that is why many of the universe ‘s prima companies are continuously puting in Costa Rica.
Costa Rica work force is known as bilingual and exceptionally talented. The state ‘s has an first-class strategic location and first-class concern clime, followed by solid substructure, good quality of life, a diverse and strong amalgamate service sector. Costa Rica can vouch good stableness, quality of operations, and positive growing potency. The investing sectors in Costa Rica have shown a sustained growing. Costa Rica is one of theA best finishs for high engineering sectors, so companies that belong in those sectors and are looking forA efficiency, can truly profit from Costa Rica ‘s advantages. Another thing that Costa Rica is known for is that is has the most suited locations for outsourcing and offshoring services in Central America.
Incentives for Investing in Costa Rica
The Costa Rican authorities implemented “ The Free Zone System ” as an investing scheme in order to advance Costa Rica ‘s export. This system represents set of benefits and inducements approved to companies doing new investings in Costa Rica. The biggest benefit for companies under the Free Trade Zone Regime is that they can obtain up to 100 % corporate income revenue enhancement freedom for a determined period and among other benefits under this government is that companies do non pay any import responsibilities or export revenue enhancements.
Exports and Imports
Both imports and exports in Costa Rica are reported by the SECMCA. Costa Rica ‘s mainly exports electronic goods, bananas, Ananas comosuss, java and medical equipment which represent 17 per centum of the state ‘s entire exports. Costa Rica ‘s chief export spouse is the United States, which represents 37 per centum of the state ‘s entire exports. Others merchandising spouses in these countries are the Netherlands, Panama and Hong Kong.
Costa Rica reported reduced exports of 828.50 USD Million in December of 2012 from 971.70 USD Million in November of 2012. Costa Rica Exports averaged 584.53 USD Million from 1995 until 2012, making a high of 1120.10 USD Million in March of 2012 and a record depression of 235.50 USD Million in December of 1995.
Fuel, electronics, pharmaceuticals and capital equipment are Costa Rica ‘s chief imports. The United States is Costa Rica ‘s chief import spouse stand foring 45 per centum of entire imports. Other import spouses of Costa Rica are Mexico, Japan, China, and Colombia.
A lessening was reported in Costa Rica ‘s imports to 1460.30 USD Million in December of 2012 from 1547.10 USD Million in November of 2012. Costa Rica Imports averaged 815.75 USD Million from 1996 until 2012, making high of 1615.50 USD Million in October of 2012 and a record depression of 320.70 USD Million in March of 1996.
Balance of Trade
Because of Costa Rica ‘s deficiency of mineral resources, this state is dependent on imports of fuels, which resulted in the state ‘s balance to be negative in the recent old ages. Costa Rica is a net exporter of nutrient and electronics. The United States is Costa Rica ‘s chief trading spouse because 45 per centum of the imports and 37 per centum of the exports in Costa Rica are from the United States. Other merchandising spouses of Costa Rica are the European Union, Panama, Guatemala and Mexico. Balance of Trade in Costa Rica decreased to -631.80 USD Million in December of 2012 from -575.40 USD Million in November of 2012. From 1995 until 2012, Costa Rica Balance of Trade norm was -204.83 USD Million making a 139.60 USD Million in April of 1999 and a depression of -696.10 USD Million in October of 2012.
Capital and Financial Account Balance of the Balance of Payments in Costa Rica are measured by utilizing the international capital flows. Capital Flows in Costa Rica is reported by the Central Bank of Costa Rica. Costa Rica ‘s capital flows increased to 1163.81 USD Million in the 3rd one-fourth of 2012 from 198.49 USD Million in the 2nd one-fourth of 2012. Historically, Costa Rica Capital Flows averaged 370.27 USD Million from 1999 until 2012, making a high of 1163.81 USD Million in August of 2012 and a low record of -230.34 USD Million in May of 2009.
Part III: Other Economic Measurements and Idexes
Costa Rica ‘s currency is the Colon ( XE, 2013 ) . The most The currency is comparatively stable since 2007 after the Central Bank of Costa Rica changed their attack to put the exchange rate in 2006 ( Quiros, 2012 ) . Since so the Bank set upper and lower boundaries and did non interfere but instead allow supply and demand within the market specify the exchange rate ( Quiros, 2012 ) . This led to the result that the state ‘s general population does non necessitate to be worried about their exchange rate and monetary value instability any longer, but besides that exporters with the United States have to acquire worried about a high Colon ( Quiros, 2012 ) .
The unemployment rate of the state decreased within 2012 ( Tradingeconomics, 2013 ) . In the 3rd one-fourth it was 10 % ( See Appendix X ) . Even though the unemployment degrees decreased over the last twosome of old ages the poorness degree increased to 21.3 % ( Williams, 2010 ) . This is because of the fact that the state managed successfully to increase the figure of occupations but the mean monthly wage is merely about 268,592 colones which equals $ 540 ( Williams, 2010 ) . The authorities recognized this job and knows that in order to cut down poorness they have to better the state of affairs and back up the societal sector and better the substructure ( The World Bank, 2011 ) . Another ground why the employment rate is still quiet high is the fact that the labour engagement of adult females is really low ( Appendix X ) .
As mentioned in the paragraph about the exchange rate the Central Bank changed the exchange rate policy which besides has an influence on the rising prices. It is supposed to maintain the rising prices lower ( Auswartiges Amt, 2013 ) . The rising prices rate was around 4.26 % in 2011 and remained comparatively stable thoughout the twelvemonth ( Arias, 2012 ) . This figure is below the Cardinal American norm ( Auswartiges Amt, 2013 ) . The goods and services with the highest addition in 2012 were intoxicant, ciragettes, rent, instruction, conveyance and wellness ( Arias, 2012 ) .
Employment cost index
In general one of the chief jobs in Latin America in order to better the labour productiveness is still a low degree of instruction ( Duryea and Pages, 2002 ) . Even though employees in Costa Rica are extremely paid over the norm in Latin America there is still room for betterment in order to increase the productiveness ( See Appendix X ) . The schools and universities need to be aligned more efficient and in order to pull good educated pupils the pay degrees have to be increased ( Monge-Gonzalez, et al. , 2011 ) .
Global fight index
This is the index released by “ The World Economic Forum ” each twelvemonth for every state in the universe. There are variables that are evaluated, but the most of import 1s are Health, Education, Innovation and Use of Technology.
Costa Rica is positioned at 61 out of 142 states as of twelvemonth 2011-12. Before this it was positioned at 56 out of 139 states in the twelvemonth 2010-11 and 55 out of 133 states in the twelvemonth 2009-10. As we can see the Costa Rica GCI rank has been worsening over the old ages, and there are many factors impacting this. The factors impacting are slow development in its overall substructure, it ranks as 95/144 states. Variables that add to the hapless substructure are Quality of roads which ranks as 131/144 states, Quality of port substructure which is even worse than the roads and is ranked 140/144 states. The last factor that affects is the Quality of Railroad substructure which is graded 106/144 states. The other factors that are impacting its rank are foremost the inefficient authorities bureaucratism and back their unequal supply of substructure. See exhibit X for a graph that describes the jobs faced by the people.
Still Costa Rica is able to keep a comparatively good GCI ranking, because of its strong instruction system which is ranked 21 out of 144 states. In the twelvemonth 2012-13 state has able to derive place in its ranking from 61 to 57 merely because of its instruction system, strong degree of technological acceptance, solid concern edification and invention. But there is still to make a batch in the field of substructure to derive higher ranking in the old ages to come.
Human Development Index
The Human Development Index is released in “ The Human Development Report ” each twelvemonth. This index is used to mensurate a state ‘s development in footings of its people development. The variables that are taken into consideration are – Income, Health and Education. At present Costa Rica HDI is 0.744, ranking 69 out of 187 states in the universe. To demo how Costa Rica differs from other states in the universe in footings of HDI, we have two charts illustrated in exhibits X and X.
In exhibit X we can see instruction and income scope between 0.5 to 0.75, and wellness scopes between 0.75 to 1, which gets the HDI for Costa Rica to 0.744. The following chart shows the growing of HDI since 1980- nowadays, in comparing with Latin America and other parts of the universe: .
As we can clearly see from the exhibit X the Costa Rica HDI has ever been above the mean HDI, and it is merely because the state ever had a strong accent on its Education and Health system.
Index of Economic Freedom
Costa Rica had a mark of 68 in the footings of economic freedom, and ranked 44th in the twelvemonth 2012. Exhibit Ten illustrates where Costa Rica falls in comparing with other states. As we can see from the above chart that Costa Rica falls under reasonably free zone, and is above the regional and universe norm. Economic freedom index has four pillars which consist of 10 freedoms that add up to the overall economic freedom. The four pillars consist of first the Rule of Law which gives Costa Rica a ranking of 49th in Property Rights and 42nd in Freedom from Corruption. The following pillar is looks at Limited Government. In respects to Fiscal Freedom, they are graded sixtieth every bit good as 16th in Government Spending. The 3rd pillar expressions at Regulatory Efficiency. In this pillar Business Freedom is ranked 124th, Labor Freedom 84th and Monetary Freedom 118th. The 4th and concluding pillar is in respects to the Open Markets. Costa Rica ‘s Trade Freedom is ranked 42nd, their Investing Freedom 36th and Financial Freedom 72nd.
These variables are taken into consideration to measure the economic freedom. It includes everything from how the authorities maps, corruptness rate, investings made in that peculiar twelvemonth, fiscal state of affairs of the state and so on.