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 have turned more negative on our short-term outlook regarding the regional sugar industry as a result of low international prices, but expect Central America to remain self-sufficient in sugar and even increase its potential for sugar exports out the long term. In this time frame, the sugar industry has strong potential to attract investment.
|Honduras Agribusiness To Outperform|
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Costa Rica Autos
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. 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.
Headline Industry Data (regional averages)...
Costa Rica Freight Transport
Oil Prices Boost Regional Freight Prospects
Since our last quarterly report it is clear that as 2015 began, international oil prices slumped more sharply than most analysts had been expecting. It is also evident that they will remain lower than at first projected for 2015 as a whole. This is good news for the Central American freight transport sector in various ways. First, it helps strengthen the US recovery, which boosts US demand for Central American exports, as well as increasing remittance payments sent back home by Central American migrant workers. Second, it creates a windfall saving on import costs which raises consumer spending and may find its way into increased freight demand. And third, because fuel costs are a significant item for freight companies, it improves operating margins for the industry.
That said, the freight industry improvement will be relatively limited. Higher demand...
Costa Rica Infrastructure
BMI View: We currently forecast an average of 2.3% real growth in Central America's construction industry value for 2015, which is considerably higher than our regional average estimate for 2014 at 0.4%. We expect Honduras, El Salvador and Nicaragua's construction industries to return to positive growth in 2015 while Panama's will contract, as the completion of the Canal expansion nears its end.
We see high risks, small scale and limited growth opportunities across the region as a whole. A crucial factor underpinning our forecasts for infrastructure investments in future years is political and security risk. This is a particular concern in El Salvador, Honduras, and...
Costa Rica Insurance
Pharmaceuticals & Healthcare
Costa Rica Pharmaceuticals & Healthcare
BMI View: A growing ageing population, favourable tax incentives and high demand for medicines confirm Central America's ability to continue offering revenue-generating opportunities to foreign drugmakers. However, the region's growing preference for traditional medicines could interfere with productive sales in coming years.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +5.6%. Our forecast has been revised upwards since Q115 due to historical data.
Healthcare: USD16.8bn in 2014 to USD17.8bn in 2015; +5.7 %. Our forecast has been revised upwards since Q115 due to revised historical data.
Costa Rica Telecommunications
BMI View: Number portability, with four out of eight countries having implemented or in the process of implementing a form of number porting, should encourage an increase in competition, but the progress will depend on the commitment of the individual countries. Mobile forecasts show much slower growth across the board, with only Nicaragua offering any real growth potential. Increasing government interference, as is the case of Guatemala, is a worrying new development. Data-driven 3G/4G services will offer real growth potential as all the large operators are investing heavily into new infrastructure.
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.
Costa Rica Tourism
Costa Rica's tourism market will perform well in 2015, with strong arrivals from North America reflecting its attractive market fundamentals. We expect this to feed through into rising investment in the tourist industry, especially as the market cements its pre-eminent position within Central America.
We expect Costa Rica's tourism industry to perform well in 2015, with overall tourist arrivals projected to increase by 5.4% to 2.8mn. This strong growth confirms our review that Costa Rica is one of the most attractive tourism markets in the region, with attractive destinations, good infrastructure and high levels of security making it a popular destination, particularly for tourists from North America. Indeed, we expect arrivals from North America to increase by 7.2% in 2015 to 1.3mn as rising GDP growth in the US in particular encourages departures. Arrivals from Latin America will also grow, by 4.1% to 1.1mn, indicating that...