1.2.1.- Costa Rica

Figure 1.2 Country map Costa Rica.

1.2.1.1.- General facts

Official name: Republic of Costa Rica

Capital: San José

Name
When Columbus debarked in Costa Rica in 1502 and suspected that large amounts of gold could be found he spoke the words: “¡Que costa tan rica!” and Costa Rica (‘Rich Coast’) received its name. However, Columbus’ prediction was never fulfilled, as little gold or other valuable minerals were found.

Time
Six hours behind Greenwich Mean Time (GMT -6)
The Netherlands: daylight saving time = GMT +2, winter-time = GMT +1

1.2.1.2.- Geography

Location
Costa Rica is located on the Central American isthmus and lies between 8º00'-11º15' northern latitude and 86º00'-82º30' western longitude.
Borders
It has borders in the north with Nicaragua, in the south with Panama, the Caribbean Sea on the east side of the country and the North Pacific Ocean on the west side.

Area
51,100 km2 (50,660 km2 of land and 440 km2 of water)

Altitude
The lowest altitude level in the country is the Pacific Ocean at sea level, the highest point is Cerro Chirripo, a volcanic mountain with an elevation of 3,810m. The capital San José has an altitude of 1,172m. The strongly diverse altitude plays an important part in geographical and ecological variation.

Characterization
A series of volcanic mountain chains run from the Nicaraguan border on the northwest to the Panamanian border in the southeast, splitting the country in two. In the centre of the highlands lays a plain of fertile volcanic soil called the ‘Meseta’ or ‘Valle Central’, at an altitude between about 1000m and 1500m. This area contains four of Costa Rica’s largest cities, including the capital, San José. The central part of San José, at an altitude of 1,172m, is the centre of all activity and accommodates one third of the country’s population.

1.2.1.3.- History

Costa Rica was named by Christopher Columbus on his fourth trip to the New World in 1502. Spanish settlement started in earnest a century later and concentrated on the central highland plateau, which has a temperate climate, abundant water and fertile soil. Throughout colonial times Costa Rica was a poor and isolated province of the Captaincy General of Guatemala. The absence of major extractive activities or an indigenous labour force to make large landholdings viable facilitated the development of a largely self-sufficient economy of small farmers, and a relatively homogeneous and egalitarian society.
In 1821 the independence of Central America from Spain led to conflict between conservatives and liberals, during which Costa Rica was annexed by the dictator Agustín de Iturbide in his Mexican empire. But republicanism won with the creation of the Central American Federation in 1823 (Costa Rica, Guatemala, Honduras, Nicaragua and El Salvador). In 1835 Brauli Carrillo Colina was elected for president. After the Federation collapsed in 1838 he proclaimed himself to dictator for life. The first years after independency were characterized by unrest. An elite of large coffee growers and exporters was formed, which had large power and influence on Costa Rica’s politics. In 1848 Costa Rica formally declared itself an independent and sovereign state. After independence Costa Rica rapidly passed from being the least developed country in Central America to one of the most prosperous, with the first coffee exports (1832), the first commercial bank (1864), the first railway (1890) and the first banana plantations (1880s).
From the mid-19th century a liberal institutional framework gradually developed. After a coup in 1870, General Tomás Guardia led the country until 1882 and curbed the power of the coffee aristocracy. During his dictatorship republican and liberal ideas began to prevail. In 1882 a liberal constitution was declared and church and state were separated by law.
During the civil war of 1948, Jose Figueres led an armed uprising in the wake of a disputed election fraud of a coalition of social-conservatives and communists under the leadership of José Angel Calderón. The victory of the junta led to the abolition of the army, the enactment of a new constitution (1949), with free elections and universal suffrage, and the foundation of one of the region’s first welfare states. 
Since 1949 Costa Rica has enjoyed the region’s longest period of unbroken democracy, during which there has been an orderly succession of democratically-elected governments and the results of general elections have not been questioned. In the decades after 1949, the two main parties, the PLN (‘Partido de Liberación Nacional’) and the PUSC (‘Partido Unidad Social Christiana’), alternated power. Figueres himself became president of Costa Rica in the periods 1953-1958 and 1970-1974 and shaped with his socialistic party PLN Costa Rica into the most democratic county of Latin America.
The current president, Oscar Arias, received during his first tenure 1986-1990 the Nobel Peace Prize for his mediation in the regional conflicts in Central America during 1987. There have been signs of public fatigue with mainstream politics, which shows in rising abstention rates in the main elections.

This trend accelerated after 2004 when a series of corruption scandals implicated high-profile politicians. Public dissatisfaction increased further as the previous government of Abel Pacheco (2002-06) failed to meet many of its goals (i.e. poverty reduction, inflation control and the approval of the Dominican Republic - Central America Free Trade Agreement (DR-CAFTA).
Arias has concentrated efforts at the beginning of his administration on trying to advance the agenda of the approval of the DR-CAFTA. Costa Rica is currently the only signatory that still has not ratified the free-trade agreement and ratification will depend on a referendum to be held on the 7th of October 2007. For the agricultural sector, a ‘no’ might lead to a serious threat of multinationals leaving the country. Besides, it will enforce production in other Central America countries and put pressure on Costa Rican companies.
Besides the TLC, Arias has set a strong focus on becoming the first ‘carbon-neutral’ country in the world. This strategy could become very prosperous for the country as awareness on the world wide climate change is rapidly increasing. It can improve the image of Costa Rica as a country, an image which in fact has been rather strong and positive since the year 1949, the year the country gave up its army.

1.2.1.4.- Social aspects

Population

Development
Human Development Index (HDI) : 0.841 (rank 48) (2006)
Human Poverty Index (HPI-1) : 4.4% (rank 4) (2006)    (See Appendix C, Table c.1)

Working Population
Unemployment rate : 6.5% (2005)
Composition : 20% Agriculture; 22% Industry; 58% Service (2005)
For a Central America country, the significance of the service sector is much higher than in any of the other countries. The only country with similar figures is Panama. The role of agriculture is diminishing and therefore, the work force being active in this sector is getting smaller.

Immigration / emigration
6% of total population is residents of foreign nationality (est. 2000) although local data confirm that the non-resident immigrant population in Costa Rica is much higher.
During the 1970s and 1980s Costa Rica took in large numbers of refugees fleeing from civil war in neighbouring Central America countries, particularly from Nicaragua. More recently there has been a wave of Nicaraguan economic migrants. The actual number of migrants is likely to be much higher than the official 6 percent, as only a minority has legal status.
New immigration laws should help solve the enormous problems with immigrants and labour. The main objectives of new legislation are reduction of corruption within its own department and besides that, digitalization of procedures which would not only reduce corruption but also speed up processes and improve international communication on the status of immigrants.

Social stability
Costa Rica is a country which has known social and economic stability for many years. Education is rather good and compulsory at primary school. Illiteracy is hardly an issue. Besides that, the country has little numbers of indigenous people and thus a homogeneous population with a substantial middle class. Nevertheless, Costa Rica is one of the countries in Latin America where this middle class is diminishing rapidly.
Public unrest is limited to protests and demonstrations. The threat of mass protest to business operations is limited. The largest popular demonstrations in recent years (i.e. the government’s attempt to dismantle the telecommunications and energy supplier (ICE) monopoly) were almost entirely peaceful. Foreign businesses have not been targeted by protestors. The ratification of the CAFTA may prompt similar union protests; however these are not expected to be violent. However, due to the fact that many sectors are still government ruled by means of public monopolies, a strike can virtually paralyze a total sector and affect the economy seriously.

Bilingualism
The next generation is not yet bilingual, although there is a high demand from especially the service sector for such qualifications. Although education is obligatory, on the quality level there are still big improvements to be made. The majority of the population attends public school, which do not teach English as part of their standard program. A smaller part of the population, the more prosperous part, attends private school and in general are taught English.

1.2.1.5.- Safety

Economic prosperity and the welfare state have ensured that Costa Rica enjoys lower crime levels than in most Latin American countries. However, the country has not been isolated from the regional trend of increasing crime. Small crime and robbery have increased over the past decade, and unemployment levels sustain the risk of higher crime rates in the next years. There has been a handful of violent disputes, and abductions or killings of individual tourists, but set alongside the scale of the tourism industry these remain isolated incidents. The police fail to investigate most small crime cases, but have a better record regarding serious crimes such as armed robbery and murder.
Drug smuggling (i.e. cocaine trafficking) dominates the organised crime scene, as elsewhere in Central America. Organised crime poses little threat to business and corruption is low measured by regional standards. Kidnapping and extortion, especially of foreign executives, are rare.
On a company level, security is quite good although measurements have to be taken (company security) to keep it that way. Many private companies are supplying all kinds of services.

1.2.1.6.- Political aspects

Form of state
Presidential democracy with a Legislative Assembly

Constitution
The Costa Rican constitution has been in force since November 1949. It includes a clause forbidding the creation of an army. Foreigners are granted the same rights as Costa Rican citizens, except from political rights (e.g. suffrage).

Executive power
The executive power is formed by the President, which is elected for a period of four years by universal suffrage. He is supported by two Vice-Presidents and a Cabinet of fifteen Ministers (of which one also holds the Vice-President position).

Legislative power
The legislative power is constituted by a single chamber (‘Asamblea Legislativa’), consisting of 57 Parliament Members, elected every 4 years in a separate vote held on the same day as the presidential election by universal suffrage. Therefore it is possible for one party to control the executive branch and for congress to be controlled by another.

Judiciary power
Although the judiciary power has the reputation for being honest and independent, it fails to fulfil its constitutional task of effective jurisdiction. In general, a civil claim in Costa Rica takes six years before a verdict is returned. Criminal cases take less time, but still a few years should be reckoned with. The problem is well-known and since 2000 a reform plan is underway to improve the jurisdiction. The number of judges and magistrates increased, but complaints about inefficiency have continued to rise.

Autonomous agencies
The public administration includes a large number of decentralised autonomous agencies. The president does not have direct control over these agencies, but may influence them indirectly by means of general guidelines and through his power to appoint the executive president and half of the board of directors of each agency. The constitution declares the state to be the sole owner of hydroelectric power, hydrocarbon deposits (coal, gas and oil), wireless services, railways, ports and airports. As a result, several of the autonomous institutions, such as the ‘Instituto Costarricense de Electricidad’ (ICE, the electricity and telecommunications monopoly), the ‘Instituto Nacional de Seguros’ (INS, the state insurance monopoly) and the ‘Junta de Administración Portuaria y Desarrollo de la Vertiente Atlántica’ (Japdeva, a port administration and development agency of the Caribbean region), enjoy monopoly powers in their respective sectors of the economy. With signing the DR-CAFTA both the ICE and INS would be opened to international competition.

Main political parties
Government: Partido Liberación Nacional (PLN)
Opposition: Partido Acción Ciudadana (PAC); Partido Movimiento Libertario (ML); Partido Unidad Social Cristiana (PUSC), Partido Unión para el Cambio (PUC); Bloque Patriótico Parlamentario (BP); Partido Auténtico Herediano (PAH); Partido Renovación Costarricense (PRC); Partido Unión Nacional (PUN)

Political stability
Political stability and absence of violence indicator (PV): 0.76 (2005)
(See Appendix A, table a.1)
In contrast to many other Latin-America countries, Costa Rica has a long tradition of political stability and peace. Due to the abolishment of the armed forces, a situation of absence of military coups and other army initiated disturbances was created in Costa Rica, which is not the case for the other countries in the region.
Another factor that contributes to Costa Rica’s political stability is the fact that both President and Parliament Members are not eligible for election in two succeeding tenures. However, this is at the cost of administrative continuity. Furthermore, division of executive, legislative and judiciary power was established within the constitution reform of 1949. This constitution is still in effect at present.
Costa Rica is an active member of the United Nations and the Organization of American States. Costa Rica holds a seat on the Inter-American Court of Human Rights and on the United Nations University of Peace and many other international organizations related to human rights and democracy. Costa Rica's main foreign policy objective is to foster human rights and sustainable development as a way to secure stability and growth.

Effectiveness
Government effectiveness indicator (GE) : 0.30 (2005)
Regulatory quality indicator (RQ) : 0.61 (2005)
(See appendix A, table a.2)

Corruption
Control of corruption indicator (CC) : 0.38 (2005)
Corruption Perception Index (CPI) : 4.1 (rank 55) (2006)
(See appendix A, table a.3 and Appendix B, table b.1)

1.2.1.6.- Economic aspects

Currency
The Costa Rican currency is the Colón (¢) which has been linked to the dollar within a certain range until the year 2007. Since the moment it has become a currency which is not directly linked anymore to other currencies, the value has remained stable against the dollar (for exchange rate see table 1.1).

Developments
Industrialisation during the 1960s and 1970s, and the growth of export oriented manufacturing in the subsequent decades, transformed Costa Rica from a predominantly agricultural economy, with income mainly dependent on primary goods exports (bananas and coffee), to a more diversified economy with developed manufacturing and service sectors.
A substantial budget, which became available after the abolition of the army in 1949, was invested in the education of the population. This has lead to a relatively high literacy rate and an additional high political stability. As a result, Costa Rica attracts the most important part of Foreign Direct Investment (FDI) in Central America, with exception of Panama.
In the 1990s investments were concentrated in the industrial sector. Due to decreasing world market prices and increasing competition, the economy, traditionally based on agricultural products (e.g. coffee, bananas), switched to modern technological products (e.g. software, microchips, pharmaceutical industry), with the microchip processing company Intel being the largest investor. Lately FDI has shifted to agriculture, financial services and tourism. An issue related to tourism is that Costa Rica is an important retirement place for foreigners creating a steady flow of foreign currency coming in and giving a push to not only the construction sector but also on real estate.
The present economy of Costa Rica has a clear dual character, with a traditional domestic economy on one side and a modern export based economy on the other. Although some constraints (bureaucracy, lack of protection of intellectual rights, bad infrastructure, etc.) still hamper foreign investments in Costa Rica, in general FDI benefits from the same conditions as local investments. Furthermore, the government maintains an active policy for attracting foreign investment with strong value added.
Agriculture remains to be a major employer, accounting for 14.7% of employment in 2005 (EIU, 2005), and changing fortunes in the sector have a considerable effect on the level of private consumption. The dynamic tourism industry is becoming increasingly important, especially for job creations.
The government continues to struggle with its large internal and external deficits, persistent high inflation (10-14%) and sizable domestic debt. It is expected that the year 2007 will show a substantial lower inflation rate (8-9%). One of the instruments to lower the government debt would be privatisation of several state-owned enterprises, however is strongly opposed by a majority of the population as state ownership is widely perceived to have been instrumental in securing the country’s relatively high standard of living. Others perceive privatisation the key issue to be solved in order to remain competitive in the world economy.

Foreign investment
Foreign Direct Investment (FDI) in Costa Rica is largely led by the US with an average of more than 70% in the last years, while other investments including those of European origin vary a lot from one year to another. Also Mexico, Panama and Colombia represent an increasing share of FDI in Costa Rica. In 2006, European FDI was approximately 10% of the total, increasing from 4,5% in 2005 and putting Europe in second place as region of origin for FDI. Between 1995 and 2005, the total amount of European FDI was estimated at US$ 580 million and was concentrated essentially in the sectors of agro-industry, tourism, commerce, construction and services. The Netherlands, Germany, Spain, Italy, Belgium and France are the main European investors in Costa Rica. In 2006 total FDI amounted to US$ 1,436 million, which represents a significant increase in comparison to the 2005 figure of US$ 861.

Free trade zones
At the moment there are 9 Free Trade Zones present in Costa Rica for stimulation export. Free trade zones include several tax, credit and bureaucracy advantages (e.g. 100% exemption of import tax on goods that are used for production of export products, 100% exemption of sales and consumer’s tax, 100% exemption of income tax during the first 8 years and 50% exemption for the next 4 years, credit for creating employment in rural areas).
By 2005, 52% of the country’s earnings from merchandise exports originated from the free zones. The US microprocessor manufacturer Intel was one of the first, and remains one of the most important, foreign investors to benefit from the ideal combination of Costa Rica’s relatively well-educated labour force and fiscal incentives offered in the Free Trade Zones. Subsequently other companies followed. The nine Free Trade Zones (‘Zona Franca’) in Costa Rica are:

FORUM Zona Franca, Global Park Parque Ind. y Zona Franca, Parque Industrial El Guarco, Zona Franca América, Zona Franca BES, Zona Franca Metropolitana, Zona Franca Puntarenas (Saret), Zona Franca Saret Alajuela, Zona Franca Ultrapark.

(For more information: http://zonasfrancas.net/zonas.php)

DR-CAFTA
If approved, DR-CAFTA regulations will be implemented in 2008. It is supposed to result in an improved investment climate. Initial agreements have been made for free entry in the telecommunication and insurance sectors in 2007 and 2010 respectively.
The privatisation of state-owned enterprises raises resistance among the population. Many Cost Ricans believe that the wealth of the country was brought mainly through the state companies. Furthermore, the fear is raised that with privatisation of e.g. energy and telecommunication companies the prices of these goods and services would raise to levels unaffordable for common citizens. For up to date information see http://www.nethemb.or.cr/.

Regional development
Most industry is located in and around the capital, San José, on the central plateau, which has been the heart of economic activity, and population settlement since colonial times. San José lies on the eastern side of the plateau, and three of the country’s biggest cities, Alajuela, Heredia and Cartago, are within a 20km radius of its centre, forming what is generally referred to as the Greater Metropolitan Area. Notable exceptions to this industrial concentration include large citrus-processing and dairy plants in the northern plains, and cement plants in the north Pacific coast region.
Guanacaste, in the north-west of the country, was negatively affected by the demise of the cattle-rearing industry, which had been the main use of land in the region. However, in recent years, a significant reactivation has occurred owing to the growth of non-traditional export crops (such as cantaloupe melon), two major irrigation schemes and large tourism development projects. A recent tourism boom transformed this region into one of the fastest-growing provinces. Due to that, crops like melon are facing problems now due to competition with the construction sector on labour and due to sharply increasing prices for land.

1.2.1.8.- Fiscal aspects

Tax system
Costa Rica maintains a territorial tax system, which implies that any income generated within the physical territory of Costa Rica is subject to income tax. A territorial tax system taxes domestic income but not foreign income.

Income tax
The income tax imposed on companies and private persons is calculated as a percentage of the yearly gross income.

Sales tax
The sales tax is a percentage added to the sale and import of goods and the rendering of certain services. This tax is charged only once on the total of the goods in question. The general sales tax is imposed with a percentage of 13%.

Dividend
Dividends that are paid from a Costa Rican company to a foreign partner company are taxed with a 15% withholding tax.

Import Tax
All products which enter into Costa Rica are subject to import duties, which vary depending on the type of product that is being imported. The specific percentage that each item pays is set forth in the Customs duties list.
The percentage set forth in the Customs duty list is not the only variable that is considered in calculating the total import duties on a particular product. In addition to the import duty (‘impuesto arancelario D.A.I.’), the consumption tax (‘impuesto selectivo de consumo- S.C.’) the 1% tax of Law 6946 and the sales tax (‘impuesto de ventas -I.V.’) all become part of the calculation to determine the import duties.

Tax exemption
Costa Rican law allows tax exemption under certain conditions. There are the Zonas Francas (Free Trade Zones) where no taxes apply and for the agricultural sector the import of supply materials is exempted by law and a directive of the Ministry of Agriculture. If the supply materials are not exempted by law the tax exemption has to be applied for with the Ministry of agriculture and the Ministry of Economies, Industry and Commerce.

1.2.1.9.- Invesment capital

Availability and capital guarantees
Both Costa Rican private and state banks have a general interest of finance in the agricultural sector as long as real estate can be offered as guarantees. Normally 70-80% of the value of the guarantee can be offered as a total of finance.

Interest rates
Lending rate (CR¢): 24.7% (2005)
Deposit rate (CR¢): 10.1%             (2005)
Private banks normally finance in US dollars and manage the international prime rate plus an extra percentage (e.g. +1,5%) adjustable if the prime rate changes.
In Costa Rica recently a movement in the private banking sector has been realised whereby international renowned banks have presence in the Costa Rican financial market.
The Dutch FMO offers a full range of financial instruments for the benefit of private companies and financial institutions in developing economies and therefore all countries in Central America. A mix of funding can be provided to meet the needs of individual projects (see www.fmo.nl).

1.2.1.10.- Infraestructure and communication

Roads
Compared to other countries in the region and taking into account Costa Rica’s limited area and inhabitants, there is a relatively extensive road network present but of poor quality which not seems to be based on any master plan. It covers 35,332 km, of which 12% asphalt, 71% paved and 17% not paved.
Secondary roads often show holes of missing asphalt parts. Outside the highlands roads are of less quality, with mostly only gravel like pavement, where 4 wheel drive cars are preferable.
Main connections exist between the ‘Valle Central’, Puntarenas, Caldera and Quepos at the Pacific Ocean and Limón at the Caribean coast. Furthermore, the Pan American Highway connects Costa Rica with neighbouring countries Panama and Nicaragua, and serves as a backbone for a series of secondary roads.
In general, the maintenance of roads and signposting are poor and behind on schedule. Maintenance costs are high because of the high levels of rainfall, rugged terrain and frequent landslides and floods. Another disadvantage of Costa Rica’s road network is the fact that all roads run through the capital San José, which makes direct transport from city to city impossible without crossing San José. The poor infrastructure in and around San Jose implies serious traffic problems as a result.

Airports
Costa Rica has 2 international airports, one 16 km north-west of the capital San José (near Alajuela), the other one in the north near Liberia. Most important is Juan Santamaría in Alajuela, near the capital San José. Every year, about 2 million passengers make use of the airport. Every day there are flights to both domestic and foreign destinations. Domestic flights are by small propeller aircrafts, which are subsidized by the government. In the year 2000, the management of Juan Santamaría was placed in the hands of a private consortium. The airport is being expanded and modernized and there are plans to convert Juan Santamariá into an international hub for the region and to double its capacity by 2010.
Cargo to Europe can be shipped by various carriers. However, direct flights to the European continent are not available, except for an Iberia flight to Madrid. For the Netherlands, the most frequently used carrier is MartinAir. Due to reorganization within MartinAir and future policies of KLM-Air France, there is uncertainty at this moment about the future cargo transport to Europe from Costa Rica. The second airport is Daniel Oduber near Liberia, but is seldomly used for cargo transport.

Harbours
Costa Rica has 4 important harbours: Puerto Limón, Moín, Puntarenas and Caldera, and two less important harbours: Puerto Golfito and Quepos. Puerto Limón and Moín, located on the Caribbean coast, are responsible for 80% of all sea freight. The harbours are however characterized by lack of efficient management, which causes the cost per ton of moving cargo in the country’s main ports to be considerably higher than that of most other ports in Central America. The harbours in Costa Rica are controlled by a state-run organization named Japdeva.
In early 2002, concessions for construction operations at Puerto Caldera were awarded. Roughly US$ 52m in private-sector investment is needed to improve port services. Puerto Caldera handles less traffic than the Atlantic ports, but if the concessions prove successful it could motivate the government to seek private-sector involvement in running Moín and Limón. However, the port workers unions are militant and pose a serious obstacle to reform. There influence is still strong and as a result, they still maintain to have ports closed for several days a year because of holidays while most international ports are opened year round.

Railroads
Plans are being developed to revive the use of the existing railroad system which covers 950 kilometres and connects both the country’s coasts through San José. It is unlikely that agricultural companies will be able to benefit from these plans on the short-medium long term.

Telephone
Telephone mainlines : 316 /1,000 people (2006)
Cellular subscribers : 217 /1,000 people (2006) (appendix C, table c.1)
The Costa Rican Institute for Electricity (ICE) and its subsidiary Radiográfica Costarricense (Racsa, which pioneered telecoms services in Costa Rica from 1920 and now specialises in data and Internet services) hold a monopoly on telecoms.
Costa Rica has an advanced national telecommunications network and enjoys a high fixed-line telephone density, about 33 lines per 100 people in 2005. The quality of the service for landlines is fairly good but insufficient on mobile connections. There still is a shortage of lines and due to the fact that there is no competition, the threat of strikes is significant.
Tariffs are under government control and therefore still low in Costa Rica which is a major reason for the fact that a large part of the population still remains confident on the benefits of a state-ruled telecommunications sector. The fact that telecommunications are still state owned is regarded as a serious threat for the future infrastructural development of Costa Rica. The possible approval of DR-CAFTA would automatically change this situation drastically.

Internet
Internet users: 235 /1,000 people (2006) (appendix C, table c.1)
The Cable Maya fibre-optic link has enabled the country to link via the Internet at high speed to the rest of the world. Internet connections are available in Costa Rica’s larger cities. The service is taken care of by RACSA and both telephone and fast cable connections are possible. Use of the Internet is high compared to the rest of Central America, despite being hindered by the state telecoms monopoly. Reasons for this are the relatively big size of Costa Rica’s middle class and the low rates in Costa Rica. RACSA estimated in October 2005 that around 17% of households have access to the Internet at home. Around 400,000 Costa Ricans are estimated to have access to the Internet at work.

Electricity
Until 1990 The Costa Rican Institute for Electricity (ICE) had a monopoly on electricity generation and distribution, however, since 1990 the ‘electricity co-generation act’ authorised limited private investments in hydroelectricity, wind power and geothermal plants. In 2004 private plants accounted for about 10% of the total capacity. Electricity facilities are available throughout the country, with electricity coverage to 97% of the population.
About 85% of Costa Rica’s energy supply is from environment friendly sources. The main source of power is hydroelectricity (67% of total capacity). Numerous volcanoes in Costa Rica are exploited for geothermal electricity generation (8% of total capacity). Another 10% is generated by alternative sources like solar and wind energy.
Costa Rica does have access to domestic fossil fuels, however chooses not to drill to prevent negative impact on the environment and therefore is fully dependent on import for these fuels. Annually about $400 million of oil and petroleum is imported.
Due to the fact that Costa Rica depends for 67% on hydroelectrically power, power cuts were experienced in the summer of 2007 due to the dry period and low levels of the reservoirs used for the production of hydroelectricity.

1.2.1.11.- International trade agreements

Multilateral Agreements:

• WTO; signed 07 may 1995

Customs Union

Free Trade Agreements

Partial Preferential Agreements

(For more information: http://www.sice.oas.org/ctyindex/CRI/CRIAgreements_e.asp)
In 2002 and 2003 the five countries of the CACM negotiated with the U.S. about a free-trade agreement (DR-CAFTA). All the parties agreed on the DR-CAFTA, except Costa Rica, which still requires ratification on the agreement by its congress. A referendum to be held on the 7th October 2007 will be decisively.

After almost seven years of negotiations, Costa Rica and Panama signed an FTA at end-June 2007, which includes immediate tax-free access for trade of 94% of industrial products and 82% of agricultural goods. Potatoes, onions, coffee, rice, sugar, palm oil, dark chicken meat and pork were excluded, while different tax reduction schedules were set up for a series of other agricultural and industrial products. Although approval of the FTA with Panama by Costa Rica’s legislators is considered to be almost certain, as there is no opposition to it, the treaty will only be sent to Congress after the referendum on DR-CAFTA, and is expected to come into effect from January 2008

1.2.1.12.- Labour

Availability
Although Costa Rica faces a rather high percentage of (illegal) immigrants, there is a significant shortage of unskilled labour. Due to the strong increase of construction works for both tourism as well as new foreign residents mainly proceeding from the USA and Canada.

Quality
The Costa Rican government gives high priority to education of the population. The budget that came available after the abolition of the military force of Costa Rica in 1949 was invested in health care and education, resulting in a literacy rate of 96% and a high average education of the working population. Therefore, Costa Rica has an excellent reputation in the field of human resources, as well for multinationals as for industrial and agricultural companies. The unemployment rate of Costa Rica is one of the lowest in the area.
Costa Rica has free and compulsory primary and secondary education. Nevertheless, over 16% of the children older than 12 year premature leave the primary education (2006), and since 1980 about 50% of all students leave high school without a diploma. The quality of teaching remains a concern, as about 20% of the teachers lack formal qualifications.

Minimum wages
The minimum wage in Costa Rica is based on the ‘cost-of-living index’, which is adjusted every half year by the ‘Consejo Nacional de Salarios’ (CNS). In periods of high inflation, adjustments can be made more often. The CNS consists of the Ministry of Employment, employers' associations and labour unions.

Labour unions
In general labour unions only exist in the public sector. In the private sector ‘Asociaciones Solidaristas’ can be found where employees and employers work together to prevent conflicts. About 15% of the working population is a member of such a union.
Labour Unions have lost much of their influence due to the withdrawal of some multinational companies which were generating many jobs. Costa Rica can be considered as a social country in which the rights of the people are quite well protected by law.

Public holiday
January 1st; April 11th (Battle of Rivas); Maundy Thursday and Good Friday; May 1st (1856 Campaign and Labour Day); July 25th (Annexation of Guanacaste); August 15th (Day of Virgin Mary’s Assumption to Heaven and Mothers’ Day); September 15th (Independence Day); and December 25th (Christmas).

1.2.1.13.- Climate and natural resources

Climate
The country’s complex topography produces five climatic zones and many microclimates. The climatic diversity encourages specialisation of agriculture in different areas. In broad terms a rainy season runs from April to October, and a dry season from November to March. The country is fortunate in being less affected by natural disasters than many of its neighbours. Hurricanes coming from the Atlantic through the Caribbean tend to pass to the north of Costa Rica, leaving it relatively unscathed, as in the case of Hurricane Mitch in 1998. The country has several active volcanoes, notably Arenal, and suffers regular minor earthquakes. The last major earthquake was in 1991.

Average climate of San José
Hottest month : June (average 24-29°C)
Coldest months : December-January (average 21-27°C)
Driest month : February (5mm average rainfall)
Wettest month : September (305mm average rainfall)

Natural resources
Costa Rica has a total land area of 5.06 million hectares. Arable and permanent crop land as percentage of land area: 10% (source: FAO).
The prices of land in Costa Rica have risen significantly in the last years. Because of the expansion of the pineapple production in the Caribbean lowlands the average price of a hectare of land has risen. On the Pacific coast both tourism and new foreign residents mainly proceeding from the USA and Canada force up the price of land.

1.2.1.14.- Subsidies and development programs

Costa Rica provides no subsidies on sectors and/or crops included in this market study. Costa Rica receives little support of international development programs. International development programs are mainly focused on the public sector (e.g. transport, health care). The Dutch EVD has the programs CPA, PSB and PESP available for Costa Rica (see Appendix G).

1.2.1.15.- Agricultural sector organization and trade promotion

Agricultural sector organizations
The principal public bodies involved in agricultural and rural development are the Ministry of Agriculture and Livestock, the Council for National Production, the Rural Development Programme, the Agrarian Development Institute, the National Seeds Office, the National Irrigation and Water Supply Department and the Integrated Agriculture and Livestock Marketing Institute. In addition, several non-governmental bodies play an important role in the sector, such as the National Banana Corporation, the Coffee Institute or the Agro-Industrial Sugar Cane League.
Costa Rican producers are organized by national chambers per product or product group. For example there are chambers established for ornamental producers, melon growers and pineapple growers. The individual chambers are grouped in the Chamber of Exporters of Costa Rica (CADEXCO). See also: http://www.cadexco.net.

Trade promotion
Promotora del Comercio Exterior de Costa Rica, PROCOMER is an agency of the Ministry of Foreign Trade and responsible for trade promotion of Costa Rica products and was created by law in 1996. 
The services offered by PROCOMER are oriented towards the needs of Costa Rican companies who want to participate in a successful way in international markets. PROCOMER has national and international presence (international office in Belgium for the European Union). The strategic objectives of PROCOMER are:

PROCOMER issues the export permits and administrates export data.
(See also: http://www.procomer.com/)

Ministry of Agriculture
The functions of the Ministry of Agriculture have been defined by a national decree and focus on the planning, improvement and protection of the agricultural sector in Costa Rica. The mission of the Ministry of Agriculture is described as ‘agricultural and rural development in function of economic and social improvement of the country, the quality of life of its inhabitants en the conservation of the natural resources, through processes of generating and transfer of technology, formulation and implementation of agricultural policies and phytosanitary and veterinary norms’. 
The Ministry of Agriculture has defined a National Development Plan 2006-2010 for the agricultural sector. The main focus of this plan is to improve the competitiveness and creating added value to stimulate the national economy by integrated management of the production chain. (See also: www.mag.go.cr) 

The State Phytosanitary Service (‘Servicio Fitosanitario del Estado’) is a department of the Ministry of Agriculture. The mission of this department is described as ‘protect the national agricultural patrimony against plagues of economic importance and quarantine plagues, apply phytosanitary measures that regulate the movement of plants, parts of plants and regulated products as well as watch to the compliance of technical and legal regulations of chemical and biological substances to protect the human health and the environment’. (See also: http://www.protecnet.go.cr/)
The State Phytosanitary Service issues importing and exporting permits and carries out the physical inspections of both imports and exports.