Costa Rican Economy expected to grow by 4.5% in 2010, 5% in 2011

Costa Rica's economy is expected to post solid growth of 4.5 percent this year and 5 percent in 2011 as it continues to invest in infrastructure and open up the telecommunications industry, the country's president said on Tuesday.

"We are efforting this push into Asian markets to increase the rate of growth. We have a very ambitious program," said Laura Chinchilla, President of Costa Rica, on the sidelines of the United Nations General Assembly in New York.

The economy of this small Central American country, known for its eco-tourism and coffee production, will boost growth by improving infrastructure such as ports, and by opening and promoting markets such as electricity and telecommunications.

Costa Rica has trade agreements with China, Singapore and the European Union bringing the amount of free trade agreements to 42 and increasing trade to 92 percent of total exports. It is also starting negotiations with South Korea.

Chinchilla, the first woman president and just four months in government after succeeding Nobel laureate winner Oscar Arias, is set to increase competitiveness by continuing to educate and train its population of more than 4.6 million.

Costa Ricans take pride in the fact that they are the only country in the Americas without an army, and that since their independence about 50 years ago have established free education -- a competitive advantage difficult to emulate in a short period of time.

With a skilled work force, and political and social stability, Chinchilla's government hopes to capture $9 billion in foreign direct investment over the next four years.

In 2009 inflows of FDI reached $1.3 billion of which 57 percent were from the United States. Most of the inflows go to manufacturing, real estate, services, and tourism.

Economic growth has come from the services sector with 60 percent of gross domestic product, industry with 32 percent and agriculture with 8 percent.

"Today, after serious trade policies based on the promotion and diversification of exports and the attraction of foreign direct investment as key elements, Costa Rica exports more than 4,116 products to 135 countries around the world, with a net worth of $8.675 billion," Chinchilla said.

"Our total exports have increased over 60 percent in the last decade," she said. Imports however, reached $11.4 billion in 2009.

Chinchilla also stressed security and prevention of the high levels of organized crime that other neighboring countries have experienced as one of her key issues in her domestic agenda.

"We are trying to design a regional agenda in terms of security issues," Chinchilla said. "Our homicide rate is relatively low. We are just trying to prevent what has happened in other regional countries."

In terms of bond issues, the president of Costa Rica's promotion agency, Jose Rossi, said it would be favorable for the finance ministry to issue global bonds as global interest rates are low and as Costa Rica's credit rating was raised to investment grade earlier this month by Moody's.

The country has $1.25 billion in outstanding debt, divided into five different global bonds, one of them maturing next year. If and when the country issues, Rossi said part of the money will go to repay the maturity due, projects in infrastructure, education and other debt issues with multilaterals.

To read the full story in Reuters by Manuela Badawy click here

Tourism and Export Sectors Grow Strongly in Costa Rica

The Tico Times reported that the Costa Rican economy has shown strong growth in the first quarter of 2010, with Tourism and Exports being the primary drivers.

Marco Piñon, the IMF mission chief for Costa Rica, visited the country during the second week of April to conduct the third and final review of the IMF's $ 735 million Stand-By Arrangement with the Costa Rican government, a line of credit approved by the agency in April 2009 to “support the country's strategy to cope with the adverse global economic environment.”

During his weeklong visit, Piñon said that thanks to strong financial and business resurgence in the first few months of the year, the Costa Rican economy stands in good shape for 2010 and that “economic recovery in Costa Rica is firmly underway”.

“Economic growth rose in the second half of 2009 and remained strong in the first quarter of 2010,” Piñon said. “Consumer and business sentiment have firmed up and financial conditions have continued to improve. … The government's strategy to shield the economy from external shocks with (IMF) funds, which in the event were not used, helped preserve confidence, maintain stability, and protect the most vulnerable groups. A supportive fiscal policy has provided a boost to the recovery and a cautious monetary policy has allowed inflation to move to low levels.”

On Wednesday, the positive outlook was reinforced by an announcement by the Costa Rican Tourism Board (ICT) that 65,800 more tourists visited the country during the first three months of 2010 than during the same period in 2009, an 11.5 percent improvement over last year. The ICT estimates that over 636,000 tourists visited the country in the first three months of 2010.

Further evidence of the recovery was provided by the Foreign Trade Promotion Office (PROCOMER), which reported on Wednesday that national exports during the first three months of 2010 increased 16.8 % in comparison with the first quarter of 2009. Through the first three months of the year, the country raked in over $2.4 billion in exports, $352 million more than during the first quarter of 2009. A 463 percent improvement in sugar sales was the biggest highlight of the export sector. Sugar exports accounted for $29 million more during the first three months of 2010 than during the same period last year.

Read the full story in the Tico Times:
"Tourism and export sectors show strong first quarter"

By Adam Williams
Tico Times Staff | awilliams@ticotimes.net

Costa Rica and Latin America will be the first to recover from the current global economic crises

On the 23rd of May La Republica, Costa Rica reported on positive predictions for economic recovery made by Miquel Savastano, Assistant Director of the IMF (International Monetary Funds) Western Hemisphere region.

Mr. Savastano predicts that Costa Rica will be one of the first countries whose economies will recover in 2010. He bases these predictions on the sound financial and fiscal policies of the Costa Rican Government and Costa Rican central bank whose fiscal policies the IMF fully endorses.

More positive news comes from Nicolas Eyazaguirre, Director of the IMF Western Hemisphere region who is quoted as saying “Latin America in general will experience a quicker recovery than the larger economies” because “many countries in the region have responded to the crises with policies that boost production and employment. The outstanding feature being that six months after the collapse of Lehman Brothers, NO Latin American financial system has experienced a banking crisis. Liquidity is good and Latin American banks have little dependence on foreign financing.”

Click here to read the full article in La Republica and here to read more coverage of this story by Christopher Howard in the excellent Live in Costa Rica Blog

To read more about the IMF’s recent reports on Costa Rica’s fiscal policies click here