Å·ÃÀÈÕb´óƬ

Costa Rica has in many ways been a development success story. An OECD member country since 2021, it offers a unique trajectory underpinned by a long tradition of democratic stability and institutionality while earning a reputation for being at the forefront of green development outcomes, being the first tropical country in the world to have reversed deforestation. The country has achieved all this while also moving to strengthen its macroeconomic fundamentals with growth averaging over 3% over the last decade, reaching 5.1% in 2023, surpassing expectations. This has been anchored by an outward-oriented model that has successfully targeted foreign investment and promoted gradual trade liberalization.

Despite these strong foundations, the development model thus far is facing significant threats. Inequality is high. With a GINI coefficient of 46.7 in 2023, Costa Rica is among the most unequal OECD member countries. Moreover, even though poverty levels have declined following the COVID-19 pandemic, reaching 22% of households in 2023 according to the National Institute of Statistics and Censuses (INEC), this process has been slow despite the country¡¯s ongoing economic growth. The pandemic also exacerbated challenges to the social compact. Despite continued investments in education for instance, deficits in learning outcomes worsened, exacerbating existing inequities. 

Finally, despite the commendable efforts on deforestation, the country¡¯s emissions have increased rapidly in the last two decades and could continue to grow in the absence of emission reduction reforms. Costa Rica also remains vulnerable to natural disasters with 78% of the population at high risk from multiple hazards.

These challenges are taking place in a context of broader global considerations including a recent increase in migration levels. The country is also facing perceptions of higher crime levels tied to the drug trade. They present nevertheless an opportunity for Costa Rica to consolidate and preserve some exemplary gains while addressing underlying threats to its development model.  

It will be crucial for Costa Rica to undertake measures to promote inclusive growth while continuing its efforts to consolidate an effective fiscal management strategy. The country needs to put in place the conditions for growth to be broad-based, and to fully reach its workforce and territory. Improving revenue mobilization and spending efficiency, especially in the social and infrastructure sectors, will be essential to tackling poverty and inequality, while strengthening climate resilience, reducing emissions, and consolidating the sustainability of its model.

Last Updated: Oct 07, 2024

The Country Partnership Framework (CPF) established by the World Bank (WB) and the Government of Costa Rica continues to foster a close partnership based on mutual learning and knowledge sharing in support of the country¡¯s overall growth and development objectives.

A by the WB Board of Directors on April 30, 2024. This strategy, which reflects the analytical underpinnings of the  (June 2023), focusses on promoting broad-based, inclusive economic growth; reinforcing and preserving human capital in key sectors like education and social protection; and enhancing resilience to natural and social shocks and the effects of climate change. All while supporting a transition to a climate-smart economy.

These efforts are underpinned by two cross cutting themes that guide the overall strategy¡¯s implementation. They refer specifically to the aims of strengthening institutions, and to enhancing equity and inclusion across all the various WB interventions. This approach takes into consideration Costa Rica¡¯s evolution as an upper middle income and OECD member country. 

As of early October 2024, the active portfolio in Costa Rica includes six operations totaling USD 1231.8 million in net commitments. It includes 4 investment projects (USD 571.82 million) and 2 development policy loans for budgetary support (USD 660 million).

Following the COVID-19 pandemic, the implementation of the (USD 156.64 million), known as ¡°Hacienda Digital¡±, which supports tax compliance and overall expenditure management capabilities, highlights how the WB has worked in partnership with Costa Rica¡¯s authorities to strengthen the State¡¯s capacity to respond to key challenges and consolidate recovery efforts and set the basis for sustainable growth. 

The second ¡°Fiscal and Decarbonization Management Development Policy Loan (DPL),¡± totaling USD 300 million, was approved by the WB in June 2021. This operation was designed to support the Government¡¯s program to protect people¡¯s income and jobs from the impact of COVID-19. It looked to benefiting the sustainability of small and medium enterprises (SMEs), reinforcing the fiscal framework in the aftermath of this health crisis, and laying out the foundations for a strong post pandemic recovery by promoting green growth and low-carbon development. A third in the series of these DPL loans builds on these efforts to support Costa Rica's fiscal and decarbonization management and was approved in June 2023 totaling USD 500 million.

Two instruments aim to strengthen fiscal, social, and physical resilience against disaster and climate risks in policymaking at the sectoral and territorial levels:

• A second Disaster Risk Management Development Policy Loan with a Catastrophe Deferred Drawdown Option (Cat DDO), approved in March 2023, aiming to enhance the Government¡¯s capacity to manage disaster risks resulting from the occurrence of natural and health-related hazards and the impacts of climate change. 
• The Climate Resilient Recovery & Territorial Development project, approved in March 2024, will work to increase access to disaster and climate-resilient infrastructure and services in selected regions while working closely to strengthen a broad level of engagement with community stakeholders. 

Costa Rica has also benefited since December 2020 from the Emission Reductions Payment Agreements with a commitment of up to USD 60 million to purchase verified reductions of 12 million tons of CO2 emissions through its emission reduction (ER) program. The already paid Costa Rica USD 16.4 million for reducing 3.28 million tons of carbon emissions during 2018 and 2019. The agreements cover the purchase of measured, reported, and verified ERs associated to reduced deforestation and forest degradation (known as REDD+), the enhancement of forest carbon stocks at the national level. The distribution of ER payments goes in accordance with an agreed Benefit Sharing Plan. 

Environmental, climate change, and disaster risk interventions have also been supported through trust funds, such as , the , the , the , and the .

In addition to these efforts, support was provided to enforce a , an international example that highlights how it can be possible to develop hydroelectric projects while applying the industry¡¯s and social practices.

Regarding energy and transportation electrification, the World Bank is supporting the initiative to transition towards an energy model that optimizes the use of renewable resources. The aim is to decarbonize top emitting sectors, such as transport, through the progressive electrification and diversification of the energy matrix, in an environment that promotes greater regional integration and the opening of international energy markets.

Last Updated: Oct 07, 2024

For the benefit of the Costa Rican population, through the Program for Results project "", the availability and quality of the universal health insurance system, as well as the institutional efficiency of the Costa Rican Social Security Fund (CCSS), were improved. Under the project, objectives such as the reduction of waiting lists and improvements in the treatment of chronic diseases were met. For example, the goal of 43 percent of patients with type II diabetes identified and with optimal clinical control was exceeded. Improvements in colorectal cancer screening also exceeded the goal of 40 percent of the target population. In addition, expectations were exceeded in the percentage of surgeries performed on an outpatient basis (46 %). One of the greatest achievements is in the expected percentage of the total number of primary health care units equipped with the Unique Digital Health Record (90.10 % achieved). The successful implementation of a pilot of integrated health care networks is another one of the attainments of the project.

A series of five informative notes, prepared in collaboration with the CCSS, analyses the factors that drove the success of the project "Strengthening Universal Health Insurance.¡± It describes how challenges were tackled and key lessons learned during the design and implementation, as well as their transformative actions. The series provides a practical guide to other countries interested in implementing similar programs and can be accessed here.

 have further improved Costa Rica¡¯s preparedness to respond to disasters through 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 Catastrophe Deferred Drawdown Option (CAT DDO), which provides a source of immediate liquidity in case of disasters.

In December 2020, Emission Reductions Purchase Agreements for US$60 million were signed. In August 2022, Costa Rica became the first country in Latin America and the Caribbean to receive payments from the Forest Carbon Partnership Facility (FCPF), receiving $16.4 million for reducing 3.28 million tons of carbon emissions during 2018 and 2019.

Through the , Costa Rica¡¯s public higher education system has benefitted from 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 participating universities has also surpassed the target of 106. In the area of infrastructure, more than thirty construction projects have been completed, including new schools and university buildings, research laboratories and dormitories. The benefits for the indigenous population also stand out, with the number of indigenous students enrolled in the four universities doubling between 2014 and 2017.

Å·ÃÀÈÕb´óƬ also conducts research and analysis in Costa Rica. In recent years, a  stands out, which contributed to understanding the factors that explain the stagnation of the poverty rate and the increase in inequality in a context of economic growth. The report provides high-level policy recommendations, which have made it possible to prioritize areas for dialogue with the government and other actors in the country.

Other analytical work has included a case study entitled ¡°,¡± research series on green and inclusive growth, the working paper ¡°,¡± and  paper showcasing key indicators helpful for monitoring gender equality and designing effective policy interventions.

Last Updated: Oct 07, 2024