Country Analysis Project:
Team 2
TEAM MEMBERS:
[Link] Muhammad 12235613
2. Sirojiddinov Samandar 12220249
3. Ravshanbekov Khikmatullo 12214728
4. Raimkulova Aizat 12214706
5. Nurillaeva Zarina 12230302
6. Sharofiddinov Sardor 12214694
7.
CONTENTS
Costa Rica
International Trade patterns …………………………………………………….3
1.1 Exports and imports in major product categories
1.2 Trading partners (export and import)
1.3 Historical trends in international trade
1. Comparative advantages of Costa Rica …………………….5
2.1 High-tech manufacturing
2.2 Agriculture
2.3 Tourism
2.4 Corporate Services and Renewable Energy
2. Political stability and geopolitical relations of Costa Rica and its impact on
International trade ………………………………………………6
3. The impact of trade policies …………………………………..7
4.1 Tariffs
4.2 Trade Agreements
Appendix …………………………………………………………………………..8
References pages………………………………………………………………..11
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I. 1. Costa Rica: Costa Rica's Foreign Trade Overview
Costa Rica is highly integrated into global trade, with foreign trade constituting 80% of its GDP.
Data from the National Institute of Statistics and Censuses (INEC) for 2023 indicates that the
country's principal exports include medical instruments (12%), syringes, needles, and catheters
(10.9%), prosthetic devices (7.5%), fresh pineapples (5.9%), and bananas (5.1%). On the
import side, the main products were petrol (9%), diesel (7.1%), hybrid integrated circuits (2.3%),
containers (1.8%), and human-use medicinal products (1.6%).
Trade Policies and Incentives
Costa Rica maintains an open trade regime with low customs tariffs, typically not exceeding
15%. The country actively promotes export-driven sectors by offering incentives such as
subsidies and tax exemptions, particularly for high-value goods like electronics and medical
devices. As a member of CARICOM and an OECD member since 2021, Costa Rica benefits
from numerous trade agreements with regions and countries, including the EU, China, Peru,
Singapore, and Central America.
Trade Deficit and Structural Challenges
Preliminary data from Costa Rica’s Institute of Statistics for 2023 shows that the country’s
exports were valued at USD 19.211 billion, while imports reached USD 26.396 billion, resulting
in a trade deficit of approximately USD 7.185 billion. This deficit is largely structural, driven by
the heavy reliance on imported inputs for its manufacturing sector and consumer goods. The
trade imbalance is projected to persist in the medium term, as imports of capital goods and
hydrocarbons are expected to continue outpacing export growth, despite rising external demand
for medical devices and agricultural products like pineapples and bananas.
Services Sector and Trade Balance Outlook
Tourism remains a critical component of Costa Rica’s foreign earnings, contributing significantly
to the services trade balance. According to the WTO, Costa Rica reported a net positive
services trade in 2022, with USD 11.8 billion in exports against USD 5.5 billion in imports. When
combining goods and services trade, the World Bank estimated Costa Rica's overall trade
balance to be positive by 1.5% of GDP in 2022.
2. Report on Costa Rica’s Trading Partners
Key Export Markets
Costa Rica's economy depends heavily on exports such as medical devices, agricultural
products (bananas, pineapples, coffee), and electronic components. The United States is Costa
Rica’s biggest export market, receiving approximately 40% of the country’s exports. Costa
Rica’s exports to the U.S., particularly in medical devices and electronics, are a key source of
revenue. The U.S. also imports large quantities of Costa Rican agricultural produce.
In Europe, countries like the Netherlands, Germany, and Belgium are important destinations for
Costa Rican exports, particularly for agricultural goods like fruits. In Latin America, markets such
as Panama, Guatemala, and Mexico are important for Costa Rican food products and
electronics.
3
Main Import Sources
Costa Rica imports various goods, such as machinery, petroleum, and chemicals, from several
countries. The U.S. is Costa Rica's largest supplier, providing close to 40% of the country’s
imports, including industrial goods, food, and chemicals.
China has become an important supplier of machinery, electronics, and textiles to Costa Rica in
recent years. Mexico is another key partner, supplying oil and manufactured products, while
countries like Japan and Germany provide vehicles and advanced technology.
Trade Agreements
Costa Rica participates in several trade agreements, such as the CAFTA-DR with the United
States and deals with the European Union and Latin American countries. These agreements
help Costa Rica by reducing trade barriers, improving market access, and enhancing its ability
to engage in international commerce.
In conclusion, Costa Rica's economy thrives on international trade, with the United States being
its most important trading partner for both imports and exports. Other countries like China,
Mexico, and European nations also contribute significantly. Trade agreements further enhance
Costa Rica’s competitiveness on the global stage.
3. Historical trends in international trade of Costa Rica
1. Pre-20th Century: Colonial and Early Independence Period
Costa Rica's economy was mostly agricultural before to the 19th century, with coffee and
bananas serving as the cornerstones of trade. Costa Rica's economy was relatively tiny during
the colonial era and the early years of independence, and agriculture provided the majority of its
income. Coffee was introduced in the nineteenth century and quickly became a major export,
connecting Costa Rica to international markets, mainly in Europe and the United States. Coffee
not only contributed to economic expansion, but it also influenced the development of the
country's infrastructure, such as highways and ports created to assist commerce. Similarly, the
banana sector grew, further integrating Costa Rica into the global economy and laying the
groundwork for future trade expansions.
2. Early to Mid-20th Century: Diversification and Industrialization
Economic Diversification:
Costa Rica attempted to expand its economy beyond agriculture between the early and mid-
twentieth century. Following World War II, the government implemented import substitution
industrialization (ISI) tactics, which were a prominent economic approach in Latin America at the
time. The government sought to lessen reliance on imported commodities by promoting
domestic industries. This period also saw the start of efforts to establish a more industrialized
economy, though agriculture remained to play an important role.
Costa Rica attempted to expand its economy beyond agriculture between the early and mid-
twentieth century. Following World War II, the government implemented import substitution
industrialization (ISI) tactics, which were a prominent economic approach in Latin America at the
time. The government sought to lessen reliance on imported commodities by promoting
4
domestic industries. This period also saw the start of efforts to establish a more industrialized
economy, though agriculture remained to play an important role.
3. Late 20th Century: Liberalization and Free Trade Agreements
Costa Rica's international trade underwent significant transformations during the late twentieth
century. Beginning in the 1980s and continuing into the 1990s, the country supported trade
liberalization. Tariffs and other trade obstacles were removed, allowing more international
competition and participation. Costa Rica abandoned its protectionist policies from previous
decades in favor of free-market reforms.
Costa Rica's 2006 signing of the Central America Free Trade Agreement (CAFTA-DR) was one
of the most significant occurrences during this time period. This deal, signed with the US and
several other Central American countries, resulted in increased commerce, particularly in
textiles, agriculture, and services. The CAFTA-DR deal allowed Costa Rica to deepen
commercial relations with the United States while also attracting foreign direct investment.
II. Comparative advantages of Costa Rica in trade
Costa Rica has distinct advantages in several industries due to its highly educated workforce,
smart investment policies, natural resources, and dedication to sustainability. These factors
contribute to the country's transition from an agrarian economy to one centered on high-tech
manufacturing, corporate services, and tourism, setting it apart from other countries. Each
industry’s strengths, weaknesses, opportunities, and threats (SWOT) are presented in separate
tables.
High-tech manufacturing
Its primary comparative advantage is its high-tech manufacturing, especially in electronics and
medical equipment, which makes up over 26% of total exports ($4,56B) in 2022, as we see in
the Picture 1. The country's well-educated workforce, proficient in English, is a major asset,
helping to attract multinational corporations such as Intel and Abbott, showcased in Table 1.
Costa Rica’s focus on innovation and strategic Free Trade Zones (FTZs) with tax incentives
create an advantageous business environment. Additionally, the table highlights challenges,
including competition from other nations in the region and the need for continued innovation.
Agriculture
Table 2 explores Costa Rica's agricultural sector, which is a top exporter of tropical fruits like
bananas and pineapples. Despite its recent fall in GDP share, Costa Rica's agriculture industry
still contributes significantly to the country's economy. Despite competition from trade
liberalization agreements like CAFTA-DR, Costa Rica has differentiated itself by promoting
organic and sustainable farming practices. The table also considers the challenges posed by
increased competition and the government's efforts to promote sustainable farming practices.
Tourism
Costa Rica's tourism sector is indicated in Table 3, focusing on its reputation as a pioneer in
ecotourism. The country's natural beauty, biodiversity, and sustainable tourism practices are
5
highlighted as key strengths. The table also addresses potential weaknesses, including
competition from other tourist destinations and vulnerability to natural disasters.
Corporate Services and Renewable Energy
Lastly, Table 4 explores the comparative advantages of Costa Rica in the corporate services
and renewable energy sectors. It highlights the strengths of Costa Rica's well-educated
workforce, which enables the country to attract multinational corporations looking for skilled
labor for outsourcing services. Additionally, the table emphasizes Costa Rica's commitment to
renewable energy, positioning the country as a leader in sustainability. In 2016, 98.1% of the
nation's electricity came from geothermal, wind, and hydroelectric power sources. Its capacity to
produce almost all of its energy from clean sources lowers operating costs for companies and is
in line with the growing demand for ecologically friendly practices worldwide.
In conclusion, Costa Rica's comparative advantages in high-tech manufacturing, agriculture,
tourism, corporate services, and renewable energy are built on its educated workforce, focus on
sustainability, and strategic use of Free Trade Zones. These factors make it a competitive and
attractive destination for investment and trade.
III. Political stability and geopolitical relations of Costa Rica and its impact on
International trade
Costa Rica is the only country which continuously holds its stance as a democratic country in
Latin America. Its political stability for a long time and strategic geopolitical relations are
appealing to foreign investments and favorably contributing to Costa Rica’s economy.
Costa Rica is a presidential, representative democratic republic with a multiparty political
system. It is especially famous for stable democratic institutions with credible elections and a
robust civil society. According to [Link] Costa Rica scored 91 out of 100 in freedom
and for political rights it scored 38 out of 40 and 53 out of 60 in civil liberties. However,
presidents have often been involved in corruption scandals. In recent years, due to instability in
countries like Nicaragua, Venezuela and Cuba, refugees in Costa Rica sharply increased, which
is resulting in unemployment rates rising.
As Costa Rica is an active member in the international community, the country claimed its
neutrality in 1983, which guarantees diplomatic relations with the major players in the world.
Especially, key partner in international trade is the United States which was accomplished
through CAFTA_DR (Dominican Republic-Central America FTA). Additionally, the country has
15 Free Trade Agreements with the European Union, Canada, Mexico, China, Singapore, South
Korea, Peru, Colombia and the United Kingdom. The region stands out with its diversified
economy where service, agriculture and manufacturing are the dominant sectors. Costa Rica
offers the Free Zones regimes to encourage direct foreign investments, exports and
development. There are three special regimes which include: Free Trade Zone Regime, Inward
Processing Regime and Duty Drawback Systems.
Costa Rica’s favorable political stability and neutral stance in the world makes it attractive to
foreign investors. We can see it by the numbers. In 2023, Costa Rica received $3,900 million in
FDI. In addition, 73% of FDI which is $2.2 billion was from the US alone in 2022. 250 US
companies who employ more than 150,000 employees operate in Costa Rica. However,
barriers like bureaucracy, slow decision-making processes and lack of transparency in taxes
make trade with extra paperwork [Link], with rising GDP and diversified export
6
market makes Costa Rica advantageous to many countries. Political stability, democracy and
neutrality have a positive impact on international trade.
IV. The impact of trade policies
Key Trade Policies and Tariffs in Costa Rica
Costa Rica’s trade liberalization efforts have focused on reducing tariffs and promoting export
growth. While tariffs on industrial goods have been reduced significantly, Costa Rica continues
to maintain high tariffs on certain agricultural products such as rice, sugar, and dairy. These
protectionist measures are intended to safeguard small domestic farmers from foreign
competition, particularly from subsidized U.S. agricultural products.
Impact on Key Economic Sectors
Agriculture
Agriculture remains an important sector of Costa Rica’s economy, though its share of GDP has
declined in recent years. Key exports such as bananas, coffee, and pineapples continue to be
major sources of foreign exchange. However, trade liberalization has exposed Costa Rican
farmers to greater competition, particularly from U.S. agricultural products under CAFTA-DR. In
response, the government has promoted sustainable agricultural practices and organic farming,
which have helped differentiate Costa Rican products in global markets.
Foreign Direct Investment (FDI) and Free Trade Zones
Trade policies have played a significant role in attracting foreign direct investment (FDI) to
Costa Rica. The country's network of free trade zones (FTZs) has been a major factor in this
regard, providing tax exemptions and other incentives to foreign companies. These zones are
home to many multinational corporations, particularly in the technology and medical device
sectors. Companies such as Intel, Abbott, and Boston Scientific have established operations in
Costa Rica, helping to create thousands of jobs and driving technological innovation.
Costa Rica's FTZs have also played a key role in its export growth. Products manufactured in
these zones, such as electronics and medical devices, account for a large share of the country's
exports. In addition to generating employment, the inflow of FDI has helped improve the skills of
the local workforce, particularly in sectors such as engineering and information technology.
Costa Rica's trade policies have played a significant role in transforming the country from an
agricultural economy into a diversified, export-oriented one. Trade agreements like CAFTA-DR
and the EU-Central America Association Agreement, combined with favorable tariff policies,
have boosted foreign direct investment and helped establish Costa Rica as a hub for high-tech
industries and eco-tourism. However, challenges remain, including the need to reduce
dependency on external markets, protect vulnerable agricultural sectors, and address regional
disparities in economic development.
Appendix:
7
Picture 1:
Table 1: Comparative Advantages in High-Tech Manufacturing
8
Table 2: Comparative Advantages in Agriculture
Table 3: Comparative Advantages in Tourism
Table 4: Comparative Advantages in Corporate Services and Renewable Energy
9
10
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