Euromonitor reports that Costa Rica’s economy seriously contracted in 2020. The country has been hit hard by the Coronavirus (COVID-19) pandemic, owing to its highly open economy that has large exposures to trade, tourism, foreign direct investment, and global supply chains. Costa Rica’s tourism exports have collapsed. Providing the outbreak remains contained, economic growth should begin to recover in quarter three. Real Gross Domestic Product (GDP) will bounce back in 2021, to growth of 2.3% and is expected to rise to 3% per year through 2027.
- The economy experienced a recession in 2020, falling by 5.5% in 2020 after an increase of 2.1% in 2019.
- The real value of private final consumption rose by 1.6% in 2019 and a fall of 4.1% was expected in 2020. Consumer spending has been hampered by the lockdown and social distancing measures in 2020, with expenditure on larger items being deferred.
- Costa Rica has solid investment prospects thanks mainly to its high levels of human capital. More than two-thirds of the inflows of Foreign Direct Investment (FDI) come from the U.S. The recent accession to the Organization for Economic Co-operation and Development (OECD) should improve the country’s investment prospects.
Tourism is the country’s largest industry, employing around 13% of the workforce and accounting for approximately 13.1% of GDP. It is also the country’s largest earner of foreign exchange. Eco-tourism makes up nearly 40% of the industry’s revenue in a typical year. An estimated 26% of Costa Rica consists of natural reserves and park systems that help to safeguard much of the world’s biodiversity and the burgeoning eco-tourism industry. Approximately 40% of all visitors are from the U.S. The real value of inbound tourist and business travel receipts rose by 5.1% in 2019 but the performance will be limited by travel bans in 2020 and is forecast to decline by 44.8%.
Costa Rica has been experiencing a population boom which will gradually decelerate in the medium term. Between 2000 and 2030, total population will increase from 3.9 million to 5.5 million. Costa Rica’s potential workforce (those between 15 and 64 years) will be growing slightly faster than total population as a result of the prolonged population boom. As growth of population slows, the percentage of elderly will rise. In 2020, 8.7% of all Costa Ricans were more than 65 years of age and the share will rise to 13.2% in 2030.
USDA’s Office of Agricultural Affairs, OAA, in San Jose, hereinafter referred to as “Post” tells us that the United Sates is Costa Rica’s largest trading partner and Costa Rica’s largest foreign direct investor. Market prospects for U.S. consumer-oriented products such as beef, pork, poultry, dairy, wine and beer, snack foods, ready-to-eat meals, frozen food products, condiments, and pet food continue to increase with impressive growth. Costa Rican consumers trust and enjoy the excellent reputation of U.S. food, beverage and ingredients products, and demand has increased since Costa Rica’s implementation of the Dominican Republic - Central America Free Trade Agreement (CAFTA-DR) in 2009.
Costa Rica has 42 trade agreements which cover about 90% of its exports. They include agreements with China, Singapore and the European Union (EU) as well as the US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR). Costa Rica’s free-trade agreement with China should be instrumental in helping to diversify export markets. The agreement is forecast to boost Chinese imports by 10% and exports to China by 16%. The tariffs on steel and aluminum announced by the U.S. will have a negative effect on Costa Rica’s producers.
Proximity with the United States is a major advantage for shipping time and for U.S. exporters who wish to visit or communicate with potential customers. In 2020, U.S. agricultural exports to Costa Rica grew 1% and reached an all-time high US$729.3 million. Additionally, U.S. food products and food companies continue to permeate the market in Costa Rica as the Costa Rican public is both receptive and accustomed to them. American food companies, restaurants, and supermarket chains, have been highly successful in Costa Rica and have a strong presence in the country.
With such a high degree of trade, especially with the U.S., Costa Rican importers are well accustomed to working with foreign partners in this market. Many business people in Costa Rica are bilingual, thus, are able to facilitate business negotiations with Americans. However, the business culture in Costa Rica can be less fast-paced than in the U.S. and those wishing to do business in here should be prepared for this cultural difference. U.S. exporters should also note that export procedures and processes in Costa Rica go through many levels of bureaucracy that can, at times, slow the importation process for food products.
In 2020, U.S. Consumer-oriented exports dropped 8% to US$294.9 million. Costa Rica also imports an abundance of U.S. processed foods, totaling US$241.1 million in 2020, a decline of 7%.
Top U.S. processed food exports to Costa Rica in 2020 included:
- Food Preparations & Ingredients
- Dog & Cat Food
- Snack Foods
- Processed Vegetables & Pulses
- Prepared/Preserved Dairy Products
- Non-Alcoholic Beverages
- Prepared/Preserved Meats