Name: Republic of Costa Rica Population: 4.5 million (2008) Capital: San Jose Other major cities: Puntarenas, Limon, Liberia Area: 19,730 sq miless Currency: Colon GNI per capita: $5,560 (WB, 2007) Main exports: Coffee, bananas, electronic components, textiles Language: Spanish Religion: Roman Catholic (70.5%), Protestant (13.8%) Life expectancy: 76 years (men), 81 years (women) WB Development Indicators
Costa Rica has been one of the most stable democracies in Latin America – with relatively strong public institutions and peaceful transitions of power since 1949.
Poverty and inequality are much lower in Costa Rica than the averages for Latin America and Central America, and social indicators are generally much stronger than for comparable countries in the region and world-wide.
Nobel laureate and former president Oscar Arias returned to power in 2006 after closely-fought elections, promising to stabilize the economy and clamp down on the corruption which had hounded the previous two governments.
The Government’s development agenda also includes reducing poverty and inequality further through a renewed emphasis on improving enrollment and the quality of secondary education, better targeting of social assistance programs, and improved social services.
In 1993, Costa Rica proclaimed its permanent neutrality. It has no standing army, and its record on human rights and advocacy of peaceful settlement of disputes have garnered it international respect.
The country has also been a world leader on environmental issues, ensuring that economic growth is not achieved at the expense of its rich natural endowments, and successfully exploiting linkages between environmental protection and poverty reduction.
Costa Rica is a development success story in many respects. An upper middle-income country with about 4.5 million people and a GDP per capita of $5,800 (2007), Costa Rica has been able to press the poverty rate down to a record low of 16.7% in 2007 thanks to the increase in real incomes and social transfers.
However, inequality is rising as growth has largely benefited skilled labor, and secondary education lags, especially among Costa Rica’s poor.
Costa Rica has experienced steady economic expansion over the past 25 or so years, primarily due to the implementation since the late 1980s of a strategy of outward-oriented, export-led growth, openness to foreign investment and gradual trade liberalization.
The economy grew at an annual average rate of 5% throughout the 1990’s and has generally outpaced the average growth rate for the region in the current millennium.
GDP growth reached a peak of 8.8% in 2006 and maintained a healthy pace in 2007.
Beyond continued macroeconomic stability, Costa Rica’s medium-term challenges are associated with the efforts needed to continue to improve competitiveness and the business climate.
Costa Rica recently approved all the legislation and regulations of the complementary agenda to implement its commitments under the Central America Free Trade Agreement, CAFTA. As of January 1, 2009, this regional free-trade agreement is in effect.
The Country Partnership Strategy (CPS) for FY08-FY11 is the second to be prepared for Costa Rica following a nearly 10-year period of very limited engagement between Costa Rica and the Bank.
The previous CPS, presented to the Board of Executive Directors in mid-2004, was a key step in establishing a framework for a closer partnership and aimed at mutual learning and knowledge sharing, rather than significant resource transfer via lending operations.
The present CPS also includes a very selective, demand-driven program, taking into account the Government's policy priorities.
FOUR-YEAR CPS TARGETS
Investments in:
Education
Environment
Infrastructure
Agriculture
Information and Communications Technologies
Knowledge-sharing and Advisory Services in:
Public Sector Debt Management
Domestic Debt Market Development
Financial Sector Reform
Management of International Reserves
Public-Private Partnerships in Infrastructure
To enable better alignment with Costa Rica's political cycle going forward, this CPS has a relatively short time-frame - August 2008 to December 2010 - covering the remaining term of the current administration and an additional 7 months following the next presidential transition.
Costa Rica’s portfolio consists of five IBRD operations ($211.5 million) and one GEF ($10 million). These loans cover the areas of health, education, environment and disaster management, and integrated infrastructure. These include:
Public Finance and Competitiveness Development Policy Loan with Deferred Drawdown Option: It aims to strengthen public finances and their transparency by enhancing the efficiency of revenue generation and results-based management of expenditures. It also purports to improve competitiveness by enhancing secondary education attainment, facilitating market entry in the telecommunications and insurance sectors, and strengthening the legal framework pertaining to intellectual property rights.
Costa Rica Catastrophe Deferred Draw Down Option (CAT DDO): The project will provide a source of immediate liquidity in case of a natural disaster. It will also complement other instruments in the country and provide a source of bridge financing while other sources are being mobilized following a natural disaster.
Port-City of Limon Integrated Infrastructure Project: It aims to revitalize the city of Limon by: investing in urban upgrade, cultural heritage protection; supporting the generation of new sources of employment and income; providing technical assistance for the Municipality to improve its capacity to deliver and manage quality services and goods; and supporting improvement of transport access, constructions and technical assistance to the Limon and Moin port terminals.
Mainstreaming Market-Based Instruments for Environmental Management: The project enhances the provision of environmental services significant at the national and global levels, and secures their long-term sustainability through a scaled-up payment for environmental services system in Costa Rica.
Telecom Sector Modernization: A $12 million - $15 million project that will contribute to the government’s strategic objective in the telecommunications sector through the following measures: (i) modernization of the legal, regulatory and institutional framework in the sector; (ii) the introduction of fair competition and private participation in the sector; (iii) the modernization of ICE; and (iv) the promotion of investment in rural and isolated poor areas and vulnerable groups.
The Bank also conducts detailed analytical work at the country level. As part of an ongoing dialogue between the World Bank and the Government of Costa Rica on economic and social policy, the Bank recently completed the following analytical work:
Country Economic Memorandum (CEM): Analyzes the sources of growth and competitiveness, with particular attention to addressing the bottlenecks in infrastructure through greater participation of the private sector.
Poverty Assessment: Focuses on recent poverty and inequality trends in Costa Rica and in-depth analysis of why the growth elasticity of poverty was low during 1994-2002. The assessment also analyzes the implication of these trends for migration.
Investment Climate Assessment (ICA): Presents a large survey followed by in depth studies of conditions related to the investment and business environment in which firms operate.
Costa Rica has been one of the most stable democracies in Latin America – with relatively strong public institutions and peaceful transitions of power since 1949.
Costa Rica has experienced steady economic expansion over the past 25 or so years, primarily due to the implementation since the late 1980s of a strategy of outward-oriented, export-led growth, openness to foreign investment and gradual trade liberalization.
The Bank also conducts detailed analytical work at the country level. As part of an ongoing dialogue between the World Bank and the Government of Costa Rica on economic and social policy, the Bank recently completed the following analytical work:
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