Name: Republic of Costa Rica Population: 4.64 million (2010) Capital: San Jose Other major cities: Puntarenas, Limon, Liberia Area: 51,060 sq km Currency: Colon GNI per capita: $6,580 (2010) Main exports: Coffee, bananas, electronic components, textiles Language: Spanish Religion: Roman Catholic (70.5%), Protestant (13.8%) Life expectancy: 82 years (women), 77 years (men) 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. It has achieved universal primary education and is making gains in secondary coverage and completion rates.
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 determined to achieve carbon neutrality by 2021.
On May 2010, Laura Chinchilla was sworn in as Costa Rica’s first female head of state. She got elected on a ticket emphasizing the fight against poverty and insecurity.
The Chinchilla administration presented the National Development Plan 2010-2014, focusing on four pillars: i) social welfare, ii) peace and security, iii) environment and territorial planning, and iv) innovation and competitiveness. This Plan includes clear national targets, such as achieving an economic growth of 5 and 6 percent and an unemployment rate of 6 percent or less by 2014, among others.
The Government has also articulated a strategy for a comprehensive fiscal reform, including measures to reduce inefficiencies in the tax collection system, modernize tax information systems and strengthen the fight against tax evasion. The Government is also implementing measures on the expenditure side to create fiscal space.
Costa Rica is a development success story in many respects. An upper middle-income country, Costa Rica was able to press the poverty rate down from 23 percent in 2004 to 17.7 percent in 2008. Extreme poverty also decreased to 3.5 percentage points in 2008, in line with the relatively high levels of growth and effective social transfer mechanisms.
However, inequality is rising (Gini coefficient went from .422 in 2006 to .439 in 2009) 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 percent throughout the 1990s and generally outpaced the average growth rate for the region in the current millennium.
GDP growth reached a peak of 8.8 percent in 2006 and maintained a healthy pace in 2007, but as a consequence of the global financial crisis the country’s economy grew 2.6 percent in 2008 and registered a decline of 1.3 percent in 2009. In response, the Government increased its spending in social and labor-intensive infrastructure, helping the economy recuperate to an estimated 4.2 percent growth in 2010.
Current projections have growth at 4 percent in 2011 and a growth between 4 and 4.5 percent over the next few years, driven by robust private consumption and domestic investment.
Citizen security is a high priority for the Chinchilla administration, as the country faces rising levels of crime linked to drug trade. Sharply rising food prices are also a concern in the region, especially for the most vulnerable people. Costa Rica’s other medium-term challenges are associated with the efforts needed to continue to improve competitiveness and the business climate.
This CPS is the third strategy to be prepared for Costa Rica following a period of limited Bank engagement. The preceding Country Partnership Strategies (2008-2011 CPS and 2004-2007 CPS) established a framework for a closer partnership between the World Bank Group and Costa Rica based on mutual learning and knowledge sharing.
The new 2012-2015 CPS is characterized by a results oriented approach and is built around three clusters which are closely aligned with the Government’s strategic view and investment program:
i) developing competitiveness, ii) improving efficiency and quality in the social sectors, and iii) supporting environment and disaster risk management.
The International Finance Corporation (IFC) is also looking to step up its program in Costa Rica and expects to concentrate on: i) renewable energy and energy efficiency projects; ii) manufacturing and agribusiness sectors with an emphasis on companies with plans to increase regional expansion and raise exports; and iii) private sector educational and healthcare institutions; iv) financial services; and v) advisory engagements to support infrastructure and sustainable agribusiness projects.
Bank support focuses on three clusters:
Developing competitiveness, including strengthening human capital and skills development, logistics, private sector involvement in infrastructure and improvements in the quality of the business environment.
Improving efficiency and equity in social sectors, including expanding access to poor populations in rural communities and introducing best practices in health care delivery.
Supporting environment and disaster management, helping the country’s efforts to consolidate its position as a global leader in the environment and strengthen its disaster management institutions.
The World Bank’s current portfolio in Costa Rica consists of four operations ($197.5 million):
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.
Equity and Efficiency of Education The objective of this project is to improve education indicators in the country in terms of access, quality, completion, and equity. The project will help reduce existing education quality gaps in rural education and improve the equity and efficiency in the allocation, administration and utilization of education sector resources.
Port-City of Limon Integrated Infrastructure Project This project 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 This 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.
The World 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 completed the following analytical work:
Competitiveness Diagnostic and Recommendations: Based on multiple data sources, it assesses the main obstacles that affect private sector growth in Costa Rica and provides policy options and targeted interventions for improving the business environment and increasing competitiveness, with the goal of achieving sustained and broad-based growth.
Public Expenditure Review: This report is the outcome of the government's request to identify possible reforms in policies and institutions to enhance the effectiveness, efficiency, and equity of public expenditures.
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.
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 World 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 completed the following analytical work:
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