Our comprehensive assessment of Costa Rica's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Costa Rica, as well as the latest industry developments that could impact Costa Rica's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Costa Rica before your competitors.
Costa Rica Country Risk
External Tailwinds Supporting Regional Underperformers
Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook - a situation which is only exacerbated by the fragmented political environment.
In contrast, our outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their manufactured goods, rising remittance inflows and lower oil prices in the quarters...
Costa Rica Industry Coverage (9)
Costa Rica Agribusiness
BMI View: Coffee production in the Central America region will remain at risk over the next few years as the nature of subsistence farming will limit investment into safeguards against diseases such as coffee rust (roya). Countries in Central America are generally dependent on corn imports and we expect the corn production deficit to widen over our forecast period. Strength in the US dollar over this time frame will hurt the capital accounts of the region's countries. We believe the region's sugar industry will post strong growth over the coming years despite low international prices.
|Honduras Agribusiness To Outperform|
|Select Countries - Agribusiness Market Value (USDmn)|
Costa Rica Autos
BMI View: The outlook for the autos industry in the Central Americas region in 2015 is modest, with tepid sales growth expected in some markets, but contractions likely in others. This is broadly in line with our outlook for the Latin America region, although many markets in Central America are small in volume terms, and modest changes in sales figures could have a relatively large impact on the year-on-year growth rate.
Income distribution across much of the region is highly unequal, and the majority of headline spending growth comes from the relatively wealthy sections of the population. This income structure is likely to continue to restrict growth in the regional autos sector.
Food & Drink
Costa Rica Food & Drink
BMI View: The economic trajectory for the region remains divergent. Despite our expectations for slower real GDP growth in Panama in the next several years, it will remain the regional outperformer. On the other hand, we have a more mixed outlook for growth in the 'northern triangle' countries. While they will likely benefit from improved agricultural yields and stronger US demand for manufactured goods, Guatemala, Honduras and El Salvador are still vulnerable to significant structural macroeconomic weaknesses as well as ongoing political risk/gang violence. We have upgraded our 2015 real private consumption growth outlook for several Central American economies, mainly due to an uptick in remittances from the US and the positive effect of cheaper fuel prices on household spending....
Costa Rica Freight Transport
BMI View: We expect improvements and growth at different levels in Central America. Heavily dependent on road freight, the countries' economies will benefit from cheaper fuel prices and exports to the US. Air freight will grow faster than road freight thanks in part to low custom tariffs and several trade agreements signed by some countries in the region.
Central American economies are fairly similar, depending heavily on road transport. In most of the countries even though air freight is growing quickly in absolute terms, it will not challenge the importance of road freight over the medium term. Improved relations...
Costa Rica Infrastructure
BMI View: We forecast an average of 2.1% real growth for the six construction industries of Central America in 2016. The decline from our forecast for 2015 - 4.9% - is mainly due to a steep drop-off in Panama as it concludes expansion of the Panama Canal and a normalisation of a housing boom in Nicaragua. The region will still offer significant opportunities: the transport sector will see strong growth as development funds target regional integration and Panama...
Costa Rica Insurance
BMI View: Central America's insurance markets are diverse in terms of size, ranging from Nicaragua's total premiums of just USD180mn to Panama's at almost eight times that size. Most will grow quickly, albeit constrained by dollar strength, and a broad trend towards health insurance products will continue to spark growth. Fragmentation offers opportunities to both new and existing players. Product innovation, particularly in low-cost alternatives, has been limited but has the potential to deliver long-term growth in many sectors.
BMI expects Central American insurance markets to continue to grow rapidly in the coming years. Annual growth rates...
Pharmaceuticals & Healthcare
Costa Rica Pharmaceuticals & Healthcare
BMI View: Legislative and regulatory improvements to the Central American healthcare system will further strengthen sector coordination, enhancing medical efficiencies and treatments over the long-term. The region's ageing population and dependence on pharmaceutical imports will increase foreign investment appeal as public health provision grows.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +4.6%. Our forecast has been maintained since Q115.
Healthcare: USD16.5bn in 2014 to...
Costa Rica Telecommunications
Number porting in Panama increased 37.4% in 2014, highlighting that the population is increasingly more willing to take advantage of better available deals as they switch operators.
It is likely that the share of pre-paid mobile subscriptions in Costa Rica will increase in 2015 as the regulator SUTEL made it mandatory for pre-paid users to register to boost mobile number portability in the country. BMI has downgraded the mobile outlook for Guatemala as it emerged that the government is planning to implement a new tax on mobile operators as of 2015.
Key Trends And Developments
Discussions over the introduction of number portability (NP) in El Salvador are ongoing. El Salvador's Superintendencia...
Costa Rica Tourism
BMI View: Costa Rica's tourist industry is set to maintain steady growth over the medium term, underpinned by rising arrivals from its key source markets in North and Latin America. We view this market as benefiting from considerable government support, particularly in the area of improving transport infrastructure. Costa Rica's political and social stability compared to many of its peers in Central America also make it an attractive investment destination for international hotel chains, despite its comparative expensiveness on a regional basis.