This is a comprehensive overall look at the Costa Rican economy and how it has been shaped and has grown over the past years. We briefly discuss the periods from Pre-Colonial, Colonial, Post Independence economy to the turn of the century economic period, as well as late 19th, 20th and currenty economic conditions of Costa Rica
Pre - Colonial Economy
Before European contact, the Carribbean and Central America was invaded by the Caribs from the North Coast of South America. The Caribs captured the territory in the coastal plain which is now Costa Rica. The Caribs had aquired gold which they made into pendants from the region of Colombia.
Costa Rica translated into English means Rich Coast; however, in the beginning it was one of the poorest regions in the Spanish Empire. In Colombus´final voyage to the Americas in 1502 he sought refuge from a storm in Costa Rica. When the Europeans saw the gold pensants the natives wore, they imagined it was a treasure chest, not realizing th gold had come from elsewhere and named the spot Rich Coast.
During the times of the American Revolution, the French Revolution and the Napoleonic Wars in Europe were disturbing progress for most of the Spanish colonies in America but not Costa Rica. The Costa Rican farmers focused all their attention, time, and efforts into raising crops. Therefore, Costa Rica's economy began becoming heavily reliant on agricutlural performance.
Post Indepence Economy
Although in the 1830's Costa Rica was troubled by political and economic strife, it began making a comeback towards the late 1840's. In 1848, Costa Rica declared itself an independent Republic and created a new constitution. In this constitution the military was completely abolished and has no longer existed in Costa Rica. Due to this monumental decision, Costa Rica's economy has been able to perpetually benefit from surpluses of "extra cash flow" not spent on military, but rather invested in other developmental sectors of the economy such as education and health care.
Another critical event happened at this time, the economy at this time was starting to branch out and become dependent on a new product that was now able to be grown, harvested, marketed and sold...COFFEE. Coffee became the new black gold and many frontrunners became economically and politically powerful by means of coffee production and were therefore deemed coffe barons. Luckily for Costa Rica, these coffe barons were incredibly interested in free trade and the inadvisability of government intervention in markets. Only the best were truely successful and their economic success seemed to triple overnight.
A Turn of the Century Economy
This time period was dedicated to the creation of more infraestructure in order to modernize Costa Rica. Minor Keith was primarily resposnible for the creation of the railroad which linked the Central Valley to the Carribean Coast of Puerto Limon. This was done so that more bananas could be exported. Inevitably, the railroad lead to more business ventures and the creation of the famous United Fruit company which dominated exports of agricultural goods from Costa Rica. Unfortunately for Costa Rica the railraod was a huge financial burden. There were not enough workers in Costa Rica to build the railroad so English speaking Jamaicans of African heritage were imported to assist in the construction which completely changed the population demograpics forever in the Limon province.
At the end, there were major shifts in power and political dominance which lead to reformation of the currency, putting Costa Rica on the gold standard.
Early 1900's Economy
This was a rough time for Costa Rica. The problems of social welfare, free education, and free healthcare were taxing on the economy. Then World War I took its toll when coffee no longer was a major export and internationally prices were declining. Since only coffee growers were taxed heavily they were now unable to provide the social safety net they did before. Previously Germany had been the best market for Costa Rican coffee and now they no longer purchased in the quantities of before which lead Costa Rica into a fierce financial crisis.
Additional taxes were intended to be put on the wealthy, but everyone was suffering with the crisis so many of the wealth took flight and abandonded the country to avoid new and heavy taxation laws. The capital flight only exageratted Costa Rica's economic problems.
Again in 1949, Costa Rica declared to the world they were completely abolishing any and all remenants of the Costa Rican military to help further cut costs and be able to move around government funding to the sectors which needed it most.
Late 1900's Economy
Despite the bust of the early 1900's the Costa Rican economy was able to slowly and steadily bounce back from the crisis by diversifying their goods and services.
By doing so, in 1998, Costa Rica was saved by the presence of Intel Corporation who began operations in March. Now the Costa Rican economy and employement strongly depends on the quantity of microprocessors that are sold internationally each year.
As other large corporations saw the success of Intel they too began bringing their operations down. Some of the major players who are stationed in Costa Rica include: Acer, Microsoft, GE, Allergan, Hospira, Abbot Laboratories, Boston Scientific, Baxter Healthcare, Proctor & Gamble, Dole, DelMonte, Chiquita Banana, HP, Continental Airways, Western Union, Payless Shoes, Rawlings Sporting Goods, Pricemart, Wal-Mart, the list goes on and on.
This is a trend that does not seem to be stopping any time soon as each month a new foreign company announces the closing of their operation in their home country and their new location in Costa Rica or their hundreds of outsourcing jobs available to help boost the Costa Rican economy.
Costa Rica also soon began realizing that it was a wonderland for many foreign visitors who enjoyed Costa Rica's natural beauty and local charm. As more and more visitors began coming, and returning with more and more visitors, Costa Rica actively decided to take a chance on promoting itself as an international tourism destination. The ICT (Instituto de Turismo Costarricense) was created to help promote the country first on a regional level and then on an international level. Quickly, Costa Rica was examined and given global positioning references to further their tourism promotion which include: third place in world classification index for environmental work, first place in Latin America classification index for competitve tourism (42nd on the world scale) and sixth place for best human development indicators in Latin America.
Recent Economic History
Unfortuantly, due to the world economic crisis, Costa Rica also suffered, although not as severly as many other countries in the world. Despite Costa Rica's intense positive growth over the past several years, the Costa Rican economy shrank slightly in 2009 losing about two and a half points. The services sector was the most severly affected and of course tourism took a big hit too.
Nevertheless, Costa Rica seems that it will bounce back just as it has done so in past crisis situations. Costa Rica continues to enjoy the region's highest standard of living, unemployement is realitively low, and the government has remained extremely stable. The agriculture exports remain strong. Also, Costa Rica has really invested in its clean and renewable energy resources which sets it on track to be carbon nuetral by 2021.
The future holds much broader economic ties with foreign countries in and outside the region. Costa Rica is currently working on the completion/implementation of the free trade agreement with North America known as TLC in Costa Rica and known as CAFTA-DR in North America, bilateral trade with Mexico, signed trade agreements with Canada, Chile, the Dominican Republic, Mexico, Panama, and several Caribbean Community countries.
More recently, Costa Rica has begun negotiating a regional Central American-EU trade agreement. Costa Rica was an active participant in the negotiation of the hemispheric Free Trade Area of the Americas and is active in the Cairns Group, which is pursuing global agricultural trade liberalization within the World Trade Organization. Costa Rica even broke ties with Taiwan to enter into new free trade agreements with China which are currently under negotiations. Very recently Costa Rica even signed free trade agreements with Singapore and will soon with South Korea despite the fact that any of the countries actually want or need to trade anything at all.