Costa Rica

In-depth country-focused analysis on Costa Rica's economic, political and operational risk environment, complemented by detailed sector insight

Costa Rica

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.

Country Risk

Costa Rica Country Risk

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External Tailwinds Supporting Regional Underperformers

Core View

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...

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Costa Rica Industry Coverage (9)


Costa Rica Agribusiness

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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)

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Costa Rica Autos

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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.

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Food & Drink

Costa Rica Food & Drink

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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)


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Freight Transport

Costa Rica Freight Transport

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Oil Prices Boost Regional Freight Prospects

Lower oil prices remain a positive factor for the Central American economies as a whole, as does the US recovery, with positive side-effects for the freight industry. Increased remittances from migrant workers in the US will also boost purchasing power. But uncertainties and problems remain. While the region's coffee exports are recovering from coffee leaf rust disease, generally weak commodity export prices in general are holding back export volumes. Many governments in the region are also struggling to control fiscal deficits and foreign debt levels, putting a ceiling on expected rates of GDP growth. Also, continuing high levels of crime, coupled with protests over corruption and other issues (particularly in Guatemala) have maintained a relatively high level of political risk.

Our view is that for road freight, the dominant form of cargo...

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Costa Rica Infrastructure

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BMI View: We currently forecast an average of 3.6% real growth in Central America's construction industry value for 2015, which is considerably higher than the regional average for 2014 at 1.3%. We expect Honduras and El Salvador's construction industries to return to positive growth in 2015 on the back of increasing government support for infrastructure projects and a strengthening project pipeline, particularly in the transport sector.

Despite the small size of their construction industries, Central American countries present a wide range of small-scale opportunities (albeit the inter-oceanic canal projects) as the region aims...

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Costa Rica Insurance

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BMI View: Central America's insurance markets are diverse in terms of size, ranging from Nicaragua's total premiums of just USD170mn to Panama's at almost ten times that size. Most are growing quickly, and a broad trend towards health insurance products will continue to spark growth. Many markets remain fragmented, and opportunities abound for acquisitions both from within and without. 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 outside Nicaragua, the region's underperformer, will consistently hit high single-digit rates, with some sectors consistently posting growth rates in excess...

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Pharmaceuticals & Healthcare

Costa Rica Pharmaceuticals & Healthcare

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BMI View: Growing demand for pharmaceuticals, compounded by underdeveloped manufacturing capabilities will ensure commercial opportunities for foreign investors within Central America over the long term. Multinational drugmakers and medical suppliers will also continue to benefit from favourable tax incentives and growing medicine consumption driven by a booming burden of chronic disease. Sluggish economies and political instability will remain problematic, though pharmaceutical and health expenditure will continue to rise throughout the region.

Headline Expenditure Projections

  • Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +5.6%. Our forecast has been maintained since Q315...

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Costa Rica Telecommunications

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Key Data

  • 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...

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Costa Rica Tourism

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BMI View: We expect positive arrivals growth of 2.4% in 2015, with strong arrivals from North America offsetting declining arrivals from Europe. However, we expect growth to moderate in the medium term, leading to lower levels of investment and development.

Costa Rica's tourism market is one of the most developed in Central America, benefiting from political and social stability and a well-developed coastal resort area that attracts a steady stream of visitors, particularly from North America and Europe. While the rest of the country is less well set-up for tourism, with a cohesive transport network being a particular lack, the government is supporting infrastructure projects that will provide long-term improvements for the tourism market. One concern is that the market is heavily dependent on arrivals from the US, and would be vulnerable to a sudden decline in US tourists. Nonetheless...

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