6 August 2014

The World Cup has come and gone, leaving football fans all over the world in the throes of withdrawal. However, the standout performances of two teams linger: Colombia and Costa Rica. Both teams outperformed the expectations that many analysts and fans had placed on them for the tournament.


costa rica poster

Their performance on the field is mirrored or sometimes surpassed in many regards by their economic performance, which has led both sovereign and corporate credits from Colombia and Costa Rica to be coveted in the markets.

In this 2-part blog, we will explore the economic data and investment opportunities in both countries. The first instalment will focus on Costa Rica, while the second will hone in on Colombia.

Despite being heavily underestimated in a group that included England, Italy and Uruguay—three former world champions—Costa Rica blazed trails in this World Cup.

The country’s team made history as the only CONCACAF team to have defeated two former world champions (Italy and Uruguay) in the World Cup, and tied with England. Costa Rica is also only one of two CONCACAF teams to have ever made it to quarter finals, where they managed to hold the mighty Dutch team to a goal-less draw that was only resolved in a penalty shoot-out.

Costa Rica celebration

Costa-Rica celebration

Costa Rica stands out in many other ways as well, particularly compared to its neighbours in Central America. In a region that is arguably better known for conflict and poverty, Costa Rica does not have an army and is also the home to thriving tourism and emerging technology industries. It is one of the few countries in Latin America that has never had a military government, or a coup d’etat, and is considered one of the most politically stable countries in the Americas.

Political stability usually translates into economic growth. The trajectory in the Costa Rican economy since 2000 speaks for itself.

Costa Rica GDP

Costa Rica GDP

In nominal terms, Costa Rica’s GDP has doubled since 2000. Economic growth has been persistently high, even in real terms.

Costa Rica Real GDP Growth

Costa Rica - Real GDP Growth

Nevertheless, Costa Rica has kept its Debt to GDP ratio in a declining trend.

 Costa Rica Debt to GDP

Costa Rica Debt to GDP

Much of this growth comes from a booming tourism industry, which is reflected in the growth of services relative to Industry (which has remained somewhat stable) and Agriculture (which has declined).

Costa Rica GDP composition

costa rica gdp composition

Costa Rica has been able to achieve this growth despite low government expenditure and revenue as a percentage of GDP compared to Latin American peers. Private investment is larger than Government expenditure in all of the data we saw. Interestingly enough, Government expenditure has been rising as a percentage of GDP and this trend is likely to continue under the recently elected government, which tends to lean to the left.

Costa Rica Private Investment and Government

Costa rica private govt

Nevertheless, Costa Rica continues to struggle with a relatively high unemployment rate.

costa rica econ stats

Unemployment has crept higher, barring a brief respite in the mid-2000s when it sank to under 5%. However, probably due to declines in tourism visitors and revenue, unemployment has remained above 7% since the onset of the crisis. Despite high unemployment, household consumption is elevated and in the most recent data (2012) was almost at 100% of GDP.

Politically, there were fears that the victory of Luis Guillermo Solís in April’s election would bring substantial changes in economic policy. Investors reacted accordingly, and uncertainty remains. However, President Solís has chosen moderate technocrats with substantial policy experience for Minister of Finance and Central Bank President. What remains to be seen is how the new government deals with rising budget deficits (almost 5% of GDP in 2013, down from a surplus of 0.6% in 2008); the new government’s rhetoric has focused on improving tax collection as opposed to raising or introducing new taxes, but there is uncertainty as to how efficacious these efforts will be.

There are a few potential investments tied to Costa Rica that investors should be interested in. One of the most attractive is COSICE, which is the main utility in Costa Rica. COSICE has a bond maturing in 2021 which currently offers a yield of 5.25%. COSICE is rated BB+ by S&P, and Baa3 by Moody’s, and has demonstrated relative resilience during recent emerging market credit shakeouts.

We can make additional recommendations once we know a bit more about your unique risk profile and return objectives. However, on the whole we believe that Costa Rica makes a compelling investment choice for more conservative investors who would still like exposure to emerging markets.By reaching out to Firstline Securities at or at 868.628.1175. We can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.

An excellent prospect for most

ticos celebrating

Michael John Cooper


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