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Overview

  • In many aspects, Costa Rica is a success story in terms of development. It is considered an upper middle-income country, which has shown a steady economic growth over the past 25 years. This growth resulted from an outward- oriented strategy, based on the 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 build its Green Trademark. The pioneering Payments for Environmental Services (PES) program has been successful in promoting forest and biodiversity conservation; making Costa Rica the only tropical country in the world that has reversed deforestation.

    The combination of political stability, social contract and steady growth has resulted in one of the lowest poverty rates in Latin America and the Caribbean, where the proportion of the population with incomes below US$ 5.5 per person per day decreased slightly from 12.9 to 10.7 percent between 2010 and 2016.

    The success of the country in recent decades is also reflected in its strong indicators of human development, which have contributed to move the country up the global ranks, higher than the other countries in the region.

    While these achievements are celebrated, the country needs to focus on maintaining the steady growth, and in continuing poverty reduction amid the COVID-19 (Coronavirus) pandemic which has hit hard Costa Rica.

    The country now faces the risk of a sudden interruption in capital flows. The Gross Domestic Product (GDP) is projected to fall in 2020 to -5.4 percent. Poverty and unemployment are expected to increase, partly due to the impact of the health emergency on tourism and trade, plus a contraction in areas such as agriculture and construction. However, a rebound is expected by 2021 as restrictions are lifted and supported by accommodative monetary policy and reforms related to the Organization for Economic Cooperation and Development (OECD) accession process, along with fiscal consolidation efforts.

    Two pressing development challenges stand out: the fiscal situation and persistent inequality. These challenges affect the basic pillars of the Costa Rican development model: inclusion, growth, and sustainability.

    The government has strived 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: Oct 09, 2020

  • The World Bank and the Government of Costa Rica established a Country Partnership Framework (CPF) to strengthen the World Bank-Costa Rica relationship. This CPF reflects analytical underpinnings from the Systematic Country Diagnostic, and is the fourth prepared for Costa Rica.

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

    The current CPF features a highly selective program that is organized around the following two strategic pillars:

    · Reducing constraints to productive inclusion; and

    · Bolstering fiscal, social and environmental sustainability.

    Based on this CPF, the WBG is supporting the Government’s efforts to bolster fiscal sustainability, increase the efficiency of its fiscal management, and strengthen its capacity.

    The active portfolio in Costa Rica includes four projects totaling US$952 million in net commitments. Cooperation includes a health loan in the amount of US$420 million to support the efforts of the Government to improve the availability and quality of the universal health insurance system.

    Other projects, approved on March 2020, will support the Government in their policy response during the health crisis and after to ensure fiscal sustainability. The Sustainable Fisheries Development Project in the amount of US$75.1 million will help fishermen increase productivity and sustainability, while the Fiscal Management Improvement Project in the amount of US$156.64 million will ease tax compliance and border-closing costs and improve expenditure management.

    Furthermore, last June a US$300 million loan was approved to support Costa Rica’s Government program to protect people’s income and jobs from the impact of COVID-19 (Coronavirus), benefit small and medium enterprises (SMEs), reinforce fiscal sustainability in the aftermath of this health crisis, and to lay out the foundations for a strong post pandemic recovery by promoting green growth and low-carbon development.

    The WBG is also working toward a green and inclusive growth of the rural territories through mainstreaming sustainable management practices and decision-making support systems in “productive landscapes”; in other words, those territories that are productive both for their natural beauty and, also for the activities developed in them (agricultural, forestry, fisheries, tourism, and others). Support also aims to improve competitiveness of rural supply chains.

    Environmental and climate change interventions continue to be supported through trust funds, such as the Forest Carbon Partnership FacilityCosta Rica’s REDD+ strategy, and Partnership for Carbon Market Readiness (PMR). In addition, support is provided to enforce a Sustainability Protocol at the Reventazón Hydroelectric Plant of the Costa Rican Institute of Electricity, an international example that proves it is possible to develop hydroelectric projects applying the industry´s best environmental and social practices. Support is also given to the country through the Disaster Risk Management Financial Strategy, which is expected to be approved in the next months.  

    Regarding energy and transportation electrification, the World Bank supports the initiative to transition towards an energy model that optimizes the use of native resources.

    The decarbonization of the industrial and transport sectors is sought through the progressive electrification and diversification of the energy matrix, in an environment of greater regional integration and opening of international energy markets. The following trusts support this undertaking: the Spanish Fund for Latin America and the Caribbean, the Korean Fund for Sustainable Growth, the Alliance for the support of the National Determined Contributions (NDCs) achievement and the Energy Sector Management Assistance Program (ESMAP). The training of technical teams and the design of financial instruments and sector plans outstand among the activities to achieve improvements, both in the regulatory framework for the electrification of public transport and in the integration of renewable energies in the electricity grid.

     

    Last Updated: Oct 09, 2020

  • Pro-Productive Inclusion

    Through the Higher Education ProjectCosta Rica’s public higher education system benefitted by an improvement in access and quality. Enrollment in undergraduate programs has reached the target of more than 102,000 students; and in graduate programs more than 7,000. The total number of officially accredited programs in the four universities participating in the Project has also surpassed the target of 106.  In infrastructure, there are more than thirty construction projects finalized, including new schools and university buildings, research laboratories and dormitories. The benefits provided to the indigenous people stand out, where the number of indigenous students enrolled in the four universities doubled between 2014 and 2017.

    Through Reimbursable Advisory Service (RAS) for the health sector, the WBG helped develop a roadmap to increase the 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 the social health insurance.

    An array of analytical work has been completed in recent years, among others, a case study known as Primary Health Care Achievements and Challenges within the Framework of the Social Health Insurance, the Costa Rica Social Sector Expenditure and Institutional Reviewresearch series on green and inclusive growth, a working paper titled A Behavioral Approach to Water Conservation, and a gender assessment.

    Pro-Fiscal, Social and Environmental Sustainability

    Through the project "Strengthening of the Universal Health Insurance", the availability and quality of the universal health insurance system was improved, and the strengthening of the institutional efficiency of the Costa Rican Social Security Fund (CCSS). Under the Program for Results mode, objectives such as the reduction of waiting lists and the care of chronic diseases have been met. For example, the goal of 41 percent of patients with type II diabetes identified and with optimal clinical control was exceeded. The improvement in colon cancer screening also exceeded the goal by reaching 15 percent of the target population. In addition, expectations were exceeded in the percentage of surgeries performed on an outpatient basis where the goal of 43 percent was exceeded. One of the greatest achievements is in the expected percentage of the total number of health areas equipped with the Single Digital Health File (80 over 60 percent expected).

    Through Disaster Risk Management (DRM) programsCosta 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 (Catastrophe Deferred Drawdown Option), which provided a source of immediate liquidity in case of disasters.

    Last Updated: Oct 09, 2020

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LENDING

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

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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Additional Resources

Country Office Contacts

San José de Costa Rica
Cynthia Flores Mora
Plaza Roble, Edificio El Patio, Piso 1 Escazú, Costa Rica
+(506) 2549-5806
+(506) 2549-5800
cfloresmora@worldbank.org
EEUU
1818 H Street NW. Washington DC, 20433
+1 202 473-1000
adavis@worldbankgroup.org