Monday 20 September 2021

Costa Rica Scores Above The Regional and World Averages In Economic Freedom

The Index covers 12 freedoms – from property rights to financial freedom – in 180 countries.

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Costa Rica’s economic freedom score is 65.3, making its economy the 61st freest of 180 countries in the 2019 Index of Economic Freedom.

The report, prepared by The Heritage Foundation, measures components such as respect for private property, operation of state entities, taxes and market opening to name a few.

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According to the report, Costa Rica‘s overall score has decreased by 0.3 points, “with declines in fiscal health, judicial effectiveness, and trade freedom exceeding improvements in labor freedom and property rights.”

Costa Rica is ranked 11th among 32 countries in the Americas region and its overall score is above the regional and world averages.

“The most prosperous of the Central American Common Market’s five countries, Costa Rica has a long history of democratic stability and one of Latin America’s highest levels of foreign direct investment per capita,” says the report.

Though traditional agricultural exports of bananas, coffee, sugar, and beef are still the backbone of its commodity-driven export economy, Costa Rica is also one of Central America’s most popular ecotourism destinations and an exporter of medical devices and other high-value-added goods and services.

The government of Carlos Alvarado is expected to continue the policy predictability, support for strong institutions, and favorable attitude toward trade and private foreign direct investment that have created an attractive business environment in Costa Rica.

“Although the regulatory regime has improved, deeper institutional reforms are needed. Excessive government bureaucracy still discourages dynamic entrepreneurial activity, slowing the pace of privatization and fiscal reform.

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“Widening budget deficits have put public debt on an upward trend. The judicial system, while transparent and not corrupt, remains inefficient,” says the report.

With respect to the “rule of law”, property rights are secure in Costa Rica and contracts are generally enforced. Despite reforms in 2018, however, land registries remain unreliable.

The judicial branch is independent, but its processes are often slow. Drug trafficking and budgetary constraints have undermined the security and justice sectors. A complex bureaucracy slows the pace of capacity-building, and corruption, including among high-ranking officials, remains a problem.

The report says that the overall business framework does not adequately support entrepreneurial activity, such as licensing requirements, though they have been reduced, procedures for launching a new business remain cumbersome and the nonsalary cost of employing a worker remains high.

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Costa Rica’s combined value of exports and imports is equal to 67.6% of GDP and the average applied tariff rate is 1.%.

“The government restricts investment in some sectors of the economy. The growing financial sector functions relatively well. About 68% of adult Costa Ricans have access to an account with a formal banking institution,” concludes the report.

 

 

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