Overview

Costa Rica is a development success story in many respects. An upper middle-income country, the country has experienced steady economic expansion over the past 25 years. The post-1980s economic growth is the product of a strategy of outward-oriented, export-led growth, openness to foreign investment; and gradual trade liberalization.

Costa Rica is also a global leader for its environmental policies and accomplishments, which have helped the country to build its Green Trademark. The pioneering Payments for  Environmental Services (PES) program has been successful in promoting forest and biodiversity conservation and Costa Rica is the only tropical country in the world that has reversed deforestation.

The combination of political stability, the social compact, and steady growth, has resulted in one of the lowest poverty rates in LAC. Using the poverty and extreme poverty lines of US$4 per day and US$2.5 per day respectively, just 12 percent of the Costa Rican population is considered poor, and 4.7 percent extremely poor (about one third of the LAC average).

Moreover, only 1.4 percent of the population lives under the US$1.25 poverty line. The country’s success over the past decades is also reflected in its strong human development indicators, which continue to rank higher than those of other countries in the region.

Costa Rica’s GDP per capita has tripled since 1960 and its growth averaged 4.5 percent between 2000 and 2013, as compared to the LAC average of 3.8 percent for the same period.

During the global crisis, real GDP growth slowed to 2.7 percent in 2008 and contracted by 1 percent in 2009. The economy rebounded following the crisis, achieving an average real growth rate of 4.9 percent between 2010 and 2012. Growth decelerated to 3.5 percent in 2013, and remained stable in 2014. It is not likely to change in 2015 but is expected to pick up in 2016 to 4.2 percent.

Despite the solid growth over the past decades, two pressing development challenges stand out: the deteriorating fiscal situation and stubborn inequality. These challenges cut across the fabric of Costa Rica’s development model and affect the basic pillars of development: inclusion, growth, and sustainability.

The new government seeks to address these problems and is committed to an inclusive society that guarantees the welfare of its people, supported by transparent and accountable public institutions.

Last Updated: Dec 23, 2015

The World Bank and the Government of Costa Rica developed the Country Partnership Framework (CPF) for 2016-2020 to strengthen the World Bank-Costa Rica relationship.

This CPF, that reflects analytical underpinings from Systematic Country Diagnostic, is the fourth prepared for Costa Rica following a period of limited Bank engagement.

The preceding CPFs established a framework for a closer partnership between the World Bank Group and Costa Rica based on mutual learning and knowledge sharing.

This four-year CPF features a highly selective program that is organized around the following two strategic pillars: (i) reducing constraints to productive inclusion; and (ii) bolstering fiscal, social and environmental sustainability.

Based on this new CPF, the WBG is supporting the Government’s efforts to bolster fiscal sustainability, increase the efficiency of its fiscal management and strengthen its capacity. Cooperation also includes a health loan in the amount of US$417 million to support the efforts of the Government to improve the efficiency and quality of the universal health insurance system.

The WBG is also working toward a green and inclusive growth of rural Costa Rica through mainstreaming sustainable management practices and decision support systems in productive landscapes and improvement of the competitiveness of rural supply chains.

The active portfolio in Costa Rica includes two projects, the Higher Education Improvement Project and a Development Policy Loan with Catastrophe Deferred Drawdown Option, totaling US$265 million in net commitments, of which US$217 million remain undisbursed as of September 15, 2015.

Environmental and climate change interventions continue to be supported through trust funds, such as the Forest Carbon Partnership Facility, Costa Rica’s REDD+ strategy, and Partnership for Market Readiness. The country is working to institutionalize Natural Capital Accounting (NCA) with support from the Wealth Accounting and Valuation of Ecosystem Services (WAVES) initiative.

An array of analytical work has been completed in recent years, among others, a social sector expenditure and institutional review, work on green and inclusive growth, a low carbon strategy, and a 2015 Gender Assessment.

Summary of main active projects in Costa Rica:

Higher Education Project: The objective of this investment operation is to increase equitable access and improve the quality and relevance of the public higher education system in Costa Rica. The Project is helping four public universities increase access by investing in infrastructure for teaching, learning and research and increase the quality of academic programs by fostering evaluation and accreditation.

Catastrophe Deferred Draw Down Option (CAT DDO): The project provides a source of immediate liquidity in case of a natural disaster. It also complements other instruments in the country and provide a source of bridge financing while other sources are being mobilized following a natural disaster.

Last Updated: Dec 23, 2015

Higher Education Project: Costa Rica’s public higher education system has been benefitted by an improve in access and quality. Enrollment in undergraudate has reached 96.833 students (end target for 2017: 102.814); and graduate 7.063 (end target for 2017: 7.524).  The total number of officially accredited programs in the four universities participating in the Project has reached 68 (end target for 2017: 85).  In the area of infrastructure, there are more than 8 projects under construction, including new schools and faculties, research laboratories and dormitories.

Ecomarkets II Project: The project succeeded in increasing Costa Rica’s Payment for Environmental Services (PES) contract coverage and land areas under PES coverage. The number of small and medium sized landholders participating in the PES program increased significantly by 120.7% between 2008 and 2014 exceeding both the original and revised target values of 50% and 85%, respectively. Also 296,904 ha of land are maintained annually under PES contracts since 2014, which represent an increase of 19% compared to the baseline value of 250,000 ha in 2008, providing environmental services of local and global importance.

Disaster Risk Management (DRM) programs: Costa Rica’s preparedness to respond to disasters has further improved with risk reduction and prevention programs. The regulatory and institutional DRM framework was strengthened with the introduction of a legal framework that requires all new public investments to follow DRM best practices and include a hazards assessment. This enhanced capacity of Costa Rica to implement its DRM program was supported by the WBG’s CAT DDO, which continues to provide a source of immediate liquidity in case of a disaster.

Equity and Efficiency of Education: Aiming to improve education in terms of access, quality, completion, and equity, this project helped build 75 schools and 230 classrooms and provided scholarships for 184,000 students, as well as transportation to schools for almost 100,000 beneficiaries.

Reimbursable Advisory Service (RAS) for health sector: The WBG helped develop a roadmap to increase efficiency and quality of health services over the short and medium term. The results of this RAS are used by the Government to develop a medium and long term strategy to enhance sustainability and equitable access to services provided through social health insurance.

Last Updated: Dec 23, 2015


LENDING

Costa Rica: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments