statistical compendium · adjusted or revised. as a result, the information and contents in this...

STATISTICAL COMPENDIUM

The Republic of Costa Rica

January, 2018

COSTA RICA

3

TABLE OF CONTENTS

REPUBLIC OF COSTA RICA .................................................................................................................................. 6 THE COSTA RICAN ECONOMY .......................................................................................................................... 18 BALANCE OF PAYMENTS AND FOREIGN TRADE ........................................................................................ 28 MONETARY SYSTEM ............................................................................................................................................ 39 PUBLIC SECTOR FINANCES ............................................................................................................................... 58 PUBLIC SECTOR DEBT ......................................................................................................................................... 69

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DEFINED TERMS AND CONVENTIONS

The following defined terms are used in this Statistical Compendium:

"Consolidated deficit of the public sector" means the deficit of the fiscal deficit of the

Government, the deficit of the Banco Central de Costa Rica (the “Central Bank ”) and the

financial results of other institutions of the non-financial public sector.

"Government fiscal deficit" means the difference between the total expenses and the

income incurred by the Central Government, which includes the Executive, Legislative

and Judicial Powers

"Non-traditional products" are products other than coffee, bananas, sugar and beef, non-

traditional natural products such as vegetables, fruits, roots, medicinal and decorative

plants, as well as manufactures, including light manufacturing and textile products . Certain amounts included in this Statistical Compendium have been subject to rounding

adjustments; accordingly, figures shown as totals in certain tables may not be an

arithmetic aggregation of the figures, which precede or follow them. Unless otherwise

specified in the context, references to "dollars", "US dollars", "US dollars" and

"$"“dollars”, “US dollars”, “US dollars” and “$” refer to US dollars. The references here

in"“colones"” and "“ȼ"” correspond to Costa Rican colones.

Presentation of Financial and Economic Information

The Republic's financial and economic statistics are subject to a three-year review

process by the Central Bank and the Ministry of Finance, during which said information can be

adjusted or revised. As a result, the information and contents in this Statistical Compendium for

the years ended December 31, 2012, December 31, 2013, December 31, 2014, December 31,

2015, December 31, 2016 and any amount for December 31, 2017, must have been preliminary

and be subject to additional revisions. The Government believes that this process is similar to

that carried out by the industrialized nations. The government does not expect revisions to be

material, although there is no guarantee that there will be no more or less material changes.

Certain statistical information reported in this document has been derived from official

publications of, and information provided by, among others, the Central Bank, the Ministry of

Finance, the National Institute of Statistics and Censuses, the General Superintendence of

Financial Institutions (General Superintendence of Financial Institutions, or "SUGEF") and the

General Superintendence of Securities (Superintendence of Securities, or "SUGEVAL").

Presentation currency and exchange rate

The colones conversions have become solely for the convenience of the reader at the

exchange rate of the national accounts, which is shown below:

Average Exchange Rate of the National Accounts

5

2012 2013 2014 2015 2016 2017 2018

(In colones per U.S. dollar )

502.9 499.8 538.3 534.6 544.8 567.5 578.5

6

REPUBLIC OF COSTA RICA

Costa Rica, which is located in Central America, is a stable constitutional democracy

whose standard of living is among the highest in Latin America. Costa Rica has been

democratically elected uninterrupted since 1949. In recent years, Costa Rica has been

characterized by in an environment of macroeconomic crisis with higher economic growth in

Central America and Latin America, low inflation, conservative management of the exchange

rate and the management of public finances.

Costa Rica held presidential elections on February 4, 2018, and will go to a second round

of elections on April 1. The current president is Luis Guillermo Solis Rivera, from the Acción

Ciudadana party, whose political party is in power for the first time and is a historic milestone in

Costa Rica because, prior 2014, Costa Rica was marked by a bipartisan political environment

between the National Liberation Party and the Christian Social Unity Party.

Costa Rica hosts a wide diversity of animal and plant species, and a quarter of its territory

is protected by public or private reserves dedicated to the conservation of the environment and

the preservation of this biological diversity. This diversity, together with the government's

investment in environmental conservation, has been developed in an important tourism industry

that is protected and regulated by environmental policies of Costa Rica.

Map of Costa Rica

Source: INEC, Mapas sociales, http://www.inec.go.cr/cartografia/mapas-tematicos

http://www.inec.go.cr/cartografia/mapas-tematicos

7

In 2018, Costa Rica will celebrate 70 years of the abolition of the army. On December 1,

1948, the President of the Junta of the Second Republic, José Figueres Ferrer, abolished the

National Army. The president handed over the keys of the General Headquarters to the last one

was presented at the University of Costa Rica, with the purpose of establishing the building that

is now the National Museum.

The political system of Costa Rica consists of three powers: the Legislative Power, the

Executive Power and the Judicial Power. There is a Supreme Electoral Tribunal, which is the

highest electoral body and has full independence in its functions. There is also the Comptroller

General of the Republic, which is an auxiliary body of the Legislative Assembly and whose main

function is the control of public funds to improve the management of public finances, contribute

to transparency and citizen control.

The Costa Rican economy has undergone a transformation process, from a production

structure based on trade and manufacturing, to one based on professional, technical, scientific

and administrative services, as well as activities related to health and social assistance. The main

areas of investment attraction are quality services, both daily and specialized, advanced and light

construction, life sciences and agro-industry and food processing. More than 4,450 products are

exported to 150 countries on five continents.

In 2017, the gross domestic product ("GDP") of Costa Rica was estimated at US$57,6

billon dollars and its GDP per capita in purchasing power parity, (international dollars per capita)

was US$ 17,149.05, higher than the average from Latin America and the Caribbean (US$

15,649.04). The population of Costa Rica amounts to 4,947 thousand inhabitants and has a work

force of 48% and 35% of the population is between 15 and 34 years old.

Currently, Costa Rica is in the process of joining the Organization for Economic

Cooperation and Development (“OECD”). On April 9, 2015, the OECD Council unanimously

agreed to invite Costa Rica to join the organization. Costa Rica must conduct 22 adhesion

evaluations in the following areas: investment, anti-corruption, corporate governance, financial

markets, insurance and pensions, competition, fiscal affairs, environment, chemicals, public

governance, regulatory policy, statistics , economy and development, education, employment,

and social affairs, health, trade and export credits, agriculture, fisheries, scientific and

technological policies, digital economy and consumption. As of January 2018, the country has

favorable formal opinions in ten committees: insurance and pensions, commerce, health,

agriculture, education, science and technology, employment, work and social affairs, regulatory

policy, consumer policy, digital economy and insurance and pensions

Territory and Population

The Costa Rican territory consists of approximately 51,100 square kilometers, largely

covered by high, rugged mountains and hills, drained by numerous streams and rivers. A

volcanic mountain system composed of three ranges extends throughout the length of the

country, with elevations in the Southern Talamanca range reaching approximately 13,000 feet

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above sea level. A relatively wide coastal plain is found in the east and northeast and a narrower

plain is found along the Pacific coast. The climate varies according to topography, from semi-

tropical in the mountains to tropical on the coastal plains. Costa Rica has coastlines that border

both the Caribbean Sea and the Pacific Ocean.

Costa Rica: Map of Provinces

Source: INEC, http://www.inec.go.cr/cartografia/mapas-tematicos

According to the National Institute of Statistics, the population of Costa Rica in 2017 was

approximately 4.9 million people. Population growth increased at an annual average rate of 1.2%

between 2012 and 2017. The majority of the population of the country lives in an area known as

the “Central Valley” where, in addition to the capital city, San José, is the main Cities in the

provinces of Alajuela, Heredia and Cartago. According to the 2011 census, approximately 57.2%

of the population of Costa Rica lived in the Central Valley. In the province of San José live about

1.4 million people.

http://www.inec.go.cr/cartografia/mapas-tematicos

9

Costa Rica: Population Growth

Source: Own preparation with INEC data, http://www.inec.go.cr/poblacion

Social Indicators

The distribution of the population of Costa Rica, by sex, has remained constant in recent

years, of which 50.5% are men and 49.5% are women. By age groups, people between 25 and

59 years old makeup almost half of the population, while those under 12 years account for

almost 20% of the population. Adolescents, between 13 and 17 years, less than 10% and young

people between the ages of 18 and 24 slightly over 12%, while those over 60 represent just over

11% of the population.

Distribution of the population by sex


http://www.inec.go.cr/poblacion


10

Distribution of the population by age


Mortality and Life Expectancy

Costa Rica has a life expectancy of 80 years old and has reduced from 8.5 to 7.9 the

infant mortality rate between 2012 and 2016. The gross mortality rate remains above four per

1,000 inhabitants.

Life expectancy and Mortality Indicators 2012 2013 2014 2015 2016

Gross mortality rate (per 1.000 inhabitants) 4.1 4.2 4.3 4.4 4.6

Infant mortality rate (per 1.000 live births) 8.5 8.7 8.1 7.7 7.9

Life expectancy at birth (years) 79.4 79.6 79.7 79.9 80.0

Source: Programa Estado de la Nación, Compendio Social, http://www.estadonacion.or.cr/estadisticas-

index#social

Maternal and Under-five mortality

Costa Rica stands out among the countries of Latin America for its health indicators, in

particular, for the low, mortality in mothers and children under five years. In 2015, the World

Bank reported that the maternal mortality rate per 100,000 live births was 25 for Costa Rica,

while the Latin American average is almost 2.7 times higher. The other countries, selected in the

following table, an exception from Chile, have rates higher than 35 deaths.

As in the previous case, Costa Rica has a lower mortality rate in children under-five years

of age. In 2015, the World Bank indicates nine deaths per 1,000 births, which represents half of

the average for Latin America and the Caribbean. Only Chile surpasses Costa Rica, with eight

deaths, while the rest of the countries are above ten.


http://www.estadonacion.or.cr/estadisticas-index#social

http://www.estadonacion.or.cr/estadisticas-index#social

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Global Goals: Maternal and Under-five mortality

Country

Maternal mortality ratio Under-five mortality rate

Modeled estimates Total

per 100,000 live births per 1,000 live births

2015 2016

Argentina 52 11

Brazil 44 15

Chile 22 8

Colombia 64 15

Costa Rica 25 9

El Salvador 54 15

Guatemala 88 29

Honduras 129 19

Mexico 38 15

Panama 94 16

Paraguay 132 20

Peru 68 15

Latin America & Caribbean 67 18

Source: World Bank, http://wdi.worldbank.org/table/WV.2

Poverty

Costa Rica has one of the lowest poverty rates in Latin America, primarily as a result of

its investment in social programs. Historically, Costa Rica has provided social assistance and

housing to poor families through the Fondo de Desarrollo Social y Asignaciones Familiares

(“FODESAF”) which is funded primarily with sales tax revenues. The Government has

undertaken initiatives to restructure FODESAF with the goal of further strengthening

FODESAF’s operations. These initiatives are designed to improve the efficiency of its anti-

poverty efforts through decentralization and specialization of certain programs and monitoring

and evaluating the social programs supported by FODESAF, and include program evaluations,

financial auditing and cost controls.

According to the Encuesta Nacional de Hogares (National Households Survey), the level

of poverty fell from 24.6% in 2014 to 20.0% in 2017, while extreme poverty dropped from 7.5%

to 5.3%. The following table sets forth certain information with respect to Costa Rican poverty

rates as of the dates indicated.

http://wdi.worldbank.org/table/WV.2

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Poverty Rates

2012

2013

2014

2015

2016 2017

Total Population

100.0

100.0

100.0

100.0

100.0 100.0

Non-poverty

79.4

79.3

75.4

78.3

79.5 80.0

Poverty

20.6

20.7

24.6

21.7

20.5 20.0

Non-extreme poverty

14.3

14.3

17.3

14.6

14.2 14.7

Extreme poverty

6.3

6.4

7.5

7.2

6.3 5.3

Source: National Institute of Statistics , http://www.inec.go.cr/pobreza-y-desigualdad/pobreza-por-linea-de-ingreso

Education indicators

Historically, Costa Rica has invested a significant portion of its public sector budget in

social services. Investments in education, health services, social assistance and housing

represented approximately 48%, on average, of the Government’s budget expenditures in the

period from 2012 to 2018.

In 2012, the Constitution was amended to require the investment of not less than 8% of

GDP in education annually by 2014, compared with the previous mandate of 6% of GDP. Costa

Rica’s budget for the 2018 fiscal year provides for an investment of 7.6% of GDP, in education.

Costa Rica has one of the highest enrollment coverages in primary and secondary

education. Both rates exceed the average for Latin America and the Caribbean. In Costa Rica, in

2015, the net enrollment rate was 96.4% in primary and 79.3% in secondary, while the average

for Latin America and the Caribbean was 91.7% and 75.9% respectively.

Similarly, the gross enrollment rate for tertiary education is higher than 50%, which is

higher than the average for Latin America and the Caribbean (44.7%), and even for countries

such as Mexico and Panama.

Participation in primary, secondary and tertiary education, 2015

Country Net enrollment rate Gross enrollment ratio

http://www.inec.go.cr/pobreza-y-desigualdad/pobreza-por-linea-de-ingreso

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School Enrollment by age groups (percentage)

Source: Programa Estado de la Nación, Compendio Social, http://www.estadonacion.or.cr/estadisticas-index

Primary Secondary Tertiary

% of relevant age group % of relevant age

group

Argentina 99.3 1 88.21 82.91

Brazil 92.7 81.3 50.6

Chile 94.3 88.0 88.6

Colombia 90.6 78.3 55.7

Costa Rica 96.4 79.3 53.6

El Salvador 91.2 68.7 29.1

Guatemala 85.5 48.2 21.8

Honduras 93.0 49.4 22.1

Mexico 95.11 .. 29.91

Panama 93.41 .. 38.71

Peru 94.1 77.7 ..

Uruguay 94.21 76.31 55.6

Latin America & Caribbean 91.71 75.91 44.71

(1) Most Recent Value (MRV) if data for the specified year or full period are not available; or growth rate

is calculated for less than the full period.

Source: World Bank, http://wdi.worldbank.org/table/2.8

http://www.estadonacion.or.cr/estadisticas-index

http://wdi.worldbank.org/table/2.8

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Costa Rican Government

The Republic achieved independence from Spain in 1821 and enforced the uninterrupted

elect since 1949. The Constitución Política de la República de Costa Rica (Political Constitution

of the Republic) of November 7, 1949 (the “Constitution”) was drafted in 1949 and establishes,

the current form of the Government. Among the most important reforms promulgated by the

Constitution are the ratification of the abolition of the army; the institution of a national program

of social services, including health services and a pension system; and guarantees of government

support for primary, secondary and higher education. In addition, the Constitution establishes

the basis for strong institutions with a variety of missions, which includes the rule of law,

safeguarding the relationship between government and citizens, and the welfare state.

In accordance with the Constitution, Costa Rica is a democratic republic, with separate

executive, judicial and legislative branches. The President and the members of the Legislative

Assembly are elected by direct popular vote. Under the Costa Rican electoral system, voters elect

a presidential candidate and two vice presidents. They also choose the political parties that have

representation in the Asamblea Legislativa (the “Legislative Assembly), where each party selects

in its own political convention.

Since 2016, the municipal elections are held two years after the presidential elections.

The organization and supervision of the electoral process is the responsibility of the Tribunal

Supremo de Elecciones (the “Supreme Electoral Tribunal”), composed of three permanent

members with functional, political and administrative independence. In addition, two temporary

members, a list of six candidates elected by the Corte Suprema de Justicia (Supreme Court of

Justice) (the “Supreme Court”), are appointed one year before an election and serve for up to six

months after an election. The Supreme Electoral Tribunal has the same degree of independence

as the three branches of the Government.

Executive authority rests with the President and the two Vice Presidents, who are directly

elected for concurrent four-year terms, and the Government Ministers, whose terms may not

exceed the President. The current president's term expires on May 8, 2018. The Constitution

states that the president may be re-elected, but not for consecutive terms. The President has the

power to appoint government ministers, and together the president and the ministers of the

Governing Council.

Legislative authority is conferred on the Legislative Assembly, which comprises 57

deputies. The deputies can mean three years and, although they can be elected, they can not

fulfill consecutive mandates. The election of deputies to the Legislative Assembly takes place at

the same time as the presidential elections.

The national judicial authority is vested in the Supreme Court, which is composed of four

divisions of appeal, as well as criminal courts, civil courts and other specialized courts. The

Supreme Court has 22 judges, elected by the Legislative Assembly for periods of eight years.

The mandate of each judge is automatically renewed unless two-thirds or more of the Legislative

Assembly votes against the renewal of the appointment. The Constitution will grant budgetary

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independence to the judiciary to ensure that a minimum of 6% of the Government's current

income is allocated to it.

For administrative purposes, the national territory is divided into seven provinces, which

is subdivided into cantons and districts. There are seven provinces (San José, Alajuela, Cartago,

Heredia, Guanacaste, Limón and Puntarenas), 82 cantons and 478 districts. Each canton is

chaired by elected officials in the form of municipalities.

Foreign Affairs and Membership in International and Regional Organizations

Costa Rica maintains diplomatic relations with approximately 160 countries. It is a

member of the United Nations (and certain of its specialized agencies such as the Food and

Agriculture Organization, the International Labor Organization and the United Nations

Education, Scientific and Cultural Organization), the Organization of American States, the

International Monetary Fund (the “IMF”), the World Bank, the Inter-American Development

Bank (the “IADB”) and the World Trade Organization (the “WTO”).

Over the last twenty years, Costa Rica has followed a trade policy meant to integrate

Costa Rica into the global economy. This trade policy is demonstrated by Costa Rica’s

participation in multilateral negotiations in the WTO and Costa Rica’s negotiations of bilateral

trade agreements and free trade agreements with strategic trade partners. Costa Rica has utilized

free trade agreements to increase market access for Costa Rican exports and enhance trade policy

certainty. Currently, Costa Rica has ten free trade agreements in force with more than 15

countries, including the U.S., Canada, Mexico, Chile, Panama, members of the Caribbean

Community and China.

The U.S. signed a free trade agreement with the five members of the Central America

Economic Integration System, including Costa Rica, on May 28, 2004. Subsequently, the

Dominican Republic became a party to the free trade agreement, now referred to as the U.S.-

Dominican Republic-Central America Free Trade Agreement (the “DR-CAFTA”). In the

referendum on October 7, 2007, the voters of Costa Rica approved the free trade agreement. On

January 1, 2009, the DR-CAFTA became effective between the U.S. and Costa Rica.

Since entering into a free trade agreement with Mexico in 1995, Costa Rican exports to

Mexico have increased by more than a factor of five, while Mexican imports into Costa Rica

have tripled. Beginning in 1998, Costa Rica replaced Guatemala as the main Central American

supplier to the Mexican market. Similarly, Mexico has become the second largest exporter of

goods to Costa Rica, after the United States.

The free trade agreement between Costa Rica and Canada, which became effective in

November 2002, was the first free trade agreement signed between Costa Rica and a G-7

country. Market access provisions in the agreement granted certain Costa Rican products, most

notably refined sugar and textiles, preferential access to the Canadian market.

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Costa Rica maintains amicable relations with all of its major trading partners and

neighboring countries. There is only a dispute recently solved before the International Court of

Justice relating to the proper location of the border with Nicaragua along the San Juan river.

The International Court of Justice (ICJ) at The Hague rule that Costa Rica owns the north

side of Isla Portillo and that Nicaragua must end its military presence in the area. The ruling also

determined the marine borders between the two countries. The court also ordered Nicaragua to

pay Costa Rica $380,000 as compensation for environmental damage to protected wetlands on

the San Juan River, which lies on the border between the Central American nations.

Environmental Policy

During the last decade, Costa Rica has developed legal and institutional regimes for the

sustainable and non-destructive use of natural resources in its search for economic and social

development. Costa Rica has created a national park system consisting of 169 national parks and

equivalent reserves, covering 26.9% of the total area of Costa Rica, and more than 100 private

reserves. Costa Rica has 5% of the world's biodiversity.

As Costa Rica has undertaken efforts to protect its rainforest, including the creation of

the national park system and reserves, ecotourism has emerged as an important contributor to

Costa Rica's GDP.

Costa Rica's commitment to sustainable environmental and economic development has

been clearly expressed in the Estrategia Nacional de Cambio Climático ("National Strategy for

Climate Change"), whereby the country committed to achieving carbon neutrality by 2021. As

part of the national strategy for climate change, the Ministerio de Ambiente, Energía y

Telecomunicaciones (“Ministry of Environment, Energy and Telecommunications”) created the

Climate Change Directorate in 2009. In the area of energy production, the Government has

dedicated resources to expand the use of clean energy sources in the country to include the

geothermal and wind energy. Currently, approximately 100% of the electricity consumed in the

country is produced using renewable energy sources and approximately 72.6% of the electricity

consumed in the country is produced by hydroelectric power plants.

The compensatory owners of Costa Rica's "Payment for Environmental Services" for the

environmental services they have provided with their forestlands, such as carbon fixation,

watershed protection and biodiversity, among others. As a result of this continuous commitment

to the environment, since 1997 the reforested area has exceeded the deforested area each year.

Costa Rica has advocated for the United Nations Framework Convention on Climate

Change and its Kyoto Protocol, and participates in the development of market-oriented

instruments to reduce greenhouse gas emissions in an effort to mitigate global warming. Costa

Rica is actively participating in the emerging carbon market and is implementing the Clean

Development Mechanism ("CDM") of the Kyoto Protocol. Costa Rica has led a series of CDM

project activities and has signed Memoranda of Understanding with several developed countries,

including the Netherlands, Norway, Switzerland, Canada and Finland, in accordance with which

17

it has agreed to promote investments in the Certified Emission Reduction (" CERs"). The

Government considers that the product of the CERs is a potential source of financing for the

activities of reforestation projects within the Payment Program for Environmental Services and

for the promotion of local generation of electricity from renewable sources.

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THE COSTA RICAN ECONOMY

Costa Rica has expanded the scope of its economic activity from its historical

dependence on the production of agricultural goods for export. It has sought to diversify its

exports, attract high-value investments, add manufactures and promote tourism based on the

country's environmental diversity. Due to this diversification strategy, the structure of Costa

Rican exports has changed a lot in the last decade, and industrial exports have increased

significantly.

Developments from 2012 to 2017

During the period from 2012 to 2017, GDP grew at a rate of 3.6%. Domestic demand

showed an average growth of 3.5%, while exports of goods and services grew by 5.5% and

imports by 5.1%.

According to the Macroeconomic Program 2017-2018, GDP from the point of view of

expenditure grew, in 2017, due to the boost of domestic demand, which grew 2.6% (3.4% in

2016) and contributed 2.6 points of GDP growth, while external demand increased 4.9% (11.4%

in 2016) with a contribution of 1.6 pp.

According to the Twenty-Second Report of the “Estado de la Nación” Program, in 2016,

exports contributed with 42% of total growth, while domestic demand represents 58%. Among

the products that have boosted exports in recent years include traditional products such as

banana, pineapple and coffee were key, as well as technological products such as medical

devices, prosthetics, needles and catheters, equipment for infusion and transfusion of serums.

Similarly, new agro-industrial products have gained importance, such as canned tropical fruits,

organic cane sugar, synthetic organic products for fluorescent luster and fried plantain

preparations.

The following tables set forth real and nominal GDP by expenditure for the periods

indicated.

Gross Domestic Product by Expenditure(1)

In millions of colones

(Volume chained at prices of the previous year, reference 2012)

2012 2013 2014 2015 2016 2017

Gross Domestic Product 23,371,406 23,901,710 24,741,936 25,640,486 26,706,197 27,558,607

Domestic Demand 24,260,781 24,683,669 25,568,524 26,654,029 27,551,521 28,261,211

Final consumption

expenditure 19,474,412 20,056,319 20,835,852 21,700,263 22,408,148 23,009,005

Private Consumption 15,482,755 15,935,290 16,596,647 17,363,660 17,971,000 18,443,221

Government

Consumption 3,991,657 4,121,029 4,240,156 4,340,194 4,443,769 4,571,781

Gross fixed capital

formation 4,814,074 4,797,961 4,954,574 5,101,486 5,304,758 5,141,484

Goods and Services Exports 7,518,481 7,767,202 8,152,639 8,365,827 9,322,719 9,775,882

Goods and Services Imports 8,407,856 8,549,161 8,980,576 9,384,524 10,203,505 10,508,895

19

Notes:

(1)/ Preliminary figures 2016-2017. Projection 2018-2019 used in the Macroeconomic Program 2018-2019, approved by the

Board of Directors of the Central Bank of Costa Rica in article 6 of the minutes of session 5813-2018, of January 31, 2018

Source: Central Bank of Costa Rica, http://www.bccr.fi.cr/indicadores_economicos_/

Gross Domestic Product by Expenditure(1)

Annual Variation Rate


2012 2013 2014 2015 2016 2017

Gross Domestic Product 4.8 2.3 3.5 3.6 4.2 3.2

Domestic Demand 5.6 1.7 3.6 4.2 3.4 2.6

Final consumption expenditure 4.9 3.0 3.9 4.1 3.3 2.7

Private Consumption 6.1 2.9 4.2 4.6 3.5 2.6

Government Consumption 0.2 3.2 2.9 2.4 2.4 2.9

Gross fixed capital formation 9.9 -0.3 3.3 3.0 4.0 -3.1

Goods and Services Exports 5.6 3.3 5.0 2.6 11.4 4.9

Goods and Services Imports 7.8 1.7 5.0 4.5 8.7 3.0

Notes:

n1 / Preliminary figures 2016-2017. Projection 2018-2019 used in the Macroeconomic Program 2018-2019, approved by the


Source: Central Bank of Costa Rica

Gross Domestic Product by Expenditure (1) (2)

(in millions of U.S. dollars, at current prices)

2012 2013 2014 2015 2016 2017

Gross Domestic Product 46,473.1 49,745.1 50,577.8 54,776.0 56,989.0 57,564.8

Domestic Demand 48,241.6 51,213.7 51,860.2 55,251.7 56,517.9 57,143.6

Final consumption

expenditure 38,724.1 41,773.5 42,348.2 45,154.9 46,304.4 46,782.5

Private Consumption 30,786.9 33,032.9 33,496.9 35,580.2 36,469.8 36,825.2

Government Consumption 7,937.3 8,740.6 8,851.3 9,574.8 9,834.6 9,957.3

Gross fixed capital formation 9,572.6 9,713.3 9,874.0 10,197.9 10,315.4 9,921.7

Change in inventories (55.1) (273.1) (362.1) (101.2) (102.0) 439.4

Goods and Services Exports 14,950.2 15,586.6 16,313.9 16,884.7 18,687.2 19,659.7

Goods and Services Imports 16,718.7 17,055.3 17,596.3 17,360.4 18,216.1 19,238.5 Notes:

(1) Preliminary figures 2016-2017. Projection 2018-2019 used in the Macroeconomic Program 2018-2019,

approved by the Board of Directors of the Central Bank of Costa Rica in article 6 of the minutes of session 5813-

2018, of January 31, 2018

(2) Amounts in U.S. dollars were converted from colones using the national account average exchange rate for the

period indicated


http://www.bccr.fi.cr/indicadores_economicos_/


20

Gross Domestic Product by Expenditure (1)

(as a percentage of total GDP, at current prices)

2012 2013 2014 2015 2016 2017

Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0

Domestic Demand 103.8 103.0 102.5 100.9 99.2 99.3

Final consumption expenditure 83.3 84.0 83.7 82.4 81.3 81.3

Private Consumption 66.2 66.4 66.2 65.0 64.0 64.0

Government Consumption 17.1 17.6 17.5 17.5 17.3 17.3

Gross fixed capital formation 20.6 19.5 19.5 18.6 18.1 17.2

Change in inventories -0.1 -0.5 -0.7 -0.2 -0.2 0.8

Goods and Services Exports 32.2 31.3 32.3 30.8 32.8 34.2

Goods and Services Imports 36.0 34.3 34.8 31.7 32.0 33.4

Notes:

(1)/ Preliminary figures 2016-2017. Projection 2018-2019 used in the Macroeconomic Program 2018-2019,

approved by the Board of Directors of the Central Bank of Costa Rica in article 6 of the minutes of session 5813-

2018, of January 31, 2018


In the period between 2012 and 2017 three key trends are prevailed in the economic

activity: activities that decrease participation, those that increase it and those that maintain a

constant participation throughout the period. Among the activities that reduce participation are

those linked to Manufacturing, which decreased that range from 13.5% to 11.7%, Agriculture,

forestry, and fishing, which decreased from 5.4% to 5.2%, and Construction which decreased

from 5.4% to 4.0%, and the Real estate activities with which they go from 8.9% to 8.2%. Among

the activities that increased participation are those related to services, such as: Teaching and

human health activities and social assistance which increased from 13.9% to 14.6%,

Professional, scientific, technical, administrative and support services which increased from

10.1% to 11.7%, Financial and insurance activities which increased from 4.7% to 4.9%,

Transportation and storage which increased from 3.9% to 4.5%, Information and

communications which increased from 3.5% to 4.5%, Housing activities and services of food

wichc increased from2.6% to 3.1%, and Other activities which increased from 2.8% to 3.2 %.

Activities that maintained participation during the period were: Wholesale and retail trade with

an average of 9.4%, Public administration and compulsory social security plans with an average

of 4.5%, Electricity, water and sanitation services with an average of 2.9%, and Mines and

quarries with an average of 0.3%.

When analyzing the growth trends of economic activities, industries can be classified as

those that were more dynamic than the economy and those that were not. The industries that had

an average growth in the period between 2012 and 2017 higher than GDP were Information and

communications (8.4%), Financial and insurance activities (9.9%), Support for professional,

scientific, technical, administrative and of services (7.2%), Accommodation activities and food

services (5.6%), Transport and storage (4.0%), Wholesale and retail trade (3.8%), Mines and

quarries (5.0%) and Other activities (4.8%). Among the industries that showed an average

growth lower than economic growth were Real estate activities (2.1%), Education and human

health activities and social assistance (2.7%), Electricity, water and sanitation services (2.0%),


21

Agriculture, forestry and fishing (1.7%), Manufacturing (1.3%) and Public administration and

compulsory social security plans (1.4%)

Only one activity, Construction, decreased (an average 0.7) in the analysis period. In

2016, construction activity decreased due to contraction in private works, especially commercial

and residential projects. It was also influenced by Construction for public use, which was the

completion of the Reventazón hydroelectric project that did not reach the base level of 2015.

Other works, such as the port works on the Atlantic slope, the construction of other hydroelectric

projects (Ventanas Nuestro Amo), partially compensated for this decrease.

According to the Macroeconomic Program 2017-2018, in 2017, construction fell mainly

due to the contraction in the private sector, decreased by 6.4% and 4.3% in 2016, which was

caused by natural phenomena in the second half of the year, such as the excessive rainfall and

tropical storm Nate, the decrease in requests for building permits and the increase in bank credit.

In contrast, construction with public destination increased 10.0% (-9.9% in 2016). This was

influenced by the execution of works for state universities, the Costa Rican Institute of

Aqueducts and Sewers and works of the Ministry of Public Education.

Among the reasons that highlight the acceleration of the most dynamic activities, in

recent years, are the following: i) the development of mobile telephones and the Internet that

stimulates activities related to information and communication; ii) the growth of support

companies, the management of human resources, marketing and advertising that has boosted

professional and technical activities; iii) the greater demand for housing loans, consumption and

services and the demand for demand deposits, which motivates the promotion of financial

activities; and iv) private consumption that has a greater incidence in the purchase of

automobiles, food, electrical and household appliances, as well as textiles.

The following tables set forth the distribution of GDP in the Costa Rican economy,

indicating for each sector its percentage contribution to GDP and its annual growth rate for the

years indicated.

22

Gross Domestic Product by Industry(1)

In millions colones


2012 2013 2014 2015 2016 2017

Gross Domestic Product at market prices 23,371,405.9 23,901,709.5 24,741,935.5 25,640,486.2 26,706,197.5 27,558,606.9

Taxes on products and imports (net of subsidies) 1,989,329.4 2,035,622.5 2,091,521.4 2,188,641.9 2,327,953.1 2,373,406.0

Value added at basic prices 21,382,076.6 21,866,087.1 22,650,386.1 23,452,160.3 24,380,465.4 25,185,780.7

Agriculture, forestry and fishing 1,264,236.4 1,265,571.3 1,285,040.2 1,249,991.1 1,316,771.7 1,366,428.1

Mines and quarries 68,307.9 72,280.7 73,114.3 78,743.8 85,235.5 86,746.7

Manufacturing 3,155,296.5 3,158,855.1 3,184,461.8 3,022,342.0 3,166,437.4 3,287,018.3

Electricity, water and sanitation services 650,231.0 558,937.2 578,867.4 642,376.8 667,959.9 685,997.8

Construction 1,252,620.8 1,133,644.4 1,157,028.9 1,265,768.4 1,211,100.0 1,133,711.0

Wholesale and Retail 2,203,235.0 2,322,098.9 2,406,263.7 2,504,109.8 2,575,071.1 2,653,948.6

Transport and storage 904,190.4 919,164.3 955,693.9 1,005,841.9 1,022,577.8 1,074,514.1

Accommodation activities and food services 617,531.8 690,316.8 749,731.1 789,191.0 815,338.8 826,818.8

Information and communications 819,952.5 873,762.6 949,393.9 1,054,734.4 1,132,402.9 1,215,642.9

Financial and insurance activities 1,096,857.1 1,187,880.4 1,279,334.8 1,387,275.3 1,594,042.2 1,686,785.4

Real estate activities 2,079,035.1 2,081,822.8 2,103,568.6 2,129,704.9 2,163,553.9 2,205,745.8

Professional, scientific, technical, administrative

and support services 2,353,839.0 2,513,806.6 2,666,978.9 2,932,012.3 3,109,707.3 3,290,608.4

Public administration and compulsory social

security plans 1,014,477.5 1,042,169.8 1,059,463.5 1,062,289.7 1,073,018.8 1,093,493.2

Teaching and activities of human health and

social assistance 3,242,803.6 3,374,274.6 3,476,660.2 3,551,659.7 3,651,043.6 3,752,855.1

Other activities 659,462.0 671,501.5 725,653.0 753,203.2 801,699.9 837,757.4

Notes:



Source: Central Bank of Costa Rica , http://www.bccr.fi.cr/indicadores_economicos_/


23


(as a percentage of total GDP, at current prices)

Industry 2012 2013 2014 2015 2016 2017

Gross Domestic Product at market prices 100 100 100 100 100 100

Taxes on products and imports (net of subsidies) 8.5 8.5 8.3 8.2 8.2 8.0

Value added at basic prices 91.5 91.5 91.7 91.8 91.8 92.0

Agriculture, forestry and fishing 5.4 5.0 5.1 5.0 5.2 5.2

Mines and quarries 0.3 0.3 0.3 0.3 0.3 0.3

Manufacturing 13.5 12.6 12.2 11.4 11.3 11.7

Electricity, water and sanitation services 2.8 3.1 3.0 2.8 2.8 2.6

Construction 5.4 4.7 4.7 4.9 4.4 4.0

Wholesale and Retail 9.4 9.5 9.5 9.5 9.0 9.3

Transport and storage 3.9 3.9 4.0 4.4 4.4 4.5

Accommodation activities and food services 2.6 2.8 2.9 3.0 3.2 3.1

Information and communications 3.5 3.6 4.0 4.2 4.4 4.5

Financial and insurance activities 4.7 4.7 4.6 4.6 4.9 4.9

Real estate activities 8.9 8.9 8.5 8.3 8.3 8.2

Professional, scientific, technical, administrative

and support services 10.1 10.5 10.8 11.3 11.4 11.7

Public administration and compulsory social

security plans 4.3 4.5 4.6 4.5 4.4 4.4

Teaching and activities of human health and social

assistance 13.9 14.5 14.4 14.6 14.6 14.6

Other activities 2.8 2.8 3.0 3.1 3.1 3.2 Notes:



Source: Central Bank of Costa Rica, Source: Central Bank of Costa Rica,



24


Annual Variation Rate

(Volume at prices of the previous year chained, reference 2012)

Millions of colons chained 2012 2013 2014 2015 2016 2017

Gross Domestic Product at market prices 4.8 2.3 3.5 3.6 4.2 3.2

Taxes on products and imports (net of subsidies) 2.3 2.3 2.7 4.6 6.4 2.0

Value added at basic prices 5.0 2.3 3.6 3.5 4.0 3.3

Agriculture, forestry and fishing 4.8 0.1 1.5 (2.7) 5.3 3.8

Mines and quarries 5.5 5.8 1.2 7.7 8.2 1.8

Manufacturing 3.4 0.1 0.8 (5.1) 4.8 3.8

Electricity, water and sanitation services 5.8 (14.0) 3.6 11.0 4.0 2.7

Construction 4.6 (9.5) 2.1 9.4 (4.3) (6.4)

Wholesale and Retail 4.1 5.4 3.6 4.1 2.8 3.1

Transport and storage 6.2 1.7 4.0 5.2 1.7 5.1

Accommodation activities and food services 3.0 11.8 8.6 5.3 3.3 1.4

Information and communications 9.3 6.6 8.7 11.1 7.4 7.4

Financial and insurance activities 14.3 8.3 7.7 8.4 14.9 5.8

Real estate activities 6.9 0.1 1.0 1.2 1.6 2.0

Professional, scientific, technical, administrative and support services 8.6 6.8 6.1 9.9 6.1 5.8

Public administration and compulsory social security plans 0.6 2.7 1.7 0.3 1.0 1.9

Teaching and activities of human health and social assistance 1.6 4.1 3.0 2.2 2.8 2.8

Other activities 3.8 1.8 8.1 3.8 6.4 4.5

Notes:



Source: Central Bank of Costa Rica Source: Central Bank of Costa Rica,


The following graph summarizes the dynamism and participation of economic activities:

In quadrant I, there are activities that grew below the average of the economy (3.6%)

and that increased their participation between 2012 and 2017. Two industries meet this

condition.

In quadrant II, the most successful activities are located, since they grew above the

average of the economy (3.6%) and increased their participation between 2012 and

2017. Seven out of fifteen, industries satisfy this condition.

In quadrant III, activities that grew below the average of the economy (3.6%) are

located, and their participation declined between 2012 and 2017. Three industries meet

this condition. Construction shows a decrease in its growth, but it was included in this

quadrant so as not to exclude it from the graph.

In quadrant IV, there are activities that grew above the economy average (3.6%) and that

decreased their participation between 2012 and 2017. Only one industry fulfills this

condition.


25

Dynamism of industries between 2012 and 2017

For growth and participation

Source: Own preparation with data from the Central Bank

Per capita Gross Domestic Product

Costa Rica’s real GDP grew, on average, by approximately 3.6% annually between 2012

and 2017. The following table set forth Costa Rica’s per capita GDP (in P.P.P.), is highest than

Central America and, in since 2014, also highest than Latin America and de Caribbean.

26

GDP per capita, current prices

(Purchasing power parity; international dollars per capita)

2012 2013 2014 2015 2016 2017

Costa Rica 14,138.7 14,503.8 15,050.3 15,740.6 16,433.7 17,149.0

Central America 8,109.7 8,420.3 8,781.4 9,126.9 9,450.2 9,836.0

Latin America and the

Caribbean 14,729.0 15,231.7 15,513.0 15,508.2 15,368.9 15,649.0 Source: IMF, 2017, http://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWORLD

In the period between 2010 and 2016, Costa Rica maintained a higher net inflow to GDP

ratio than the average for Latin America and the Caribbean and a group of countries in the

region. It was only surpassed by Panama. The average annual FDI of Costa Rica was 5.8% of

GDP, 70% more than the average for the region.

The following table sets out the net inflows of foreign direct investment, net inflow

income by country as a percentage of GDP for the years indicated.

Net Foreign Direct Investment by Country, net inflow of capital

(as percentage of GDP)

Country Name 2012 2013 2014 2015 2016

Latin America and the Caribean 3.4 3.2 3.3 3.8 3.5

Argentina 2.8 1.8 1.0 2.0 0.6

Chile 11.4 7.6 9.2 8.4 4.9

Colombia 4.1 4.3 4.3 4.0 4.9

Costa Rica 5.8 6.4 6.4 5.4 5.1

Guatemala 2.5 2.5 2.0 1.8 1.7

Honduras 5.8 5.8 6.6 6.3 5.2

Mexico 1.5 3.7 2.3 3.1 3.2

Panama 8.5 8.5 10.1 9.7 10.9

Peru 6.1 4.9 2.2 4.4 3.6

Uruguay 11.8 1.3 6.5 4.6 -0.6 Source: World Bank, https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD

Employment, Labor and Wages

In the third quarter of 2017 the Costa Rican labor force consisted of approximately 2.3

million persons, representing approximately 46% of the total population, also the rate of

unemployment was 9.4%, below the average 9.6% for the period between 2012 and 2017.

In 2016, the unemployment rate decreased slightly to 9.5% from 9.6% for the same

period in 2015, which also constituted a slight decreased from 9.7% for the same period in 2014

but an increase from 8.3% for the same period in 2013. In 2013, the unemployment rate

decreased to 8.3% from 9.8% in 2012.

http://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWORLD

https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD

27

The following table sets forth certain information with respect to the Costa Rican labor

force as of the years indicated.

Labor Force and Employment

As of December 31,

2012 2013 2014 2015 2016 2017 (1)

Labor Force 2,212.031 2,277,577 2,279,775 2,242.919 2,280,989 2,282,526

Employed 1,944,166 2,088,282 2,059,600 2,027,518 2,063,366 2,068,710

Unemployed 217,865 189,295 220,175 215,401 217,623 213,816

Unemployment Rate 9.8 8.3 9.7 9.6 9.5 9.4

(1) Third quarter of 2017

Source: National Institute of Statistics, http://www.inec.go.cr/empleo

Between 2013 and 2017, economic activity has consistently employed 2.0 million people,

representing 90.3%, 90.3% and 90.4% of the labor force for 2014, 2015 and 2016 respectively.

In 2014, the increase of the unemployment, was mainly explained by an increase of

unemployed women between most of them were between 25 and 44 years old and already had

some work experience. The economic activities that reduce employment in 2014 was retail

services, and Administrative and support services activities.

Attracted by employment opportunities in Costa Rica, immigrants from Nicaragua form a

significant portion of the labor force in construction, domestic services and agriculture in Costa

Rica. Migrant workers are required to obtain a work permit from the Government and contribute

to social security. In 2012, the Government approved the issuance of immigrant visas to

businesses that establish a presence in Costa Rica.

In Costa Rica, employers must compensate employees dismissed for a just cause. Said

compensation includes a notice of dismissal and compensation for dismissal based on the

number of years of service up to eight years, days of vacations not enjoyed and proportional

Christmas bonus.

The Constitution requires that minimum wages be set in each sector. Subject to this

limitation, employees and employees are free to update salaries and salaries. In the private

sector, minimum wages are adjusted twice a year. Clients can enter salary arbitration

mechanisms. Costa Rican law provides protection against the dismissal of pregnant women and

provides benefits in addition to persons with disabilities.

Public sector employees can be dismissed only for just cause. Wages and salaries of

public sector employees are subject to cost of living adjustments. Since 1978, Costa Rican law

has prohibited the collective bargaining of public sector employees, except in cases where

collective bargaining agreements were in force before 1978. In addition, the Supreme Court

eliminated arbitration of labor disputes in the sector public in 1993.

http://www.inec.go.cr/empleo

28

BALANCE OF PAYMENTS AND FOREIGN TRADE

During 2017 (with data for the third quarter only), Costa Rica’s current account surplus

exceeded its capital account deficit, resulting in a US$683 million decrease in the Central Bank’s

net international reserves. In 2016, net international reserves amounted to US$6.9 billion,

equivalent to approximately 5.5 months of imports.

During 2016, Costa Rica’s current account surplus exceeded its capital account deficit,

resulting in a US$235 million decrease in the Central Bank’s net international reserves. In 2016,

net international reserves amounted to US$7.5 billion, equivalent to approximately 6.6 months of

imports.

During 2015, Costa Rica’s capital account surplus exceeded its current account deficit,

resulting in a US$644 million increase in the Central Bank’s net international reserves. In 2015,


imports.




imports.




imports.


resulting in a US$2,109 million increase in the Central Bank’s net international reserves. Net

international reserves amounted to US$6.9 billion, equivalent to approximately 6.1 months of

imports.

Current Account

At the third quarter of 2017, the current account deficit of the balance of payments

represented 2.05% of estimated 2017 GDP. Net international reserves of the Central Bank

amounted at US$6.9 billion, representing the equivalent of approximately 5.5 months of imports.

During 2017, growth of external sales reflected the higher demand for manufactured

products from companies with special regimes (medical equipment and implements, iron

products and contact lenses) and, to a lesser extent, pineapple and bananas. In addition, growth

was a result of a recovery in sales of manufactured products of the definitive regime, particularly

sugar. By destination of sales, the U.S. and Europe remain the main markets; However, sales of

goods directed to Asia has grown out, which was evidenced by an increase of 1.5 p.p. in its share

of total exports (4.7% from 3.2% the 2016).

29

In contrast, the value of goods directed to Latin America fell by 6.5%. The contraction

of the Latin American market was concentrated in Venezuela, the Dominican Republic and

Colombia with drops of 66.5%, 9.6% and 19.3% respectively. On the other hand, the oil bill and

the acquisition of inputs related to the metallurgical industry, the paper and plastic industry, and

consumer goods (pharmaceutical and food) were in the main imports. In particular, the oil bill

amounted to USD 979.2 million, 19.7% higher than in the same period of the previous year (-

16% a year ago), as a result of the 17.7% increase in the price per barrel of the hydrocarbon

cocktail and 1.7% in the amount of barrels.

During 2016, the current account deficit of the balance of payments represented 3.603%

of GDP, 0.42 percentage points higher than the previous year. During 2015, the current account

deficit of the balance of payments represented 2.956% of GDP, 0.65 percentage points higher

than the previous year. During 2014, Costa Rica’s current account deficit was US$2.4 billion

(4.9% of GDP) compared to a current account deficit of US$2.5 billion in 2013. Imports

decreased at a rate of 5.2% during this period compared to the corresponding period in 2013.

Exports of goods decreased 3.4% in 2014 compared to 2013.

During 2013, Costa Rica’s current account deficit was US$2.5 billion (5% of GDP)

compared to a current account deficit of US$2.4 billion for the corresponding period in 2012.

Imports grew at a rate of 2.1% during this period in 2013 compared to 2012, primarily due to

increased imports of raw materials and capital goods by companies under special regimes.

Exports of goods grew a 0.9% in the 2013 compared to 2012, primarily due to decreased

traditional exports, such as coffee and bananas. In particular, coffee exports were affected by

lower production volume because of the rust fungus, which affected approximately 60% of all

plantations, and lower international coffee prices.

Capital Account

On October 2, 2017, the Central Bank of Costa Rica announced that the Fondo Latino

Americano de Reservas (FLAR) Board of Directors approved a loan for US$1 billon, aimed at

strengthening the country ’s international reserves position.

With this loan the Central Bank seeks to restore the macroeconomic conditions necessary

to maintain the flow of net external savings and have an additional tool to pursue exchange rate

stability.

At the third quarter of 2017, the current account deficit of the balance of payments

represented 2.05% of estimated 2017 GDP. Net international reserves of the Central Bank

amount at US$6.9 billion, representing the equivalent of approximately 5.5 months of imports.

The reserves decrease explained by a capital outflow of US500$ million (estimated) due private

sector operations in May of 2017.

During 2016, Costa Rica’s balance of payments was equivalent to 1.2% with respect to

2016 annual GDP, which was financed with long-term external savings flows; particularly direct

investment. However, lower net income from other capitals led to a reduction in reserve assets of

US $ 88 million.

30

During 2015, the capital and financial account surplus was US$3.25 billion (5.94% of

GDP). In March 2015, the Republic issued notes due 2045 in an aggregate principal amount of

US$1 billion. The decrease in capital inflows was primarily the result of lower operations of the

private sector.


GDP), compared with US$3.2 billion (6.5% of GDP) for the corresponding period in 2013. In

April 2014, the Republic issued notes due 2044 in an aggregate principal amount of US$1

billion. The decrease in capital inflows was primarily the result of by lower operations of the

private sector.


GDP), compared with US$4.4 billion (9.7% of GDP) for the 2012. These flows financed the

current account deficit and resulted in an increase in net international reserves. In April 2013, the

Republic issued notes due 2025 in an aggregate principal amount of $500 million and notes due

2043 an aggregate principal amount of $500 million.

The Central Bank reduced its net debt level in 2012, while the Government and other

non-financial public sector entities increased their external obligations. During 2012, the

Republic issued notes due 2023 an aggregate principal amount of US$1 billion and the ICE

issued notes due 2021 in an aggregate principal amount of US$250 million.

Balance of Payments

(in millions of U.S. dollars)

For the year Ended December 31,

2013 2014 2015 2016 2017(2)

Current Account -2,431 -2,453 -1,941 -1,697 -1,188

Goods Trade Balance -5,558 -5,329 -4,627 -4,421 945

Exports (f.o.b.) 8,866 9,456 9,431 10,166 14,937

Imports (c.i.f.) 14,425 14,784 14,059 14,587 13,991

Services Balance 4,563 4,539 4,608 5,114 3,866

Rent -1,828 -2,114 -2,379 -2,864 2,156

Current Transfers 392 450 457 473 381

Capital and Financial Account -3,536 -2,921 -3,221 -1,837 -868

Capital Account 7 -25 30 86 31

Financial Account -3,544 -2,896 -3,251 -1,923 -899

Direct investment 803 424 414 495 2,068

Portfolio investment 377 330 271 113 -127

Other investment 1,670 763 461 663 1,296

Errors and Omissions -660 -531 -696 -547 -426

International Monetary Reserves(1) 460 -113 644 -235 -683

31

(1) A positive number represents a decrease in international reserves and a negative number represents an increase in international reserves.

(2) Figures correspond to the last period with available data (third quarter 2017).


Foreign Trade

Costa Rica has adopted a trade policy is designed to integrate the country into the global

economy. The implementation of this policy is reflected largely in the increase in Costa Rica’s

exports, the diversification of its products, the diversification of the markets for its products, the

increase in foreign direct investment, and the generation of employment by the export sector.

Three decades ago, Costa Rica was significantly dependent on four traditional

agricultural goods (coffee, bananas, sugar and beef). Today, the country exports over 4,000

different products. The quantity and variety of agricultural goods sold abroad has increased and

now includes products such as watermelons, pineapples, melons, potatoes and ornamental plants.

In addition, Costa Rica is exporting high-technology products, such as computers, medicines and

medical equipment. As a result, the four traditional agricultural goods accounted for only 11% of

Costa Rica’s total exports in 2013.

Costa Rica has also increased its market diversification during the past decade. It exports

to approximately 150 countries around the world. In 2017, approximately 39.7.% of Costa Rica’s

exports were sent to the U.S., 22.0% to the European Union, 16.2% to Central America, 4.8% to

Asia and 11.5% countries in South America and the Caribbean.

Foreign trade in Costa Rica depends largely on the economies of the U.S., the European

Union and other Central American countries, given that approximately 81.1% of total exports go

to these areas. The economic slowdown in those countries in 2009, together with the uncertainty

of the magnitude, duration and impact of the global economic crisis were important causes for

the external demand slowdown for Costa Rican exports in 2009. Exports have rebounded in the

past years, however, as Costa Rica adjusted its volume of exports to international market prices.

The following table sets forth information about the value of Costa Rican imports and

exports for the periods indicated.

Merchandise Trade Balance


Exports (f.o.b.) Imports (f.o.b) Merchandise Trade Balance

2013 8,866.33 14,425.14 -5,558.82

2014 9,455.57 14,784.33 -5,328.76

2015 9,431.74 14,059.49 -4,627.75

2016 10,166.20 14.587.19 -4,420.99

2017(1) 8,240.20 11,160.7 -4,194.60 (2) Figures correspond to the last period with available data (third quarter 2017).


32


Exports

In recent years, Costa Rica’s foreign trade has gained importance. Changes in Costa

Rica’s export model and the increased aggregate value of Costa Rica’s national production have

resulted in export growth, on average, of 5.28% annually from 2014 to 2017. The expansion of

high-tech manufacturing in Costa Rica has been enhanced by the arrival of Intel and other

companies, including Lucent Technologies and Abbott Laboratories, which have assisted in the

expansion and diversification of the country’s production for the local and external markets.

In 2014, Intel the world´s largest microprocessor manufacturer closed his plant in Costa

Rica to move it to Asia. However Intel Components Costa Rica maintains its service center and

research in the country

Economic data for 2015 gives a measurement on the true impact of Intel closure in the

country. Intel's sales represented a fifth of Costa Rican exports. Accumulated data from January

to May 2015 show that the sales of components for computers amounted to US $ 7.8 billion,

while in the same period for 2014 year sales amounted to US $ 865 million, representing a

reduction in exports of 17% by April 2017. The Manufacturing sector is an important contributor

to GDP; therefore, the closure of the Intel plant had a strong impact on GDP in 2015 and other

economic indicators.

Excluding computer devices from a macroeconomic analysis, Costa Rican exports have

been growing. Total exports (including goods and services) grew in 2013 by 1.5% compared to

same period in 2012, because of an expansion of international sales of companies under special

regimes. Services exports increased by 17.3% in 2013, compared to 8.0% in 2012, primarily due

to increased sales of informatics and data processing services, accounting business support

services and inbound tourism.

In 2012, total exports (including goods and services) increased by 9.9%, primarily due to

increased exports of microelectronics, microprocessors and medical devices. Services exports

increased by 9.6%, primarily due to growth in the computer and information services sector.

Since the mid-1980’s, Costa Rica has continued to liberalize its economy. The promotion

of exports as well as export diversification has become the focus of Costa Rica’s foreign trade

policy. Moreover, until 2006, Costa Rica’s exchange rate policy, through a crawling peg regime,

aimed to adjust nominal exchange rates in accordance with the inflation rate differentials

between Costa Rica and its principal trading partners in order to maintain the competitiveness of

Costa Rican exports. Beginning in 2006, the Central Bank transitioned out of the crawling peg

regime and into a managed floating exchange regime with bands.

The Promotora de Comercio Exterior de Costa Rica (Promoter of Costa Rican Foreign

Trade) is charged with designing and coordinating programs with respect to exports and

investments and has opened offices in Canada, Germany, Mexico, Chile, China, Trinidad and

Tobago, Panama, Dominican Republic, Miami and New York.


33

Imports

At the third quarter of 2017, the oil bill and the acquisition of inputs related to the

metallurgical industry, the paper and plastic industry, and consumer goods (pharmaceutical and

food) were the main drivers in imports of goods. In particular, the oil bill amounted to

US$1,217.3 million, 24.2% higher than in the same period of the previous year, as a result of the

17.9% increase in the price per barrel of hydrocarbons.

In 2016, imports of goods and services grew 10.2% driven by an increase in the

purchases of raw materials, consumer goods (vehicles and textiles), hydrocarbons and services

especially transport and travel.

In 2015, importation of goods and services decreased in real terms by 0.5%, compared to

a reduction by 4.0% in 201). By economic destination, the reduction in goods evidenced lower

purchases of inputs for the electrical and electronic industry and the lower number of barrels of

hydrocarbons, in part, due to the substitution of fossil fuels for clean energy. This effect was

mitigated by the increased purchases of food products and supplies for the plastics industry and

construction materials. Services imports increased by 10.6%, especially for transport services

and travel by residents.

Imports of goods and services decreased by 4.6% in 2014, but increased by 2.4% and

8.5% 2013 and 2012, respectively. Imports decreased in 2014 primarily due to lower purchases

of inputs connected to the electrical and electronics industry (influenced by the transfer of

manufacturing operations Intel).Imports of raw materials and capital goods accounted for most

of the growth, reflecting increased growth of the industrial manufacturing sector, which has

contributed to the overall expansion of the economy. Imports of capital goods and raw materials,

primarily for the industrial manufacturing and construction sectors, accounted for 63.4%, 66.6%

and 66.4% of total imports in 2014, 2013 and 2012 respectively.

During 2012 to 2014, the levels of Costa Rican imports have increased while the

composition of those imports has changed. In 2014, imports (including goods and services)

decreased by 4.6% compared to an increase of 2.4% in 2013, breaking with a trend of increases

started in 2010.

In 2012, the import of goods and services increased by 8.6%, primarily due to an increase

in purchases of consumer goods, raw materials (for the electrical and electronics sector) and

capital goods, as well as metallurgy and metalworking, tools and transport equipment.

Costa Rica has no domestic sources of hydrocarbon fuels. Imports of crude oil and other

fuels, as well as all refining activities, are under the control of the Refinadora Costarricense de

Petróleo (“RECOPE”), a state monopoly.

Direction of Trade

34

The U.S. is Costa Rica’s most important trading partner. In 2017, trade with the U.S.

accounted for approximately US$7.4 billion, or 38.21% of total imports, and approximately US$

4.2 billion, or 43.0%% of total exports.

Trade with members of the Central American Common Market (CACM) has increased

over the past five years as the economies of these countries have become more stable. Although

the DR-CAFTA became effective on January 1, 2009, the agreement could not minimize the

effects of the global financial crisis on Costa Rican exports to the U.S. during 2009.

The following table sets for the value of exports (f.o.b.) by country for the periods

indicated.

Value of Exports (f.o.b.) by Country(1)

(in millions of U.S. dollars, except percentages)

For the ended December, 31

2012 2013 2014 2015 2016 2017

Central America 1,544.95 1,536.96 1,563.13 1,661.02 1,642.61 1,715.94

El Salvador 293.70 299.25 284.30 284.85 274.15 286.46

Guatemala 414.82 433.12 464.44 522.80 516.34 525.86

Honduras 339.06 313.94 317.30 331.66 334.82 365.98

Nicaragua 497.38 490.64 497.09 521.71 517.30 537.64

North America 3,775.23 3,665.69 3,849.29 3,877.04 4,292.14 4,558.68

Canada 67.88 78.03 69.15 100.34 85.47 77.15

United States 3,395.96 3,355.45 3,528.84 3,545.65 3,949.47 4,207.17

Mexico 311.40 232.22 251.30 231.04 257.20 274.36

Caribbean Countries 165.58 157.52 186.17 179.15 182.53 216.07

Other Latin America 1,273.47 1,227.26 1,347.26 1,257.28 1,237.49 1,220.28

Europe 1,693.31 1,729.66 1,787.44 1,867.09 2,182.47 2,330.71

Netherlands 431.00 432.51 427.46 436.21 575.44 594.82

Belgium-Luxemburg 295.76 320.91 368.50 430.39 532.22 684.03

Italy 190.99 142.62 149.16 170.73 207.84 157.12

United Kingdom 236.74 223.17 234.33 167.66 181.05 205.78

Spain 83.51 77.27 116.78 127.10 153.63 158.69

Other Europe 455.32 533.19 491.19 535.00 532.32 530.27

Asia 262.00 280.09 338.68 307.40 321.62 506.19

South Korea 24.13 26.32 42.52 32.38 33.57 37.73

China-Taiwan 81.95 86.39 101.32 73.63 62.35 126.34

Hong Kong 32.80 40.78 30.18 26.02 32.10 38.63

Japan 28.40 26.18 49.71 96.31 112.86 171.94

Others 94.71 100.42 114.96 79.05 80.72 131.56

Oceania 22.17 18.65 46.92 35.11 43.32 50.90

Africa 10.58 31.79 16.56 13.35 12.12 8.59

Other countries 0.03 - - - - -

Total 8,747.33 8,647.62 9,135.46 9,197.43 9,914.30 10,607.36

1 Exports from free trade zones and in-bond industries are uncategorized as to origin

Source: Central Bank of Costa Rica and percentage prepared by Ministry of Finance,



35

Costa Rica is an active participant in the multilateral trading system and an important

contributor in strengthening the Central American economic integration process. The economic

opening of the country is reflected in its participation in multiple Free Trade Agreements

(“FTA”): the country has 14 FTAs that govern trade with 45 trading partners - including the

European Union (28), European Free Trade Association (“EFTA”), U.S., Canada, Mexico, Chile,

China, Peru and Singapore, among others - that together represent 83.4% of imports and 93.4%

of the country's exports. The entry into force with the remaining countries of the Caribbean

Community (“CARICOM”) and Colombia, will increase preferential trading partners to 50,

adding up to 86.1% of the total trade in goods.

In the last years trade with members of the Central American Common Market

(“CACM”) has increased over the past five years as the economies of these countries have

become more stable. Although the DR-CAFTA became effective on January 1, 2009, the

agreement could not minimize the effects of the global financial crisis on Costa Rican exports to

the U.S. during 2009.

36

The following table sets for the value of imports (c.i.f.) by country for the periods indicated.

Value of Imports (c.i.f.) by Country(1)

(in millions of U.S. dollars, except percentages)

For the years ended December 31, Region -Country 2012 2013 2014 2015 2016 2017

Central America 845.27 857.78 894.24 867.30 900.70 925.58

El Salvador 221.22 226.30 221.67 234.82 236.16 250.74

Guatemala 402.37 385.90 408.93 399.15 416.78 422.01

Honduras 116.22 117.59 108.49 103.52 106.06 101.06

Nicaragua 105.47 127.99 155.16 129.82 141.69 151.76

North America 7,760.47 7,435.35 7,739.58 6,916.77 6,874.12 7,366.71

Canada 234.31 147.19 174.85 159.82 155.23 157.15

United States 6,368.24 6,187.97 6,419.28 5,605.19 5,651.32 6,087.33

Mexico 1,157.92 1,100.20 1,145.46 1,151.76 1,067.58 1,122.23

Caribbean Countries 117.83 163.79 74.33 47.28 27.04 12.57

Others Latin

America 1,689.28 1,754.88 1,558.77 1,458.24 1,488.98 1,526.32

Europe 1,351.46 1,420.31 1,585.93 1,672.88 1,755.56 1,886.07

Germany 285.80 303.00 359.24 376.89 387.43 404.5

Spain 188.02 190.39 206.00 217.39 222.73 281.92

Italy 130.45 177.66 206.61 179.09 199.03 206.69

Netherlands 112.19 151.70 117.85 83.95 95.84 90.61

Sweden 100.74 56.76 50.45 32.17 38.84 46.55

Switzerland 100.09 89.22 116.11 114.86 145.58 152.72

United Kingdom 89.98 95.58 101.91 132.46 127.13 127.87

Other Europe 344.19 356.01 427.76 536.08 538.99 575.21

Asia 2,766.31 3,002.10 3,223.33 3,416.57 3,745.47 3,680.30

South Korea 274.07 308.86 261.26 283.71 257.10 232.23

China-Taiwan 1,526.96 1,695.14 1,854.64 2,056.33 2,196.87 2,191.85

Hong Kong 52.44 56.94 98.09 106.76 187.07 165.38

Japan 512.69 443.84 403.24 397.17 421.40 387.11

Other Asia 400.16 497.32 606.10 572.60 683.02 703.73

Oceania 19.43 10.91 13.15 15.65 18.53 16.07

Africa 18.65 22.28 15.87 14.96 15.93 17.16

Others 346.46 421.05 456.48 336.43 450.28 496.42

Total 14,915.17 15,088.46 15,561.69 14,746.09 15,276.61 15,927.18

(1) Imports from free trade zones and in-bond industries are uncategorized as to origin

Source: Central Bank of Costa Ricahttp://www.bccr.fi.cr/indicadores_economicos_/


37

Foreign Investment

The Costa Rican economic development model is based on international economic

integration, export diversification and foreign direct investment. One of the key elements of this

strategy is the diversification of investors. Historically, the U.S. was the main source for foreign

direct investment. China, however, has recently become an important investment partner, while

traditional partners such as Mexico and Spain have remained significant partners in investment

and job creation.

Foreign direct investment inflows in Costa Rica are significantly different from the rest

of Latin America. While most of other Latin American countries attract foreign direct investment

channeled to natural resources sectors, Costa Rica has concentrated foreign direct investment

inflows in technology and knowledge-intensive areas. Although manufacturing is still a top

generator of foreign direct investment, Costa Rica has been diversifying its sources of foreign

direct investment to service industries such as design, development and testing, research and

development, education and training services.

According to the Central Bank, 2016, Costa Rica received US$2.5 billion in foreign

direct investment representing a decrease of 8.5% as compared with 2015. The flows of foreign

direct investment (FDI) to Latin America and the Caribbean decreased by 7.9% in 2016

compared to 2015, totaling US$ 167,043 million, which represents a reduction of 17% from the

maximum amount in 2011, reported by the Economic Commission for Latin America and the

Caribbean (“ECLAC”). These results are driven by the low prices of raw materials and their

impact on investments directed at the natural resources sector, the slow growth of economic

activity in several economies and the global scenario of technological sophistication and

expansion of the digital economy that tends toward a concentration of transnational investments

in developed economies, according to the annual report Foreign Direct Investment in Latin

America and the Caribbean 2017.

The regulatory framework governing foreign investment in Costa Rica currently imposes

limited foreign investment restrictions. One such restriction is a prohibition on investment in

certain border areas, such as Costa Rica’s coastline. The prohibition also applies to domestic

investments. Costa Rica’s Constitution provides for equal treatment of foreigners and Costa

Rican citizens.

According to statistics compiled by the Ministry of Foreign Trade foreign direct

investment in the industrial manufacturing sector accounted for (8.48)%, (5.97)%, 6.17%, 13.4%

and 27.2%, of total foreign direct investment in 2016, 2015, 2014, 2013 and 2012, respectively.

The following table sets forth gross foreign direct investment by economic sector for the

periods presented.

38

Gross Foreign Direct Investment by Economic Sector and Percentage of Total

(in millions of U.S. dollars, except percentages of total)

For the Year Ended December 31,

2013

2014

2015

2016

Agriculture 1.8 0.1%

25.2 0.9%

402.7 14.6%

38.8 1.5%

Industry 369.0 13.5%

803.6 27.5%

958.2 34.8%

1.602.9 63.6%

Commerce 658.9 24.0%

996.5 34.1%

648.2 23.6%

519.7 20.6%

Tourism 130.1 4.7%

34.7 1.2%

53.3 1.9%

96.7 3.8%

Real Estate 1.285.3 46.9%

761.1 26.0%

449.0 16.3%

269.8 10.7%

Services 276.9 10.1%

278.2 9.5%

239.4 8.7%

-24.0 -1.0%

Others 19.1 0.7%

27.4 0.9%

1.1 0.0%

14.7 0.6%

Total 2,741.1 100.0%

2,926.6 100.0%

2,751.9 100.0%

2,518.6 100.0%

Source: Central Bank of Costa Rica and percentage prepared by Ministry of Finance,


During 2016 and 2015, the reduction of foreign direct investment resulted from the

closure of the Intel manufacturing plant and other contributing factors, such as low prices of raw

materials and their impact on investments directed at the natural resources sector. The reduction

of foreign direct investment during this period was systemic to all of Latin American.

During 2014, foreign direct investment grew by 6.77% compared to 21.39% in 2013, due

to an increase in the slowdown cause by a decrease in investments in real estate activities and

accommodation and food service activities.

During 2013, the U.S. accounted for 46.3% of total foreign direct investment, compared

with 45.1% in 2012. Between 2010 and 2013, an average of approximately 56.2% of the foreign

direct investment received by Costa Rica originated in the U.S.

In 2013, Spain accounted for 8.0% of total foreign direct investment (the second largest

source of foreign direct investment), compared with 13.6% in 2012. Mexico accounted for 4.9%

of the foreign direct investment in 2013, compared with 14.8% in 2012. Other Central American

countries, collectively, were the source of US$413.8 million of foreign direct investment in

2013. The services sector absorbed US$794.1 million of foreign direct investment in 2013,

while the industrial sector absorbed US$358.1 million of foreign direct investment in 2013.

Currently, Costa Rica has foreign investment treaties in effect with, among others,

Argentina, Belgium, Bolivia, Canada, Chile, the Czech Republic, France, Germany,

Luxembourg, the Netherlands, Paraguay, South Korea, Spain, Switzerland, the United Kingdom

and Venezuela.


39

MONETARY SYSTEM

Central Bank

The Central Bank is the monetary authority of Costa Rica, and its primary purpose is to

maintain the internal and external stability of the economy and the soundness of the financial

system. The Central Bank is the sole issuer of Costa Rican currency and acts as lender of last

resort to the banking system. The Central Bank enacts monetary policy through the use of

discount facilities, open-market operations and through the establishment of reserve

requirements for financial institutions. In addition, the Central Bank manages international

reserves and is responsible for the supervision of foreign exchange regulations applicable to

financial institutions.

The Organic Law of the Central Bank, enacted in 1995, provides a high level of

autonomy for the Central Bank. The Central Bank is prohibited from financing the activities of

the Government, except that in extraordinary cases it can purchase Government securities up to

an amount equal to 5.0% of the amount of the Government budget on an annual basis, which 3-

month securities must be redeemed within the same fiscal year they were purchased. In addition,

with the exception of the President of the Central Bank and the Minister of Finance, the seven

members of the board of directors of the Central Bank are appointed by the Government Council

for terms of 90 months. Such appointments must be ratified by the Legislative Assembly and

members may not be removed except under certain limited circumstances.

The Organic Law of the Central Bank establishes that the Central Bank must publish its

Macroeconomic Program during the first 30 days of each semester. The Macroeconomic Program

establishes the Central Bank’s inflation target and the orientation of its monetary and exchange rate

policies. The President of the Central Bank must inform the Legislative Assembly once a year

about the execution of monetary and exchange rate policies, credit growth and the use of

international reserves, as well as the actions taken to meet the inflation target and for the

promotion of conditions for the strengthening and proper functioning of the national financial

system.

40

The following tables set forth the summary balance sheet of the Central Bank for the

periods indicated.

Summary Balance Sheet of the Central Bank

(in millions of current U.S. dollars)(1)

2011 2012 2013 2014 2015 2016 2017

Net international reserves 4,789.46 6,999.29 7,333.23 7,255.91 7,834.09 7,573.79 7,081.1

Total Domestic Credit -168.23 -1,138.90 -403.58 -120.23 -228.44 -434.55 -198.07

Government -172.19 -1,141.74 -405.23 -120.78 -228.44 -434.55 -198.07

Rest of the Public Sector 3.96 2.85 1.66 0.55 - - -

Other Net Assets 2,006.60 2,132.34 2,495.16 1,534.14 1,735.52 2,089.04 1,718.4

Monetary Base 2,990.14 3,566.74 3,908.33 4,029.23 4,384.15 4,528.02 4,819.5

Open Market Operations 3,352.27 4,144.53 5,242.57 4,389.95 4,721.27 4,473.71 3,546.9

External Debt 285.43 281.46 273.92 250.65 235.74 226.55 235.04 (1) Amounts in U.S. dollars were converted from colones using the historical end of period exchange.


Supervision of the Financial Sector

The Law for the Regulation of the Securities Exchange, Law No. 7,732, (which became

effective on March 27, 1998), created the Consejo Nacional de Supervisión del Sistema Financiero

(National Supervisory Board of the Financial System, or “CONASSIF”), charged with supervising

the financial system through the use of its regulatory authority, including its powers to authorize

entities subject to its review to participate in the financial markets, to suspend or revoke such

authorizations and to intervene in such entities’ activities. The CONASSIF is composed of seven

members: the President of the Central Bank, or in his absence the Manager of the Central Bank, the

Minister of Finance, or in his absence the Viceminister of Finance, and five members appointed by

the board of directors of the Central Bank.

The CONASSIF also has the authority to promulgate rules and regulations for, and appoint

the Superintendent and the Intendent of: SUGEF, which regulates and supervises banks and other

financial intermediaries and regulates foreign exchange operators; the Superintendencia General

de Pensiones (Superintendency of Pensions, or “SUPEN”), which in turn regulates and supervises

the pension fund system of SUGEVAL which in turn regulates and supervises stock exchanges and

issuances of securities and the Superintendencia General de Seguros (Superintendency of

Insurance, or “SUGESE”), which supervises insurance providers.


41

Monetary and Financial Policy

The principal objectives of Costa Rica’s monetary policy over the last four years have been

to maintain inflation within 1 percentage point of its targets and to foster a stronger net

international reserve position. In its ongoing transition to an inflation targeting regime, Costa

Rica’s monetary policy has shifted from a focus on monetary targets to an inflation target, with the

former being used as intermediate goals. Instruments used to conduct monetary policy have also

shifted, with shorter-term interest rates acquiring more relevance. Costa Rica’s monetary policy

has been complimented by the absence of controls on foreign exchange convertibility or remittance

in Costa Rica.

From 1983 to 2004, the Central Bank guided its monetary policy by targeting monetary

aggregates. Central Bank bills (mostly with 6- and 12-month maturity) and bonds were the main

instruments to control the money supply and attain inflation and international reserves objectives in

the context of a crawling-peg exchange rate system. Over the last ten years, the Central Bank has

shifted the reference for the monetary policy rate toward shorter-term instruments. In 2004, the

Central Bank started using 30-day deposit rates as its reference for the monetary policy rate. In

2006, the reference rate shifted to the rate on 1-day deposits at the Central Bank and in 2008 the

reference rate shifted to the rate on 1-day Central Bank credit in the interbank market. In

November 2010, an interest range for the 1-day rate was formed between the Permanent Credit

Facility rate (1-day lending rate) and the Permanent Deposit Facility (1-day deposit rate). In April

2011, the reference rate shifted to the mid-point of a range defined by the rates on 1-day deposit

and credit facilities of the Central Bank. The range is currently 200 basis points wide, with 3% as

the floor and 5% as the ceiling.

In addition to the floor and ceiling rates established by the 1-day deposit and credit

facilities, the Central Bank manages liquidity through 1-day auctions that allow it to keep the

market interest rate close to the policy rate level. 7- and 14-day auctions are used as a complement

to 1-day auctions when stronger corrections in the stock of liquidity are required.

As established in 2008 by the board of directors of the Central Bank, the Central Bank still

uses longer-term bills and bonds to compensate for the impact on liquidity of the Central Bank

deficit and international reserve accumulation, while using very short-term instruments to calibrate

its monetary policy to attain its inflationary target. Longer-term bills and bonds are placed pursuant

to weekly auctions by the Central Bank.

On November 30, 2017, the board of directors of the Central Bank approved setting the

interest rate for the standing credit facilities to the monetary policy rate plus 100 basis points and

the interest rate on certain long-term deposits as the monetary policy rate less 100 basis points. The

monetary policy rate is currently set at 4.75%.

Reserve Requirements

The Organic Law of the Central Bank authorizes the Board of Directors of the Central

Bank to set the reserve requirements applicable to deposits and other obligations in the financial

system up to a maximum of 15%. The reserve requirements generally apply to all types of deposits

42

within institutions supervised by SUGEF regardless of the type of financial institution, except for

those expressly exempted from this obligation by the board of directors of the Central Bank.

Different reserve requirements may apply to obligations in local and foreign currency.

Since 2005, the Central Bank Board has set reserve requirements at 15% on all deposits

and obligations, in local or foreign currency. In 2011, the Central Bank extended the application of

minimum reserve requirements to liabilities arising from short-term external debt as a result of the

Central Bank determination that short-term capital from abroad is similar to bank deposits.

Minimum reserve requirements took effect gradually, starting at a 5% rate in September of 2011,

and increasing to 10% and 15% in October and November 2011 and are currently set at 15%.

Long-term external loans remain exempt from reserve requirements.

Monetary Policy following Global Financial Crisis

In 2008, monetary and exchange rate policies were mainly directed to attenuate the adverse

impact of the global financial crisis and to reduce the inflationary pressure from a high domestic

demand expansion. During the first half of 2008, low international interest rates and significant

capital inflows prevented a more aggressive interest rate policy by the Central Bank to contain

inflation. By the fourth quarter of 2008, developed countries experienced a liquidity crunch, which

led the Central Bank to focus on mechanisms to address eventual liquidity shortages. Despite an

ambitious initial inflation target that implied reducing inflation as measured by the consumer price

index from 11% in 2007 to 8% in 2008, 12-month inflation at year-end 2008 amounted to 13.9%,

partly influenced by high international commodity prices as well as exchange rate depreciation.

The global financial crisis that started in October 2008 led to a reduction in international

commodity prices and easing of domestic price pressures. Monetary policy between 2010 and 2014

was geared toward lowering inflation to levels similar to those of commercial partners, taking

advantage of the decrease in international prices to break inflation inertia. As a result, inflation

between 2010 and 2014 remained within the 4%-6% inflation band and around the 5% inflation

target. During the first three months of 2014, the Central Bank changed its inflation target band to a

range of 3% to 5%, with a long term inflation target of 4%.

In February 2, 2015, an exchange rate regime of managed float that will allow the exchange

rate to be determined freely but Central Bank of Costa Rica reserves the possibility of participating

in the exchange market to prevent strong fluctuations.

The risks to the financial system highlighted by the global financial crisis led the Central

Bank and the Government to carry out a series of actions in 2008 and 2009. The Central Bank

offered financial intermediaries a special operations plan to address extraordinary liquidity needs

that included, among others: (i) a credit line in colones to financial intermediaries for as much as

30% of current account balances and 10% of term deposits; (ii) allowing the Central Bank to

auction bonds up to 100 billion colones (US$174.4 million) for 3 months; and (iii) broadening the

spectrum of financial entities allowed to hold repurchase operations with the Central Bank to all

entities supervised by SUGEF.

43

In December 2008, the Legislative Assembly approved the capitalization of three state

banks for a total of US$117 million, with the goal of compensating for the impact of the global

financial crisis on the lending capacity of such institutions.

In 2009, the Central Bank and the Ministry of Finance entered into a Precautionary Stand-

by Arrangement with the IMF for US$735 million that would extend over a 15-month period. The

purpose of the arrangement was to provide the Central Bank with enough resources to face any

liquidity problems in the financial system or a deterioration in the balance of payments related to

the global financial crisis. The arrangement expired in 2010 with all reviews completed and

without any disbursements made.

In 2009, the Central Bank also adjusted international reserve management policies in

response to higher volatility in the international markets. As a result, investment of reserves in the

international banking system was reduced, terms were shortened and maximum investment per

entity reduced. Minimum credit ratings allowed for investment of the reserves were tightened.

To promote a stable, efficient and competitive financial intermediation system, the board

of directors of the Central Bank took measures in 2011 to meet extraordinary liquidity

requirements in the financial system. These measures included: (i) expanding the catalog of

instruments allowed as collateral in the Integrated Liquidity Market (“ILM”), an electronic

platform in which supervised financial entities can manage their short-run liquidity positions and

have access to Central Bank deposit and credit 1-day permanent facilities, to include securities

issued by autonomous institutions of Costa Rica and other sovereign governments, in addition to

standardized securities of the Ministry of Finance and the Central Bank which were already

admitted, and (ii) establishing a system of credit facilities and credit lines in local and foreign

currency geared toward addressing systemic liquidity shortages in the ILM.

During the fourth quarter of 2012, Costa Rica experienced a significant inflow of foreign

financial investment into locally denominated debt instruments of the Government and private

sector financial institutions, due in part to the strong fundamentals of the Costa Rican economy,

the differential in interest rates on colon-denominated and U.S. dollar-denominated investments

and stability in the colon-U.S. dollar exchange rates. These inflows resulted in an increase in

liquidity in the Costa Rican financial sector and increased the costs to the Central Bank of

keeping exchange rates within the lower limit of the exchange-rate target band, creating

significant appreciating pressures on the colon-U.S. dollar exchange rate and adversely affecting

competitiveness of the export sector of the economy. Although such inflows decreased

beginning in the first quarter of 2013 along with local interest rates, in order to create a policy

tool to prevent a recurrence of such destabilizing inflows, in January 2013 the Government

presented a bill to the Legislative Assembly for approval of what became the “Ley para

Desincentivar el Ingreso de Capitales Externos” (Law to Discourage Foreign Capital Inflow),

approved by the Legislative Assembly on March 24, 2014.

The law contains two mechanisms that allow the implementation of temporary measures

to confront imbalances in the economy related to inflows of foreign capital into the country. The

first mechanism allows the executive branch to increase the income tax withholding rate by up to

30 percentage points, and for up to six months, on (i) interest, (ii) discounts, (iii) promissory

notes; (iv) securities in favor of persons not domiciled in Costa Rica, and (v) income and capital

gains from investment funds, in the event that the board of directors of the Central Bank

44

determines, in a decision adopted by at least five of its members, that foreign capital inflows are

causing an imbalance in the Costa Rican economy. The executive branch may decide to apply

different tax withholding rates and terms to different types of income, currencies and

investments. The law excludes from this mechanism: (i) income from securities issued by the

Government or other non-financial Government agencies in international markets, or financial

institutions recognized by the Financial Regulatory Agency (Superintencencia General de

Entidades Financieras); (ii) payments of interest, commissions and other financial expenses paid

by corporations domiciled in Costa Rica to foreign financial institutions recognized by the

Central Bank as institutions that usually engage in international transactions, and (iii) payments

related to capital leases and interests paid on loans used in industrial or agricultural activities to

first-tier financial institutions recognized as such by the Central Bank. In addition, the law

excludes any payments related to foreign holders of securities or any other type of financial

instrument who held such securities or financial instruments as of the date of entry into effect of

the decree issued by the Government in connection with the Central Bank’s determination of the

existence of the imbalance. However, the law applies to payments made to any transferees of

those securities or financial instruments made after the date of entry into effect of such decree.

The second mechanism allows the Central Bank to require a mandatory deposit in a non-

interest bearing account at the Central Bank of up to 25% of the total amount to be invested by

persons not domiciled in Costa Rica in securities registered with the National Registry of

Securities and Intermediaries (Registro Nacionald de Valores e Intermediarios) in the event that

the board of directors of the Central Bank determines, in a decision adopted by at least five of its

members, that foreign capital inflows are causing an imbalance in the Costa Rican economy. The

term for such deposits shall be established by the Central Bank and may not exceed the period of

investment by more than one year.

On January 20, 2013, the Central Bank decided to limit the growth of financial institutions’

loans and investments portfolio in local currency to the non-financial private sector for the period

starting on February 1, 2013 through October 31, 2013 to 9%. In addition, the Central Bank also

limited growth of financial institutions’ loans and investments portfolio in foreign currency to the

non-financial private sector, for the same period, as follows: (i) if growth of such portfolio for the

year ended December 31, 2012 was equal to or less than 20%, total growth for the period from

February 1, 2013 to October 31, 2013 shall not be more than 6%; and (ii) if growth of such

portfolio for the year ended December 31, 2012 was more than 20%, total growth for the period

from February 1, 2013 to October 31, 2013 shall not be more than 30% of the growth rate for the

year ended December 31, 2012. In July 2013 the Central Bank eliminated these restrictions to

credit growth.

Inflation and Interest Rates

During the period from 2010 to 2017, the average inflation rate was 3.31%, gradually

converging to inflation rates observed in Costa Rica’s main commercial partners. The average

inflation rate for such period was significantly lower than the average inflation rate observed over

the last 30 years, reflecting lower inflationary pressures from abroad but also a shift, beginning in

2006, from a crawling peg to an exchange-rate band that, together with the negative impact of the

global financial crisis on international commodity prices, helped break the historic inflation inertia

of previous periods.

45

In 2015 the inflation rate was -0.81%, driven in part by a reduction in international prices

of raw materials and oil, which negatively affected the economies that use these goods, including

some Latin American countries and caused a depreciation of their currencies. However, the net

importers of these raw materials, such as Costa Rica, experienced a favorable shock in the terms of

trade. As of January 30, 2015, the annual inflation rate was at 0.04%.

In 2014, the inflation rate was slightly higher than the line targets set by the Central Bank,

as the variation of the Consumer Price Index was 5.1%.Inflationary pressure was not associated

with monetary imbalances or pressure from imported inflation. Control measures the Central Bank

allowed the payment methods, determinants of inflation in the long run, grow at rates

commensurate with the level of economic activity, inflation and greater financial deepening. For

this reason their behavior did not generate additional demand pressures on prices. As of January

30, 2015, the annual inflation rate was at 0.04%

In 2013, the inflation rate was in line with the targets set by the Central Bank, as the

variation of the Consumer Price Index was 3.7%, mainly as a result of the actions of the Central

Bank aimed at reducing inflationary pressures and stabilizing the exchange rate.

The following table sets forth changes in the consumer price index (“CPI”) and the

Manufacture producer price index (“IPP-MAN”) for the periods indicated.

Inflation

(percentage change from previous year at period end)

Year Consumer Prices Manufacture Producer Prices

2012…………………. 4.6 3.77

2013…………………. 3.7 1.41

2014…………………. 5.1 4.94

2015…………………. -0.80 -0.43

2016…………………. 0.77 0.29

2017 2.57 3.14



46

Interest Rates

The following table sets forth interest rates on Central Bank instruments and the

monetary policy rate as of the dates indicated.

Interest Rates on Central Bank Instruments and Monetary Policy Rate

BEM 12-month rate 1-day market rate

Monetary

Policy

Rate

March 31, 2013 6.2 5.0 5.0

June 30, 2013 N.A. 3.8 4.9

September 30, 2013 N.A. 3.7 4.0

December 31, 2013 N.A. 3.9 3.8

March 31, 2014 6.0 4.6 4.0

June 30, 2014 N/A 5.3 5.1

September 30, 2014 5.9 5.1 5.3

December 31, 2014 6.3 5.2 5.3

March 31, 2015 5.7 3.9 4.5

June 30, 2015 5.0 3.2 3.5

September 30, 2015 4.4 2.9 3.0

December 31, 2015 3.6 2.2 2.2

March 31, 2016 3.1 1.6 1.7

June 30, 2016 3.4 1.3 1.7

September 30, 2016 N.A. 1.5 1.7

December 31, 2016 N.A. 1.9 1.7

March 31, 2017 N.A. 1.5 1.7

June 30, 2017 N.A. 5.5 4.5

September 30, 2017 N.A. 4.8 4.5

December 31, 2017 N.A. 4.7 4.7

n.a.: Figure not available.


Monetary Policy Rates

The base rate (“tasa básica pasiva”)—an average of interest rates on 150-210 days

deposits, that serves as an index for interest rates on most flexible rate bank loans—kept its

upward trend into the second half of 2012 for much longer than Government bond rates, partly

influenced by a few relatively high-volume operations that impacted the average. Because of

this, and given its status indicator relating to the financial market, the board of directors of the

Central Bank approved a modification to its calculation methodology to exclude extreme values

and use a simple average of short-term deposit rates rather than an average weighted by deposit

size. Since October 2012, the upward trend in the base rate reversed and has decreased by 305

basis points, which is consistent to that observed in Government and Central Bank bond rates.

However, as December 2014, the base rate closed at 7.2%, 70 basis points more than 2013


47

In 2013, due to the economic slowdown in certain economic activities not subject to

special regimes and in accordance to the conditions of the monetary market, the board of

directors of the Central Bank reduced the Monetary Policy Rate two times. On June 20, 2013, the

rate was reduced from 5.0% to 4.0% and on December 19, 2013 it was further reduced to 3.75%.

In addition, in July 2013 limits to growth in credit to the non-financial private sector were

eliminated.

In 2014, the board of directors of the Central Bank increased the monetary policy rate

two times during 2014. On March 13, 2014, the rate was increased from 3.75% to 4.75%; and

on May 7, 2014, it was further increased to 5.25%. In 2015 to 2016, the rate was reduced from

5.25% to 1.75%.

Liquidity and Credit Aggregates

According to the Central Bank, the evolution of monetary aggregates has been key during

the last eight years, the evolution of the aggregates reflects an improvement in the control of

liquidity. During the from 2005 to 2008 period, the monetary aggregates grew at rates much

higher than nominal GDP, the bank's total liquidity during 2010-2011 grew to 5.9% and 5.8%,

respectively, well below the nominal GDP growth rate of 9.6 % in the two years period. The

slowdown in the bank's total liquidity was partly caused by a slowdown in deposits in foreign

currency that is the result of the stable exchange rate experienced since the end of 2010, which

drastically reduced depreciation expectations.

The recent evolution shows that in 2016 and 2015 the monetary base was extended by the

interventions of the Central Bank in the exchange market caused by the operations of the

Treasury, and the payment of the maturities of the Central Bank bonds.

In 2014, the monetary base increased by 10.4%, mainly due to the acquisitions of US

dollars in the exchange market, corresponding to the interventions of the Central Bank to defend

the lower exchange rate band, and a decrease in deposits to term.

In 2012, the monetary base increased by 16.9%, mainly due to the purchase of US $ 1.4

billion by the Central Bank (with a monetary effect of approximately ȼ685 billion). In 2013, the

monetary base increased by 10.2%, mainly due to the acquisitions of US dollars in the exchange

market, corresponding to the interventions of the Central Bank in defense of the lower exchange

rate band, and a decrease in time deposits. Total bank credit also slowed down during the period

after the global financial crisis, although the public and private components showed a

significantly different behavior. For 2011, private sector credit regained part of its dynamism,

which led to a strong growth in bank credit.

The following table sets forth the composition of Costa Rica’s monetary base (expressed

in terms of the Central Bank’s monetary liabilities) and net international reserves for the periods

indicated.

48

Monetary Base and the Central Bank’s International Reserves

(in millions of U.S. dollars)(1)

As of December 31,

2012 2013 2014 2015 2016 2017

Net international reserves of Central Bank 6,999.29 7,333.23 7,255.91 7,834.09 7,573.79 7,081.13

Total credit -2,277.79 -807.15 -240.46 -456.89 -869.10 -198.08

Domestic credit -1,138.90 -403.58 -120.23 -228.44 -434.55 -198.08

Government -1,141.74 -405.23 -120.78 -228.44 -434.55 -198.08

Official Entities 2.85 1.66 0.55 - -

Foreign Credit - - - - -

Other Net Assets 2,132.34 2,495.16 1,534.14 1,735.52 2,089.04 1,718.49

Total

Monetary Base 3,567 3,908 4,029 4,384 4,528 4,844

Central Bank Control Instruments 4,145 5,243 4,390 4,721 4,474 3,565

Long-Medium run foreign financing 281.46 273.92 250.65 235.74 226.55 236

Total 5,429 6,577 7,817 9,332 8,537 8,646

(1) Amounts in U.S. dollars were converted from colones using the historical average exchange rate for the

period indicated

Source Central Bank of Costa Rica, http://www.bccr.fi.cr/indicadores_economicos_/

The following table sets forth selected monetary indicators for the periods indicated.

Selected Monetary Indicators

(percentage change, except as indicated)

At December 31,

2012 2013 2014 2015 2016 2017

M1 15.21 7.74 1.44 12.80 5.26 -4.27

Quasi-money 14.34 9.85 8.62 8.49 7.01 2.76

In foreign currencies 6.08 6.54 12.18 2.94 10.98 11.26

In domestic currency 23.44 12.99 5.44 13.75 3.60 14.14

Total Net Credit 9.95 15.49 10.59 13.27 8.38 8.5

Government (53.08) 129.10 38.68 31.91 6.09 20.40

Private Sector 15.15 11.64 8.67 11.22 8.41 7.58


The total outstanding credit of the domestic component of the national banking system

amounted to ȼ13.5 trillion at December 31, 2014. At December 31, 2014, current account

deposits in colones in the banking system amounted to ȼ1.8 trillion.



49

Liquidity and Credit Aggregates

(in millions of current U.S. dollars)(1)

At December 31,

2012 2013 2014 2015 2016 2017

Liquidity aggregates 21,293.35 23,298.39 24,966.82 27,293.25 29,111.26 30,612.3

M1 4,389.41 4,729.05 4,797.27 5,411.52 5,695.90 5,239.8

NPP 1,225.62 1,321.71 1,344.82 1,426.16 1,470.51 1,490.2

Current account deposits in colones 3,163.79 3,407.33 3,452.44 3,985.36 4,225.39 3,749.5

Quasi-money 16,903.94 18,569.34 20,169.55 21,881.74 23,415.36 25,372.5

In foreign currencies 8,214.40 8,751.36 9,817.10 10,105.72 11,215.05 11,990.7

In domestic currency 8,689.55 9,817.98 10,352.45 11,776.02 12,200.32 13,381.7

Credit aggregates 19,978.33 23,073.55 25,516.20 28,901.26 31,322.32 32,656.9

Government 681.10 1,560.37 2,163.86 2,854.35 3,028.06 3,503.3

Rest of Public Sector 290.12 293.90 293.55 401.94 492.46 495.30

Non-financial Private Sector 18,282.72 20,308.58 22,162.65 24,471.50 26,659.47 27,558.9

Non-banking Private Financial

Sector 724.39 910.70 896.14 1,173.47 1,142.33 1,099.3

(1) Amounts in U.S. dollars were converted from colones using the historical end of period exchange.


Financial Sector

As of January 31, 2018, the banking system in Costa Rica consisted of 52 institutions: i)

three state-owned commercial banks (the Banco Nacional, the Banco de Costa Rica and the Banco

Crédito Agricola de Cartago, that is currently in the process of intervention by the CONASSIF at

to ensure the solvency, soundness and good functioning of the Financial System); ii) two banks

created by special laws (the Banco Popular y de Desarrollo Comunal, a full service commercial

bank and the Banco Hipotecario de la Vivienda, which only provides mortgage loans and is

responsible for managing and distributing the Government’s housing loans and subsidies); iii) 12

private banks; iv) 5 non-bank financial firms; v) 1 savings and loan association; vi) 24 credit

cooperatives; vii) 3 foreign exchange firms, and viii ) 2 mutuales de vivienda (housing savings and

loans associations). Local regulators, SUGEF, SUPEN, SUGEVAL, and SUGESE, supervise 77%

of total assets of private bank-related financial groups. Of these financial groups, Grupo

Financiero BCT is the only one reporting a non-resident bank entity with significant asset value.

The goals of SUGEF are to prevent financial and banking crises and to give information to

depositors to aid in the depositors’ decisions regarding allocation of financial risk. In furtherance of

these goals, SUGEF has promulgated regulations establishing capital adequacy requirements for

entities under its supervision to ensure their financial soundness and has established means of

recovery or correction for such entities. SUGEF supervises the banking system and other financial

entities and requires filings of balance sheets, income statements and statements of stockholders’

equity every three months as well as regularly scheduled reports on foreign exchange exposure and


50

other information from the banks operating in the Costa Rican financial system. From time to time,

SUGEF conducts a full audit of the activities of each entity under its supervision. The Organic Law

of the Central Bank provides SUGEF with the power to sanction financial intermediaries that do

not comply with its regulations, including the powers of suspension and intervention. Following

the principles of the Basel Committee on Banking Supervision, commonly known as the Basel I

Framework, financial institutions must maintain a minimum ratio of total capital to risk-weighted

assets equivalent to 10%.

Implementation of the Basel II framework has been gradual. During 2013, SUGEF started

the process of strengthening the financial institutions’ risk management through various

regulations including a comprehensive risk management framework for liquidity risk and other

risks, such as market risk and operational risk. In connection with Basel III, SUGEF has initiated a

diagnostic process in order to define priorities, deadlines and guidelines that ultimately will result

in a roadmap consistent with its ongoing or future projects and initiatives. Currently this process is

very advanced, the OECD considers it a requirement for the entry of Costa Rica to this

organization.

Historically, the participation of foreign banks in the financial system has been

concentrated in corporate banking and services tied to foreign trade. Since 1994, foreign banks,

including U.S., Canadian, Mexican, Caribbean, Colombian and certain Central American banks,

have entered the market competing to provide personal and corporate banking services in Costa

Rica. The operations in Costa Rica of the local licensed subsidiaries of foreign financial entities

are subject to the same regulatory regime applicable to Costa Rican private banks. On the other

hand, the activities in Costa Rica of international banks without a local license are permitted, but

are limited only to the services for which a local license is not required. Similarly, other foreign

non-bank institutions have begun operations in Costa Rica. In addition, the financial systems in

the Central American region have been undergoing a consolidation process and Costa Rica has

not been the exception. As the Costa Rican banking industry has become more competitive and

sophisticated in recent years, several private Costa Rican banks have merged with other national

or foreign institutions in an effort to increase their capital and draw upon the experience of their

strategic partners. Today, the largest private banks are subsidiaries of banks headquartered in

Colombia, Canada and the U.S., with local private banks accounting for less than 2.6% of total

assets of the system.

The following table sets forth the amounts of assets and liabilities corresponding to each category of

financial institutions (excluding offshore activity) as of December 31, 2014.

51

Structure of the Regulated Financial System

as of December 31, 2017

(in millions of U.S. dollars and percentages of total)

Assets Liabilities

Total Loans/1 Investments Other

Productive

Non Productive

Assets

Total

Cost Liabilities

Non Cost Liabilities

Commercial State Banks 21.721 26% 12.750 23% 4.147 28% 309 20% 4.513 33% 19.640 27% 16.407 26% 3.233 32%

BNCR

329 0% 202 0% 32 0% 1 0% 93 1% 259 0% - 0% 259 3%

BCR

8.924 11% 4.865 9% 2.170 15% 219 14% 1.669 12% 8.023 11% 7.038 11% 984 10%

BCAC

12.467 15% 7.683 14% 1.944 13% 89 6% 2.750 20% 11.358 15% 9.368 15% 1.989 20%

Banks created by special laws 6.232 7% 4.558 8% 1.293 9% 0 0% 380 3% 4.942 7% 4.620 7% 321 3%

Banco Hipotecario de la Vivienda

238 0% 208 0% 19 0% - 0% 10 0% 85 0% 80 0% 4 0%

Banco Popular y Desarrollo

Comunal 5.994 7% 4.350 8% 1.274 9% 0, 0% 370 3% 4.856 7% 4.540 7% 316 3%

Private Banks

18.219 22% 12.311 23% 1.784 12% 910 59% 3.212 23% 16.434 22% 13.874 22% 2.559 25%

Cooperativas de Ahorro y

Crédito 5.583 7% 4.030 7% 1.328 9% 0,00 0% 224 2% 4.615 6% 4.315 7% 300 3%

Empresas Financieras No

Bancarias 621 1% 431 1% 65 0% 21 1% 103 1% 548 1% 486 1% 61 1%

Entidades Autorizadas

Sistema Financiero

Nacional de Vivienda

2.052 2% 1.410 3% 261 2% 0,00 0% 380 3% 1.900 3% 1.816 3% 83 1%

Caja de Ahorro y Préstamo de

la ANDE 1.954 2% 1.555 3% 254 2% 0,00 0% 144 1% 644 1% 563 1% 81 1%

Total

84.341 100% 54.358 100% 14.576, 100% 1.552 100%

13.853 100% 73.310 100% 63.113 100% 10.197 100%

(1) Includes loans that are current or up to 90 days past due Source: General Superintendency of Financial Institucions, https://www.sugef.fi.cr/servicios/reportes/BalanzaDeComprobacionSoloSaldosReportados.aspx

https://www.sugef.fi.cr/servicios/reportes/BalanzaDeComprobacionSoloSaldosReportados.aspx

52

Past Due Loan Portfolio of the Financial System as of December 31, 2017

(in millions of U.S. dollars and percentages of total)

Total loans Current loans 1-30 days 31-60 days 61-90 days 91-180 days More 180 days Judicial Collection

Commercial State Banks 13.264,31 100.0% 12.111,33 0,91 358,70 0,03 211,44 0,02 135,97 0,01 82,98 0,01 13,49 0,00 350,41 0,03

BNCR 289,36 100.0 106,15 0,37 41,80 0,14 27,84 0,10 29,13 0,10 3,98 0,01 3,09 0,01 77,38 0,27

BCR 5.043,44 100.0 4.503,47 0,89 217,01 0,04 105,12 0,02 66,91 0,01 61,15 0,01 10,28 0,00 79,49 0,02

BCAC 7.931,51 100.0 7.501,71 0,95 99,88 0,01 78,48 0,01 39,93 0,01 17,86 0,00 0,11 0,00 193,54 0,02

Banks created by special laws 4.700,02 100.0 4.159,38 0,88 290,64 0,06 101,56 0,02 45,97 0,01 23,55 0,01 3,66 0,00 75,25 0,02

Banco Hipotecario de la Vivienda 210,28 100.0 210,28 1,00 - - - - - - - - - - - -

Banco Popular y Desarrollo Comunal 4.489,74 100.0 3.949,10 0,88 290,64 0,06 101,56 0,02 45,97 0,01 23,55 0,01 3,66 0,00 75,25 0,02

Private Banks 12.565,36 100.0 11.971,92 0,95 277,33 0,02 97,63 0,01 50,07 0,00 40,24 0,00 15,76 0,00 112,40 0,01

Cooperativas de Ahorro y Crédito 445,43 100.0 391,74 0,88 29,24 0,07 10,30 0,02 5,30 0,01 3,37 0,01 0,83 0,00 4,65 0,01

Empresas Financieras No Bancarias 1.460,06 100.0 1.194,80 0,82 140,96 0,10 61,05 0,04 26,48 0,02 6,74 0,00 0,30 0,00 29,71 0,02

Entidades Autorizadas Sistema Financiero

Nacional de Vivienda 4.115,89 100.0 3.771,75 0,92 150,06 0,04 86,84 0,02 47,57 0,01 24,19 0,01 12,00 0,00 23,48 0,01

Caja de Ahorro y Préstamo de la ANDE 1.582,42 100.0 1.522,87 0,96 29,44 0,02 11,84 0,01 3,93 0,00 7,85 0,00 5,54 0,00 0,96 0,00

Total 56.097,84 - 51.394,50 10,41 1.925,72 0,59 893,66 0,29 497,25 0,20 295,45 0,07 68,74 0,03 1.022,52 0,41

Source: General Superintendency of Financial Institucions, , https://www.sugef.fi.cr/reportes/indice%20de%20reportes/Informacion%20Crediticia.html

https://www.sugef.fi.cr/reportes/indice%20de%20reportes/Informacion%20Crediticia.html

The quality of the loan portfolio of the regulated financial system deteriorated from 2009

to 2011, as the economy went into recession in 2009 after the global financial crisis. Even though

it has rebounded, it still has not reached pre-crisis levels. The ratio of past due loans to total loans

increased was 2.08% in 2009. During 2010, the ratio of past due loans to total loans decreased to

1.87% and decreased further to 1.83% during 2011. Public banks saw a much greater

deterioration in their loan portfolio than the financial system as a whole. The ratio of loans past

due to total loans portfolio of public banks, decreased to 2.41% in 2010 from 2.5% in 2009, but

increased in 2011 to 2.53%. In 2012 and 2013, the ratio of loans past due to total loans portfolio

of public banks reached 2.44% and 2.36%, respectively.

Foreign Exchange and International Reserves

Foreign Exchange

Since 1992, there have been no controls on foreign exchange convertibility or remittances

in Costa Rica. Costa Rican residents are allowed to buy or sell foreign exchange without

restriction, and there are no restrictions on the repatriation in foreign currency of capital or

dividends by foreign investors. In addition, the Central Bank authorized state-owned and private

commercial banks to participate freely in the foreign exchange market. Participants in the exchange

market are authorized to maintain a net position in foreign exchange of up to 100% of capital, with

daily changes restricted to 1% of the previous day’s position.

In 2006, the exchange rate regime shifted from a crawling peg – prevalent between 1992-

2006 – to a crawling band. Initially, the width of the band was set to increase on a daily basis with

the ceiling increasing by 0.14 colones and the floor decreasing by 0.06 colones per day.

In 2008, the band was narrowed from 17 to 11 percentage points in response to the strong

volatility displayed by the exchange rate at the outset of the global financial crisis, when the

exchange rate depreciated by 10% over a period of four months (April through August 2008) and

remained at the top of the crawling band through October. The floor was fixed at the current level

of 500 colones per dollar and the ceiling was set to increase by 20 cents per working day. During

this same period, the Central Bank intervened in the foreign exchange market, selling a total of

US$1.3 billion.

In 2009, the exchange rate remained at the top of the crawling band through August and

depreciated 6%, partly reflecting the increase in the trade deficit. During the second half of 2009,

the exchange rate began to turn around, fluctuating within the band, and reflecting a less negative

behavior in net external demand. Exchange rate policy aimed at promoting flexibility and

increasing the level of integration and efficiency in the foreign exchange market by incorporating

additional participants in MONEX, the foreign currency market organized by the Central Bank

that provides participants with an electronic platform to negotiate and liquidate foreign currency

in real time.

In 2010, the net supply of foreign exchange in the market increased, reflecting an

improvement in the financial account of the balance of payments. Throughout the year, the

exchange rate appreciated by an additional 11% over the appreciation already observed in 2009,

54

reaching 507 colones per US dollar, close to the lower limit of the crawling band. Given the

significant supply of foreign exchange, on September 1, 2010, the board of directors of the

Central Bank agreed on an International Reserve Strengthening Program (“IRSP”), which

consisted on purchasing US$600 million between September 2010 and December 2011 as a

precautionary measure. Between September and December 2011, the Central Bank purchased

US$265 million as part of the IRSP, and accumulated a total of US$561 million for the year as a

whole.

In 2011, the exchange rate remained relatively stable. Central Bank intervention took

place mostly during the first quarter, when the IRSP was completed with the purchase of US$335

million, part of which was done in defense of the crawling band. A total of US$129 million was

accumulated in international reserves throughout the year. Higher current account deficit and

lower government borrowing compensated the increase in direct investment and other private

inflows.

In 2012, the increase in external resource inflows, combined with a lower net U.S. dollar

requirement by the non-financial public sector, led to a surplus in the foreign exchange market,

resulting in the exchange rate levels at the lower limit of the exchange rate band. As a result, the

Central Bank intervened by buying U.S. dollars. In 2012, the nominal exchange rate appreciation

was 0.6%, compared with a 3.8% appreciation in 2011.

In 2013, despite a moderate deterioration in public finances, borrowing requirements did

not create pressures on the local interest rates. In this context, the Government was able to use a

portion of the funds from the issuance in 2012 of is Notes due in 2023 and the issuance in 2013

of its Notes due 2025 and its Notes due 2043 to cover domestic demand for foreign exchange,

which in turn helped to maintain the exchange rate close to the lower limit of the Central Bank’s

target exchange rate.

During the first three months of 2014, the exchange rate depreciated 8.9%.. During this

period, net foreign exchange demand from the non-banking public sector increased and

scheduled foreign currency sales from the Ministry of Finance contracted, creating pressure on

the exchange rate and increasing the market’s expectations of exchange rate depreciation. The

Central Bank intervened by selling U.S. dollars in an attempt to reduce volatility.

In February 2015, Costa Rica began its transition to a free floating exchange rate system

by eliminating the exchange rate bands that had been in place since 2006, but reserving for the

possibility to participate in the exchange market in order to prevent strong fluctuations in the

exchange rate. Additionally, the Central Bank will continue to keep its policies in place for

stabilization operations.

55

The following table sets forth the average and period end colón/dollar exchange rates for

the dates and periods indicated.

Nominal Exchange Rate

(colones per U.S. dollar)

Average End of period

At December 31, 2010 525,68 512,97

At December 31, 2011 505,69 511,84

At December 31, 2012 502,88 508,20

At December 31, 2013 499,75 501,41

At December 31, 2014 538,36 539,42

At December 31, 2015 534,55 538,41

At December 31, 2016 544,76 554,64

At December 31, 2017 567,51 570,49

Source: Central Bank, http://www.bccr.fi.cr/indicadores_economicos_/

International Reserves

Net international reserves of the Central Bank stood at US$7.1 billion at December 31

2017, representing the equivalent of approximately 5.7 months of imports.

At December 31, 2016, the current account deficit of the balance of payments represented

2.956% of GDP, 0.42 percentage points higher than the previous year. Net international reserves of

the Central Bank stood at US$7.5 billion at December 31, 2016, representing the equivalent of

approximately 6.6 months of imports.

International reserves at the Central Bank recovered gradually between 2009-2011, after

high commodity prices and the global financial crisis in 2008 caused net reserves to decrease from

US$4.9 billion in April 2008 to US$3.6 billion in October 2008. Positive net accumulation of

reserves has taken place every year beginning in 2009. International reserves increased by US$561

million in 2010, US$129 million in 2011 and by US$2.1 billion in 2012.


56

Securities Markets

Costa Rica has one stock exchange, the Bolsa Nacional de Valores (National Stock

Exchange).

Laws regulating the securities market were enacted in 1990 and 1998, the first of which

was designed to stimulate the development of the securities market, in part through the creation

of the Comisión Nacional de Valores (National Securities Commission), an entity under the

authority of the Central Bank with supervisory authority over the securities market in Costa Rica.

The second of such laws, which became effective on March 27, 1998, restructured the Comisión

Nacional de Valores as SUGEVAL.

SUGEVAL is responsible for promoting and regulating the Costa Rican securities

markets. Its functions include authorizing public offerings of securities, issuing securities

regulations and supervising the operation of stock exchanges. SUGEVAL regulates and

supervises the securities markets, including setting professional ethics standards, requiring

information such as annual reports from listed companies, setting controls and penalties and

regulating the relationship between issuers and investors in the securities market. The securities

market is dominated by trading in debt securities (principally Government bonds), while trading

in equity securities is limited.

During 2011, the National Stock Exchange worked with the SUGEVAL to actively

participate on a proposal that would boost the market, eliminate regulatory barriers and expand

opportunities both for new issuers and for financing investment projects.

The main regulatory changes in the securities market approved by CONASSIF in the last

three years include reforms to public offering regulations to allow issuances by public

infrastructure trusts and changes to investment fund regulations to authorize private and venture

capital investment funds. Other regulations enacted during that period were rating agencies rules to

comply with IOSCO Principles on Rating Agencies, corporate governance regulations, which are

compulsory rules that apply to banks, broker agencies, fund managers and insurance companies,

and securities clearing and settlement regulations.

The global financial crisis significantly impacted Costa Rica’s stock market performance

in 2009, when volume traded at the exchange declined, and the average maturities of instruments

shortened. The economic slowdown also pushed investors to hold off on investment projects.

The following table sets forth trading volume for the National Stock Exchange for the

periods indicated.

57

Stock Exchange Trading Volume (in millions of U.S. dollars, and percentage of total)(1)

Stock Exchange Trading Volume

(in millions of U.S. dollars, and percentage of total)

2012 2013 2014 2015 2016 2017

Stock Exchange Trading Volume 60,051.65 58,341.58 50,434.52 54,076.29 48,985.81 47,009.01

Average exchage rate 502.46 499.71 537.77 534.44 545.22 567.39

Number of operations 120,572 98,866 90,057 96,423 89,441 84,587

By market

Primary market 8,035.69 13% 7,475.27 13% 7,822.22 16% 8,272.48 15% 8,723.44 18% 9,831.85 21%

Secundary market 52,015.97 87% 50,866.31 87% 42,612.30 84% 45,803.81 85% 40,262.37 82% 37,177.15 79%

By sector

private sector 5,122.13 9% 4,809.91 8% 4,882.29 10% 3,858.12 7% 3,886.47 8% 4.374.57 9%

public sector 54,929.53 91% 53,531.67 92% 45,552.23 90% 50,218.17 93% 45,099.34 92% 42,634.43 91%

By instrument's currency

Colones 42,663.84 71% 42,585.98 73% 36,941.53 73% 37,849.16 70% 29,446.77 60% 22,738.34 48.37%

US dolars 17,076.00 28% 15,069.26 26% 13,241.45 26% 16,071.93 30% 19,409.24 40% 24,178.39 51.43%

Brazil real 1.01 0% - 0% 2.39 0% 7.22 0% 0.05 0% 0 0%

Unidades de Desarrollo 310.80 1% 686.33 1% 249.15 0% 147.97 0% 129.75 0% 92.37 0%

By Maturity

0 to 30 days 11,886.82 20% 12,108.15 21% 8,895.30 18% 8,353.87 15% 7,511.30 15% 7,282.03 15%

31 to 90 days 7,041.75 12% 8,358.19 14% 6,448.78 13% 12,834.70 24% 12,111.95 25% 12,999.68 28%

91 to 180 days 11,321.63 19% 14,066.50 24% 11,105.73 22% 3,264.92 6% 2,017.54 4% 3,198.76 7%

181 to 360 days 11,731.00 20% 11,126.31 19% 10,992.79 22% 3,474.03 6% 3,267.49 7% 4,083.58 9%

1 to 3 years 5,161.71 9% 4,605.06 8% 3,656.31 7% 12,695.85 23% 9,318.18 19% 6,295.85 13%

more of 3 years 12,908.74 21% 8,077.37 14% 9,335.61 19% 13,452.92 25% 14,759.35 30% 13148 28%

By Type Operation

Primary Market 8,035.69 13% 7,475.27 13% 7,822.22 16% 8,272.48 15% 8,723.44 18% 9,831.8 21%

Stocks 26.20 0% 54.82 0% 104.14 0% 55.63 0% 39.92 0% 57.57 0%

Shares 152.04 0% 163.48 0% 162.15 0% 170.33 0% 173.75 0% 244.915 1%

Debt 5,566.95 9% 10,229.50 18% 5,407.79 11% 8,002.77 15% 7,437.93 15% 6,693.42 14%

Repo 19,360.35 32% 18,733.70 32% 16,095.36 32% 18,644.00 34% 18,414.90 38% 17,850.85 38%

Overnight 26,826.73 45% 21,571.06 37% 20,795.47 41% 18,861.60 35% 14,129.10 29% 12,356.17 26%

Others 73.25 0% 113.25 0% 47.10 0% 69.36 0% 66.77 0% 28.75 0%

(1) Transactions in colones have been translated into US dollars at the Central Bank in effect on the date of the transaction.

(2) Repurchase agreements or repos. (3) Considers only the buying position to avoid duplicating trading volume on repos.

(4) Repos includes interest on the transaction.

(5) Issuers authorized by the SUGEVAL to list securities on the stock exchange.

Source: Bolsa Nacional de Valores, https://www.bolsacr.com/estadisticas-negociacion

https://www.bolsacr.com/estadisticas-negociacion

58

PUBLIC SECTOR FINANCES

The Costa Rican public sector is composed of the Government, non-financial public

sector institutions (including state-owned companies), and financial public sector institutions

(including the Central Bank and the state-owned banks). Government expenditures are financed

through the collection of income taxes, sales taxes, other minor taxes and tariffs, as well as

through domestic and external borrowings.

Revenues management

Between the period from 2012 to 2017, Central Government revenues increased from

US$6.5 to US$8.4 billion. The main revenues include sales and income and profits, which each

represent 31% of the total collection. In the case of the income and profit tax, growth exceeded

nominal GDP, which increased from 3.8% to 4.5% of GDP, from 2010 to 2016. This is a result

of the improvements that the administration has implemented to increase tax revenues, among

which stands out, mainly, digitization of the platforms used to declare and pay taxes, as well as

the implementation of a series of tools that facilitate cross-checking to detect evasion.

Below is a brief description of the main tools:

Electronic filing of tax returns (ATV): Making on line and off the tax returns.

Consultation of debts settled by the Tax Administration (Partial Payments of

Income, Education and Culture Stamp, Electronic Bets and the Solidarity Tax

according to the last statement presented).

TICA and DATAMART: online tools to facilitate compliance and the auditing of

customs procedures. The tools are available to customs 'users and customs'

administration officials.

The AMPO System, to reinforce controls and control processes, aimed at large

taxpayers.

DENUNCIEYA to facilitate citizen reporting from the website or from mobile

devices.

The GEOGRAPHICAL TAX INFORMATION System (SIGT), allows locating

the real estate subject to the payment of the Solidarity Tax.

Implementation of the Electronic Invoice, a new tool that will allow, in the

medium and long term, the General Directorate of Taxation, to have quickly the

billing information that is issued at the national level; which will significantly

improve the tax control processes. This verification system consists of an electronic

voucher that is generated when the sale of goods or services is made. In addition to

supplying the actual information of the sale amount, it eliminates the paper expense

associated with printing proof of payment.

59

Unique Tax Registry: Web Site with facilities directed to the citizen for

registration, modification or de-registration as a taxpayer or declarant; consultation

of taxpayer data including identification, location, tax and linking data. For the tax

official, web system for registration, modification or de-registration of taxpayers or

declarants; consultation of information of the taxpayer and of the affidavits

presented; modification of taxpayer data and, consultations and reports. The

administration of the system includes the loading of catalogs and their maintenance,

execution of processes, migration of active taxpayers and their tax obligations.

Predictive Model: its objective is to determine taxpayers with differentiated

characteristics that denote possible tax defaults and frauds, which can be grouped

according to the type of atypical behavior that they present, which can be isolated

or with samples of what happens with high often, easily identified. Each defined

segment must contain a list of taxpayers, prioritized according to the highest tax

risk discovered, based on the detection of anomalies and inconsistencies.

System for the automatic exchange of information with the OECD member

countries: To have a technological solution for the automatic exchange of

information with OECD member countries, complying with the established

directives, and thus have a tool for the fight against fraud and tax evasion.

In the case of sales tax, there is evidence of a deterioration in its base due to the fact that

the tax design obeys a production structure of the 1980s that is very different from the current

one. This tax, does not tax the most dynamic sector of the economy, services, which affected the

deterioration of the collection that goes from 4.7% to 4.5% of GDP from 2010 to 2013.

Therefore, the current Administration presented before the Assembly Legislative a bill to

modernize this tax. Additionally, the Executive Branch presented three more initiatives to

increase tax revenues, which are now laws of the Republic:

Law on “fight against smuggling”: before this reform, only smuggling

transactions with merchandise valued above US$ 50,000 were sanctioned with

criminal sanctions (that is, serving a sentence in prison). After the reform, the

threshold was reduced to US$ 5,000; but sanctions may also be imposed when

smuggling activities are divided into smaller transactions to stay below that

threshold (ie, the crime of fragmented smuggling).

Law on “Tax on Legal Entities”: this law restores a tax on legal persons that was

declared unconstitutional in 2015. The tax is levied on any entity registered with the

National Registry. As the entities registered with the National Registry do not

register automatically with the tax administration, this reform also imposes a tax on

inactive companies (those not registered with the tax administration). The rates are

determined by the total turnover and between 15% and 50% of a minimum monthly

salary is established (for example, 15% applies to entities registered with the

National Registry but not registered with the tax administration; both of them).

Administration) with a total turnover of less than 125 minimum monthly salaries

pay 25% of a minimum monthly salary, those with a total turnover exceeding 280

60

monthly minimum wages pay 50% of a minimum monthly salary). This law also

allows Costa Rica to dismiss companies that do not comply with the obligation to

pay such tax and register with the Tax Administration for 3 consecutive years.

“Fight against tax fraud”: this reform establishes rules that give the tax

administration the right to access the general information presented by financial

institutions about taxpayers, and to identify the beneficiary owners. To this end, the

government created a centralized registry of the main beneficiary beneficiaries of

any legal entity within the country. This Act also introduced a provision for foreign

trusts managed by a resident fiduciary to maintain ownership and identity

information. All this information is now available for the Costa Rican tax

administration. This is an important reform and in line with the objective of Costa

Rica not to be classified as a country included in the blacklist. It also introduced

sanctions for tax advisers who participate in tax evasion behaviors and created a

special commission within the Ministry of Finance to investigate irregular behavior

of tax auditors and investigate corruption cases. To fight against tax evasion, all

service providers (for example, doctors, lawyers and all persons who provide

services) are required to accept electronic payments. Finally, a certificate of good

reputation is required for any entity / individual that enters into a public contract.

Other reforms were: grant the tax administration the right to grant tax refunds of up

to 1% of the VAT paid by those who use electronic invoices to encourage the use of

electronic invoices; disclosure of information obligations for non-profit entities on

their purpose, income and expenses to promote transparency in the non-profit

sector; and sanctions against public servants that encourage the use of confidential

information.

Expenditure management

In 2016, US$10.3 billion were allocated to current expenditure and US$1 billion to

capital expenditure.

Between 2013 and 2017, remunerations decreased from 7.3% to 7.0% of GDP. Interest

increased by 2.5% to 3.1% in the same period due to an increase in debt and current transfers

increased from 7.5% to 7.9% during the same period due to certain constitutional and legal

mandates of the Government. Capital expenditure increased by 0.4 points of GDP during this

period (from 1.4% to 2.0%).

The current Administration promoted a set of legal reforms to reduce current spending

including the following:

Reform of pension laws: to stop the growth of public spending due to increases in

pensions, Congress approved several reforms to the pension regimes charged to the

National Budget. For example, before the reform, the children of the Deputies

could inherit for life the pension received by a deceased father, but after the reform,

the children of deceased deputies can benefit from the pension until they reach the

age of 25. Before the reform, there were many special adjustment mechanisms for

61

pensions. For example, the pensions received by the Deputies increased by 30%

each year. After the reform, all pensions will be readjusted twice a year (that is,

every six months) based on the percentage increase in the cost of living; this

eliminates all special pre-existing adjustment mechanisms. The reform also

imposed pensions in excess of 10 minimum wages, establishing a progressive

solidarity rate seeking greater equity.

Law on efficiency in the administration of public resources: before the reform,

the autonomous institutions attached to the Central Government had the right to

accumulate the funds received in a given year that were not spent or executed.

These institutions would not face any limitation or restriction on the amount of

public funds they would receive next year. After the reform, these entities will have

up to two years (4 years for entities in the education sector) to use the surpluses

they report at the end of a year according to the National Development Plan.

Otherwise, the funds will be returned again to the Central Government, which will

use the funds to pay the public debt of Costa Rica.

In addition to the projects approved between 2014 and 2016, the Executive Branch, after

a consensus process with different political actors, presented the Public Finance Strengthening

Project (File 20.580) which proposes comprehensive changes in sales tax, income tax, fiscal

responsibility and public employment. This project would provide a solution to the structural

problem of public finances. Below is a summary of its main contents:

Income Tax: In order to provide the system with an increased progressive tax, a

chapter in the Income Tax Law is introduced to tax the passive income of capital,

the tax is added to them at a rate of 15% , beyond what exists today for the passive

rents of movable capital.

Value Added Tax: VAT is a significant improvement in tax control and the

competitiveness of domestic production. This would imply the expansion of the

taxpayer base, the increase in the taxable rate and the change from a quite limited

credit deduction criterion to a full financial deduction. In this, whoever collects the

tax would deduct the VAT paid to suppliers, who in turn would deduct what they

paid and so on in the entire production chain.

Fiscal responsibility: The bill proposes a fiscal rule that would limit the growth of

current spending, according to the debt ratio of the central government-GDP. This

parameter would be used because the central government's debt, over the years, has

been originated mainly by the growth of current spending over current income. The

fiscal rule is designed so that as the debt / GDP increases, the growth restriction of

current spending is higher. On the contrary, at a level of debt considered to be

sustainable in the medium and long term, current spending may grow at the same

rate of GDP growth.

Addition of public salaries to the law: With the reform of the law on public

salaries, the aim is to guide the remunerations of the public function towards a

scheme of efficiency and quality in public spending. To this end, it is established: i)

limiting of the highest salaries of the Public Administration; ii) the legal regulation

62

of prohibition and exclusive dedication regimes, and iii) the conversion of the

annuity into a mechanism for evaluating individual excellence, but which takes into

account compliance with the institutional goals and the National Development Plan.

The following table sets forth a summary of Government accounts and their percentage

of GDP for the periods indicated.

63

Central Government Finances

(in millions of U.S. dollars) CONCEPTO 2012 2013 2014 2015 2016 2017

INGRESOS TOTALES 6.510,8 7.077,9 7.059,0 7.821,1 8.385,8 8.357,4

I- Ingresos Corrientes 6.503,0 7.075,7 7.054,4 7.819,7 8.373,2 8.344,5

I-1 Ingresos Tributarios 5.981,1 6.587,7 6.543,4 7.224,4 7.650,9 7.735,6

Impuesto a los ingresos y utilidades 1.773,0 2.029,8 2.027,6 2.333,3 2.599,8 2.752,5

Sobre importaciones 302,8 309,3 314,2 326,6 340,6 315,7

Arancel: 255,2 261,4 264,2 278,1 291,1 269,2

1% Valor Aduanero: 47,6 47,9 50,0 48,5 49,5 46,6

Sobre exportaciones 7,6 9,8 9,0 8,4 9,3 9,9

Por Caja Banano Exportada 0,3 0,3 0,3 0,3 0,3 0,4

Der.de Exp.ad/valorem 7,3 8,2 5,7 5,1 6,0 6,5

Impuesto Exportaciones Vía Terrestre 0,0 1,2 3,0 3,0 3,0 3,1

Ventas 2.233,0 2.354,6 2.353,3 2.499,4 2.596,4 2.560,9

Interno 1.162,5 1.264,3 1.207,4 1.310,4 1.358,2 1.330,5

Aduanas 1.070,5 1.090,3 1.145,9 1.189,0 1.238,2 1.230,4

Consumo 373,6 353,0 363,8 420,1 468,7 429,5

Interno 51,5 44,4 40,2 40,2 41,5 39,0

Aduanas 322,0 308,6 323,6 380,0 427,2 390,5

Otros ingresos tributarios 1.291,1 1.531,2 1.475,6 1.636,7 1.636,1 1.667,0

I-2 Contribuciones Sociales 147,3 112,6 111,3 118,7 267,9 123,9

I-3 Ingresos no Tributarios 44,2 41,6 50,4 95,7 81,8 132,0

I-4 Transferencias 330,4 333,8 349,3 380,9 372,7 353,0

0

II- Ingresos de Capital: 7,8 2,2 4,6 1,4 12,6 12,9

GASTOS TOTALES Y CONCESIÓN NETA 8.501,6 9.749,1 9.895,6 10.938,0 11.383,5 11.918,7

Gasto Total sin Intereses 7.563,6 8.485,8 8.602,5 9.441,5 9.777,9 10.117,3

GASTOS CORRIENTES 7.842,1 8.947,9 9.030,2 9.947,0 10.327,4 10.773,5

Remuneraciones 3.275,1 3.636,5 3.656,8 3.953,3 3.997,3 4.035,5

Sueldos y Salarios 2.744,1 3.048,0 3.064,6 3.286,6 3.333,8 3.343,1

Cargas Sociales 531,0 588,5 592,2 666,7 663,5 692,4

Bienes y Servicios 284,2 316,9 333,9 362,0 362,8 382,3

Intereses 938,1 1.263,4 1.293,1 1.496,5 1.605,5 1.801,5

Deuda Interna 844,6 1.138,3 1.114,8 1.229,4 1.273,4 1.459,2

Deuda externa 93,4 125,0 178,3 267,0 332,1 342,2

0

Transferencias 1/ 3.344,7 3.731,1 3.746,4 4.135,2 4.361,7 4.554,1

Sector Privado 1.134,5 1.280,6 1.261,5 1.391,2 1.413,3 1.411,8

Sector Publico 2.196,1 2.432,0 2.453,3 2.712,6 2.902,8 3.050,4

Sector Externo 7,2 12,1 11,0 10,7 9,5 10,3

Transferencias con recurso externo 6,9 6,5 20,6 20,6 36,0 81,7

0,0%

GASTOS DE CAPITAL 659,5 801,3 863,2 983,7 1.048,8 1.144,1

0

Inversion 102,4 162,9 161,2 182,5 174,5 173,5

Transferencias 557,1 638,4 702,0 801,2 874,3 970,6

Sector Privado 25,0 29,1 30,1 32,7 33,1 32,7

Sector Publico 508,8 527,9 536,6 590,3 612,6 828,7

Sector Externo 0,0 0,0 0,0 0,0 0,0 2,8

Transferencias con recurso externo 23,2 81,4 135,3 178,1 228,6 106,4

0,0

Concesión Neta de Préstamos 0,0 0,0 2,2 7,3 7,3 1,2

Concesión 0,0 0,0 2,2 7,3 7,3 1,2

Recuperación 0,0 0,0 0,0 0,0 0,0 0,0

0,0

DEF/SUPERÁVIT PRIMARIO -1.052,7 -1.407,8 -1.543,5 -1.620,4 -1.392,2 -1.759,9

% PIB -2,3% -2,8% -3,0% -3,0% -2,4% -3,1%

SUP/ DÉFICIT FINANCIERO. -1.990,8 -2.671,2 -2.836,6 -3.116,9 -2.997,7 -3.561,3

% PIB -4,3% -5,4% -5,6% -5,7% -5,3% -6,2%

Fuente: Ministerio de Hacienda, http://www.hacienda.go.cr/index.php/component/content/article?id=139

http://www.hacienda.go.cr/index.php/component/content/article?id=139

64

Central Government Finances

(Percentage of total GDP) CONCEPT 2010 2011 2012 2013 2014 2015 2016 2017

TOTAL REVENUE 14,0% 14,2% 14,0% 14,2% 14,0% 14,3% 14,7% 14,5%

Current income 14,0% 14,2% 14,0% 14,2% 13,9% 14,3% 14,7% 14,5%

I-1 Tax revenues 12,7% 13,0% 12,9% 13,2% 12,9% 13,2% 13,4% 13,4%

Income tax 3,8% 3,9% 3,8% 4,1% 4,0% 4,3% 4,6% 4,8%

On imports: 0,6% 0,7% 0,7% 0,6% 0,6% 0,6% 0,6% 0,5%

Tariff 0,5% 0,6% 0,5% 0,5% 0,5% 0,5% 0,5% 0,5%

1% Costum Value 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1%

On exports 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

By Exported Banana Box 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Ad / valorem Export Law 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Land Exports Tax 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Sales 4,7% 4,8% 4,8% 4,7% 4,7% 4,6% 4,6% 4,4%

Internal 2,5% 2,5% 2,5% 2,5% 2,4% 2,4% 2,4% 2,3%

Costum 2,2% 2,4% 2,3% 2,2% 2,3% 2,2% 2,2% 2,1%

Consum 0,7% 0,8% 0,8% 0,7% 0,7% 0,8% 0,8% 0,7%

Internal 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1%

Costum 0,6% 0,7% 0,7% 0,6% 0,6% 0,7% 0,7% 0,7%

Other tax income 2,8% 2,7% 2,8% 3,1% 2,9% 3,0% 2,9% 2,9%

I-2 Social Contributions 0,3% 0,3% 0,3% 0,2% 0,2% 0,2% 0,5% 0,2%

I-3 Non-Tax Income 0,1% 0,1% 0,1% 0,1% 0,1% 0,2% 0,1% 0,2%

I-4 Transfers 0,8% 0,8% 0,7% 0,7% 0,7% 0,7% 0,7% 0,6%

II- Capital Income : 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

TOTAL EXPENSES AND NET CONCESSION 19,0% 18,1% 18,3% 19,6% 19,6% 20,0% 20,0% 20,7%

Total Expense without Interest 17,0% 16,0% 16,3% 17,1% 17,0% 17,2% 17,2% 17,6%

CURRENT EXPENSES 16,7% 16,7% 16,9% 18,0% 17,9% 18,2% 18,1% 18,7%

Remunerations 6,9% 7,1% 7,0% 7,3% 7,2% 7,2% 7,0% 7,0%

Wages and salaries 5,8% 5,9% 5,9% 6,1% 6,1% 6,0% 5,8% 5,8%

Social charges 1,1% 1,1% 1,1% 1,2% 1,2% 1,2% 1,2% 1,2%

Goods and services 0,6% 0,6% 0,6% 0,6% 0,7% 0,7% 0,6% 0,7%

Interests 2,0% 2,1% 2,0% 2,5% 2,6% 2,7% 2,8% 3,1%

Internal Debt 1,7% 1,8% 1,8% 2,3% 2,2% 2,2% 2,2% 2,5%

External debt 0,3% 0,3% 0,2% 0,3% 0,4% 0,5% 0,6% 0,6%

Transfers 1 / 7,2% 6,9% 7,2% 7,5% 7,4% 7,5% 7,7% 7,9%

Private sector 2,5% 2,5% 2,4% 2,6% 2,5% 2,5% 2,5% 2,5%

Public sector 4,5% 4,3% 4,7% 4,9% 4,9% 5,0% 5,1% 5,3%

External Sector 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Transfers with external resource 0,1% 0,0% 0,0% 0,0% 0,0% 0,0% 0,1% 0,1%

CAPITAL EXPENSES 2,3% 1,4% 1,4% 1,6% 1,7% 1,8% 1,8% 2,0%

Investment 0,3% 0,3% 0,2% 0,3% 0,3% 0,3% 0,3% 0,3%

Transfers 2,0% 1,1% 1,2% 1,3% 1,4% 1,5% 1,5% 1,7%

Private sector 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1% 0,1%

Public sector 1,7% 0,9% 1,1% 1,1% 1,1% 1,1% 1,1% 1,4%

External Sector 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Transfers with external resource 0,1% 0,1% 0,1% 0,2% 0,3% 0,3% 0,4% 0,2%

Net Loan Concession 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Concession 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Recovery 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

DEFICIT / PRIMARY SURPLUS -3,0% -1,9% -2,3% -2,8% -3,1% -3,0% -2,4% -3,1%

% GDP

SUPERAVIT / FINANCIAL DEFICIT. -5,0% -4,0% -4,3% -5,4% -5,6% -5,7% -5,3% -6,2%

% GDP -5,0% -4,0% -4,3% -5,4% -5,6% -5,7% -5,2% 94,8%

Fuente: Ministerio de Hacienda, http://www.hacienda.go.cr/index.php/component/content/article?id=139


65

Public Sector Balance

In 2017, the deficit of the global public sector increased as a result of an increase in the

Central Government deficit, explained in the previous section.

In 2016, the deficit of the global public sector experienced an improvement due to the

reduction of the Government deficit, because of improvement in tax revenue and a deceleration

in public spending. On the one hand, an increased total income was a result of a greater

collection of income tax and an extraordinary increase in non-tax revenues, due to a transfer of

employer-employee contributions that were incorporated into the pension fund for a fee to the

national budget. On expenses, the salaries slowed down because of low inflation, which caused

low adjustments in salaries, as well as the guidelines for the freezing of positions and the control

of some less rigid expenditure items.

The following table sets forth the consolidated public sector deficit as a percentage of

GDP for the periods indicated.

Consolidated Public Sector Deficit

(percentage of GDP)

2012 2013 2014 2015 2016 2017

Global Public Sector -4.9 -6.1 -5.2 -5.7 -4.8 -5.6

Central Bank of Costa Rica (1) -0.6 -0.8 -0.7 -0.8 -0.6 0.4

Non-Financial Public Sector -4.3 -5.3 -4.5 -5.0 -4.2 -5.2

Central government (2) -4.3 -5.4 -5.6 -5.7 -5.3 -6.2

Public institutions (3) 0.7 0.7 0.8 0.8 1.1 -3.1

Public enterprises (4) -0.7 -0.7 0.3 -0.1 0.0 1.0 (1) Financial results for 1998 and prior years do not include adjustments for capitalization of the BCCR, according

to article 175 of its Organic Law.

(2) Base accrued.

(3) Includes CCSS, CTMS, FODESAF, ICT, INDER, INA, OCIS.

(4) Includes the CNP, ICAA, INCOP, JPS, RECOPE, ICE.

Source: Central Bank, http://www.bccr.fi.cr/indicadores_economicos_/#


66

National Budget

The budget for 2018 was set at US$16.1 dollars, which presents an increase of 3.2% from

the budget for 2017. In terms of GDP, there was a deceleration of the 2018 budget in relation to

2017, remaining at 26.6% of GDP. There is a reduction of salaries in relation to GDP, however

other items such as transfers increased due to social commitments with issues of tertiary

education, poverty and social security. On the other hand, capital spending fluctuates above 1.5%

of GDP.

Most of the budget is directed to the service of public debt and spending on education

and, thirdly, pensions from the National Budget. In addition, three key entities receive a

substantial portion of the budget: Public Works, Labor, which includes a series of transfers to

the social sector and the Judiciary.

67

National Budget by economic classification

(in millions of US dollars and% of GDP)

2015 2016 2017 2018

Total 14,565.6 14,671.1 15,898.2 16,099.2

General Total Without Amortization 11,513.1 11,739.7 12,662.7 13,340.1

Current expenses Without Interest 8,919.6 9,106.0 9,495.3 9,955.5

1 Current Expenses 10,623.5 10,783.9 11,414.8 12,335.3

Remunerations 4,249.9 4,245.4 4,329.4 4,533.8

Acquisition of Goods And Services 462.4 441.9 504.2 552.9

Interests 1,703.9 1,678.0 1,919.5 2,379.8

Current Transfers 4,207.3 4,418.7 4,661.7 4,868.7

2 Capital Expenses 879.6 947.6 1,234.4 999.7

3 Financial Transactions 3,061.4 2,938.7 3,236.7 2,760.3

4 Amounts without Allocation 1.2 0.8 12.2 4.0

% of GDP

Total 26.6% 25.7% 27.6% 26.6%

General Total Without Amortization 21.0% 20.6% 22.0% 22.1%

Current expenses Without Interest 16.3% 16.0% 16.5% 16.5%

1 Current Expenses 19.4% 18.9% 19.8% 20.4%

Remunerations 7.8% 7.4% 7.5% 7.5%

Acquisition of Goods And Services 0.8% 0.8% 0.9% 0.9%

Interests 3.1% 2.9% 3.3% 3.9%

Current Transfers 7.7% 7.8% 8.1% 8.0%

2 Capital Expenses 1.6% 1.7% 2.1% 1.7%

3 Financial Transactions 5.6% 5.2% 5.6% 4.6%

4 Amounts without Allocation 0.0% 0.0% 0.0% 0.0%

Source: M. of Finance, http://www.hacienda.go.cr/contenido/12487-presupuesto-de-la-republica

http://www.hacienda.go.cr/contenido/12487-presupuesto-de-la-republica

68

National Budget by institutional classification

(in millions of US dollars and% of GDP)

2015 2016 2017 2018 2015 2016 2017 2018

GRAND TOTAL 14,565.64 14,671.12 15,898.20 16,099.24 26.6% 25.7% 27.6% 26.6%

Legislative power 113.27 112.51 108.99 112.42 0.2% 0.2% 0.2% 0.2%

Legislative Assembly 64.23 64.08 61.18 63.81 0.1% 0.1% 0.1% 0.1%

Office of the Comptroller General of the Republic 38.41 38.02 37.01 37.62 0.1% 0.1% 0.1% 0.1%

Defender of the inhabitants of the Republic 10.63 10.42 10.81 11.00 0.0% 0.0% 0.0% 0.0%

Executive power 13,638.98 13,718.26 14,888.08 15,048.21 24.9% 24.1% 25.9% 24.9%

Presidency of the Republic 35.86 28.28 28.25 28.04 0.1% 0.0% 0.0% 0.0%

Ministry of the Presidency 19.03 17.75 17.48 17.74 0.0% 0.0% 0.0% 0.0%

Ministry of the Interior and Police 84.61 83.08 82.32 84.95 0.2% 0.1% 0.1% 0.1%

Ministry of Foreign Affairs and Worship 48.69 44.33 47.82 49.89 0.1% 0.1% 0.1% 0.1%

Ministry of Public Security 436.69 403.44 445.18 446.98 0.8% 0.7% 0.8% 0.7%

Treasury 209.06 205.05 206.00 207.10 0.4% 0.4% 0.4% 0.3%

Ministry of Agriculture and Livestock 102.69 86.43 83.47 68.39 0.2% 0.2% 0.1% 0.1%

Ministry of Economy, Industry and Commerce 13.83 39.31 39.25 40.15 0.0% 0.1% 0.1% 0.1%

Ministry of Public Works and Transportation 625.12 652.01 816.07 819.52 1.1% 1.1% 1.4% 1.4%

Ministry of Public Education 4,092.77 4,289.09 4,520.98 4,598.96 7.5% 7.5% 7.9% 7.6%

Ministry of Health 503.52 511.44 536.11 563.25 0.9% 0.9% 0.9% 0.9%

Ministry of Labor and Social Security 725.48 740.39 833.54 820.05 1.3% 1.3% 1.4% 1.4%

Ministry of Culture and Youth 88.16 79.44 91.85 87.12 0.2% 0.1% 0.2% 0.1%

Ministry of Justice and Peace 222.46 214.95 239.31 249.88 0.4% 0.4% 0.4% 0.4%

Ministry of Housing and Human Settlements 18.00 18.51 17.85 12.81 0.0% 0.0% 0.0% 0.0%

Ministry of Foreign Trade 17.31 14.00 15.61 12.97 0.0% 0.0% 0.0% 0.0%

Ministry of National Planning and Economic Policy 18.46 17.96 18.13 17.79 0.0% 0.0% 0.0% 0.0%

Ministry of Science, Technology and Telecommunications 16.77 16.16 16.79 15.30 0.0% 0.0% 0.0% 0.0%

Ministry of Environment 91.13 102.33 102.25 98.53 0.2% 0.2% 0.2% 0.2%

Public Debt Service 4,787.24 4,619.39 5,162.62 5,156.75 8.7% 8.1% 9.0% 8.5%

Pension Regimes 1,476.49 1,529.40 1,561.92 1,648.58 2.7% 2.7% 2.7% 2.7%

Specific Items 5.61 5.51 5.29 3.46 0.0% 0.0% 0.0% 0.0%

Power of attorney 745.53 761.56 821.03 820.68 1.4% 1.3% 1.4% 1.4%

Power of attorney 745.53 761.56 821.03 820.68 1.4% 1.3% 1.4% 1.4%

Supreme Electoral Tribunal 67.86 78.78 80.09 117.92 0.1% 0.1% 0.1% 0.2%

Supreme Electoral Tribunal 67.86 78.78 80.09 117.92 0.1% 0.1% 0.1% 0.2%

Millions of US dollarsINSTITUTION

% of GDP

Source: M. of Finance, http://www.hacienda.go.cr/index.php/component/content/article?id=139


69

PUBLIC SECTOR DEBT

Costa Rica’s gross public sector debt is comprised of the domestic and external debt of the

Government, the Central Bank, state-owned non-financial companies and the autonomous agencies

of the Government. Gross public sector debt does not include public sector financial institutions.

Costa Rica’s total domestic public debt consists of colón-denominated debt and foreign-currency

denominated debt issued in Costa Rica by the Government, the Central Bank and autonomous

agencies of the Government and non-financial public sector institutions and enterprises. Costa

Rica’s total gross public sector external debt consists of loans from foreign creditors to the

Government, the Central Bank, autonomous agencies of the Government and non-financial public

sector institutions and enterprises as well as bonds of these entities issued outside of Costa Rica.

From 2016 to 2017 approximately 6.5% of the indebtedness of the non-financial public sector was

guaranteed by the Government.

Costa Rica’s total gross public sector debt fluctuated from 43.1% of GDP in 2010 (US$16

billion) to 64.31% of GDP in 2017 (US$ 37.4 billion). After going through a fiscal consolidation

process driven mostly by strong economic performance during 2007 and 2008, the global financial

crisis triggered an expansionary fiscal policy that implied a deterioration of public finances from

2009 onwards. Additionally, legal constraints obligated the Government to rely more on domestic

resources to finance its fiscal deficit.

On August 24, 2012 the Legislative Assembly approved Law 9070, which authorizes the

Government to issue in the international markets up to US$4.0 billion of debt over the following

ten years, with a maximum of US$1.0 billion (or its equivalent in other external currency) of debt

per calendar year. The main objective of Law 9070 is for the Government to substitute expensive

domestic debt with cheaper external debt. On November 21, 2012, the Republic issued US$1.0

billion aggregate principal amount of its notes due 2023. On April 30, 2013, the Republic issued

US$500 million aggregate principal amount of its notes due 2025 and US$500 million of its Notes

due 2043, the Republic issued US$1.0 billion aggregate principal amount of its notes due 2044. As

result of these placements, the share of domestic debt of total public sector debt decreased to

77.9% in 2013 and 75.1% in 2014.

Government debt was US$19.4 billion in 2014 (39.3% of GDP). Government debt

increased by 10.2% of GDP from 2010 to 2014, mainly due to the decrease in tax revenues and the

expansionary fiscal policy that the Government implemented to mitigate the effects of the 2009

global financial crisis, both of which led to an increase in the deficit and gross financing needs. In

addition to the incurrence of Government debt to finance the fiscal deficit, the increase in

Government indebtedness in 2014 compared to 2013 reflected the increased borrowing

requirements due to the recurrent fiscal deficit. Government debt contributed the largest share to

total public sector debt, averaging 67.4% of total public sector debt over the period from 2010 to

2014, and averaging 61.58% of GDP from 2015 to 2017. Since 2004, the Government has repaid

external debt by issuing relatively expensive domestic debt. However, with the enactment of Law

9070, the Government has been able to issue external debt to refinance such maturities.

70

The following table sets forth the composition of public sector debt between domestic

and external debt.

Total Public Sector Debt

(in millions of U.S. dollars and as a percentage of total)

At December 31,

Type 2012 2013 2014 2015 2016 2017

Domestic

Public Debt 18,320.21 79,3% 21,042.50 77.8% 20,926.73 75.02% 23,370.93 74.18% 26,701.96 75.80% 28,670.94 76,85%

Foreign Public Debt

4,785.69 20,7% 5,977.17 22.12% 6,968.19 24.98% 8,133.66 25.82% 8,524.67 24.20% 8,637.98 23,15%

Total 23,105.91 100,0% 27,019.67 100,0% 27,894.92 100,0% 31,504.59 100,0% 35,226.63 100,0% 37.308,92 100%

Source: M. of Finance, http://www.hacienda.go.cr/contenido/12519-estadisticas-de-la-deuda-publica

The following tables set forth the public sector debt of the Government, non-financial public sector

and the Central Bank as at the end of each year.



At December 31,

Sector 2012 2013 2014 2015 2016 2017

Central Government 15,744.0 68.1% 17,782.5 65.8% 19,355.6 69.3% 22.314,27 70,83% 25.222,27 71,60% 28.162,74 75,5%

Non-Financial Public Sector 3,303.0 17.6% 4,021.9 19.3% 4,163.5 15.8% 4.489,02 14,25% 5.578,57 15,84% 5.585,9455 15,0%

Central Bank 4,058.9 14.3% 5,215.2 14.9% 4,416.9 14.9% 4.701,30 14,92% 4.425,79 12,56% 3.560,23 9,5%

Total 23,105.9 100.0% 27,019.7 100.0% 27,936.0 100.0% 31.504,59 100,00% 35.226,63 100,00% 37.308,92 100,0%



(as a percentage of GDP)

At December 31,

Sector 2012 2013 2014 2015 2016 2017

Central Government 34.30 35.94 38.55 41.01 45.09 49.18

Non-Financial Public Sector 7.20 8.13 8.38 8.25 9.97 9.75

Central Bank 8.84 10.54 8.62 8.64 7.91 6.22

Total 50.34 54.61 55.55 57.90 62.97 65.15


Domestic Debt

From 2012 to 2017, most of Costa Rica’s public sector domestic debt was issued through

bonds. The balance of public sector domestic debt was from loans by commercial entities and

multilateral organizations.

Costa Rica’s public sector deficits are financed primarily through Títulos de Propiedad de

la Deuda Interna (“Treasury Bonds”). These instruments are sold primarily through public

http://www.hacienda.go.cr/contenido/12519-estadisticas-de-la-deuda-publica



71

auctions with a portion being placed with state-owned institutions and enterprises. The Central

Bank’s debt is issued through BEMs and certificates of deposit.

The non-financial public sector used the domestic market to finance itself in relatively

small amounts prior to 2008. Beginning in 2009, however, the non-financial public sector started

increasing its use of the domestic market. The non-financial public sector’s domestic debt

increased from US$414 million in 2009 to US$2,875 million in 2017. The increase in the use of

domestic debt since 2008 can be explained by Law 8660, “Ley de Fortalecimiento y

Modernización de la Entidades Públicas del Sector Telecomunicaciones,” which was approved by

the Legislative Assembly in July 2008 and allowed ICE (electric and telecom state enterprise) to

use domestic and external financial instruments in amounts to cover its funding needs up to 45% of

its assets.

As of December 31, 2017, the domestic debt obligations of the Central Bank accounted

for US$3.5 billion, or 12.37% of total gross public sector domestic debt.

The Central Bank and the Government hold auctions of BEMs (“bonos de estabilización

monetaria”) and Treasury Bonds once a week, at which time stock exchange brokers submit

their bids as to amount and interest rates. The aggregate amount of BEMs and Treasury Bonds

offered in each auction is based on the financial needs of the Government and the liquidity of the

financial system, compared with the Central Bank’s monetary targets.

The following table sets forth the gross public sector domestic debt as of the dates

indicated.

Gross Public Sector Domestic Debt


At December 31,

2013 2014 2015 2016 2017

Central Government

14,266.82 67.80% 14,971.28 71.54 % 16,808.35 71.92% 19,426.54 72.75% 22.248,66 77,60%

Non-Financial Public Sector 1,587.25 7.54% 1,646.91 7.87% 1,879.92 8.04% 2,865.74 10.73% 2.875,8424 10,03%

Central Bank

5,188.43 24.66% 4,308.54 20.59% 4,682.66 20.04% 4,409.68 16.51% 3.546,43 12,37%

Total

21,042.50 100.00 20,926.73 100.00 23,370.93 100.00 26,701.96 100.00 28.670,94 100.00



72

The following table sets forth the aggregate principal amount of Government bonds in circulation as of the

dates indicated.

Government Bonds in circulation

(in millions of U.S. dollars at book value, except percentages(1))

Total Colón U.S. Other

Denominated Bonds Denominated Debt Currencies

At December 31, 2010 10,851.3 100% 7,170.5 66.1% 3,499.0 32.2% 181.8 1.7%

At December 31, 2011 12,489.2 100% 8,790.3 70.4% 3,552.5 28.4% 146.38 1.2%

At December 31, 2012 15,744.0 100% 10,911.8 69.3% 4,720.3 30.0% 111.9 0.7%

At December 31, 2013 17,782.5 100% 12,305.5 69.2% 5,393.5 30.0% 83.5 0.5%

At December 31, 2014 19,355.6 100% 12,339.4 63.8% 6,943.7 36.0% 72.5 0.4%

At December 31, 2015 22,314.27 100% 14.070,1 63.1% 8.153,83 36.5% 90.27 0.5%

At December 31, 2016 25,222.27 100% 15.684,5 62.2% 9.372,92 37.2% 164.75 0.6%

At December 31, 2017 28,162.75 100% 16,889.4 60.0% 11,093.74 39.4% 179.55 0.6%

(1) Percentage of total Government debt


Historically, the Government and the Central Bank issued debt with maturities of six

months or less. Beginning in 1999, the Government and the Central Bank developed more

competitive joint auctions through the use of standardized financial instruments and issued a

greater amount of debt with terms of one, three, five, seven, 10 and 15 years.

The following table sets forth the maturities for Government bonds in circulation as of

the dates indicated.

Government Bonds in Circulation, by Maturity

(percentage of total Government debt)

At December 31,

2012 2013 2014 2015 2016 2017

From 8 to 30 days 1.05 1.68 3.72 1.72 2.49 4.19

From 31 to 90 days 5.86 4.15 2.40 4.10 4.42 3.13

From 91 to 180 days 4.16 1.50 6.00 4.56 3.79 4.78

From 181 to 360 days 5.21 7.72 8.05 9.31 4.34 5.94

From 361 to 720 days 7.55 14.52 13.44 12.36 13.50 10.45

From 721 to 1440 days 26.69 20.53 18.59 19.02 17.80 18.10

More than 1441 days 49.47 49.91 47.81 48.92 53.66 53.42

Total 100 100 100 100 100 100

Source: M. of Finance, http://www.hacienda.go.cr/contenido/12519-estadisticas-de-la-deuda-

publica

External Debt

Gross public sector external debt was US$8.6 billion at December 31, 2017. Gross public

sector external debt increased by 1.33% from US$8.5 billion at December 31, 2016, compared

with US$8.1 million in 2015, principally due to issuance of external debt by bilateral loans of the




73

central government. In 2010, the external debt was US$3.9 billon gross public sector external

debt increased by 115.3% to US$8.1 billion at December 31, 2012, primarily due to the issuance

by the Republic on 2012, 2013, 2014 and 2015 of Notes due 2023, 2025, 2044, 2045 in an

aggregate principal amount of US$4 billion (US$1 billion each one).

From 2011 to 2016, the ratio of external debt to GDP increased from 10.7% in 2011 to

15.2% in 2016. The increase in the ratio of public sector external debt to GDP is explained by the

issuance of external debt notes.

The following table sets forth the total gross public sector external debt, net of gross

international reserves of the Central Bank, as of the dates indicated.

Total Gross Public External Debt, Net of Reserves


As of December 31,

2012 2013 2014 2015 2016 2017

Total gross public external debt 4,786 5,977 6,968 8,133 8,524 8,638.

Less: gross international reserves 6,857 7,331 7,255.91 7,834 7,573 7,081

Total public external debt, net of reserves -2,071) -1,354 -284 -299 -950 -1,556


Costa Rica’s public external debt is held by a variety of multilateral, bilateral and private

commercial bank creditors, as well as a large number of non-resident financial institutions.

Commercial bank creditors, holders of bonds and multilateral organizations accounted for 97%

of total gross public sector external debt outstanding as of 2014. The IADB and World Bank are

Costa Rica’s largest creditors, accounting for 12.46% and 9.13%, respectively, of the gross

public external debt as of 2017.

The following table sets forth the total gross public sector external debt, by creditor and

percentage of total, as of the dates indicated.

Gross Public External Debt, By Creditor and Percentage of Total


As of December 31,

2012 2013 2014 2015 2016 2017

Multilateral 2,097.1 43.8% 2,002 33.5% 2,259.7 33.5% 2,491.6 30% 2,812.5 32.9% 2,921.1 33.82%

World Bank 585.1 12.2% 598.7 10% 600 8.6% 608.5 7.4% 763.04 8.63% 788.23 9.13%

Inter-American Development Bank 747.9 15.6% 797.7 13.3% 914,1 13.1% 1,087.4 13.3% 1,048.36 12.30% 1,076.26 12.46%

Central American Bank for Economic Integration 546.0 11.4% 283.6 4.7% 457,8 6.6% 535.8 6.5% 792.66 9.30% 842.34 9.75%

Others 217.9 4.6% 322.0 5.4% 287,9 4.1% 259.8 3.1% 235.48 2.76% 211.88 2.45%

Bilateral 332.2 6.9% 263.0 4.4% 226,6 3.3% 255.4 3.1% 346.1 4.0% 383.75 4.44%

Commecial Banks 6.4 0.1% 152.0 2.5% 231,9 3.3% 136.6 1.6% 115.9 1.3% 83.0 0.96%

Bonds and floating rate notes 2,350.0 49.1% 3,560.0 59.6% 4.250,00 61% 5,250.0 64.5% 5,250.0 61.5% 5,250.0 60.78%

Total 4,785.7 100% 5,977.0 100% 6,968.2 100% 8,133.6 100% 8,524.6 100% 8,638.0 100%


74


The public sector external debt to GDP increased from 4.4% in 2010 to 5.2% in 2014. The

increase in the ratio of public sector external debt to GDP is partly explained by the use of

external financing by the ICE as a result of Law 8660 “Ley de Fortalecimiento y Modernización

de las Entidades Públicas del Sector Telecomunicaciones,” approved by the Legislative

Assembly in July 2008, which allowed the ICE to use local and international markets to meet its

funding needs.

The following table presents the external debt of the public sector by maturity.

The following table sets forth the amortization schedule of Costa Rica’s consolidated

public sector external debt for the five years ending December 31, 2019, excluding interest

payments on such debt.

Gross External Debt Amortization scheduled as of December 31, 2017

(Millions of dollars)

2018 2019 2020 2021 2022 2023 2024 or more

Total Debt Service 473,942 481,659 746,996 511,681 623,650 1.616,798 11.838,659

Amortization 100,583 96,669 347,917 130,669 236,028 1.256,704 6.799,229

Bilateral 9,898 8,418 8,418 20,955 33,493 32,925 385,762

Multilateral 90,686 88,252 89,499 109,714 133,298 142,801 2.136,891

Other - - - - 69,237 80,978 1.276,575

Eurobonos - - 250,000 - - 1.000,000 3.000,000

Interest payment 373,358 384,989 399,080 381,012 387,622 360,094 5.039,430

Non-financial public sector 339,938 291,077 281,801 766,468 202,552 184,593 1.885,284


Public Sector External Debt, by Maturity

(as a percentage of total)

At December 31

2012 2013 2014 2015 2016 2017

Less than a year 12.00 10.10 4.90 1.59 1.63 1.6

2 to 5 years 24.5 14.1 12.90 10.09 9.98 10.17

More than 5 years 63.5 75.8 82.20 88.32 88.39 88.23





75

Debt management

Liability Management Transactions

Debt swaps and reverse auctions are alternatives offered by the Ministry of Finance to the

investors holding of the securities to replace them with new securities under new financial

conditions or, alternatively, dispose of the cash, in case of the auction reverse. Passive

management operations allow the Ministry of Finance reduce the refinancing pressures, achieve

a lengthening of the maturity term of the securities and, in turn, foster the approach and

communication with the holders of the debt.

Particularly, reverse auctions are a mechanism of liability management of more recent use,

due to the fact that they were introduced in the market at 2013 and have allowed to reduce the

pressure due to domestic debt maturity by more than US$86 million on average for the 2013-

2017 period. In the other hand, these operations allow the issuer; obtain savings in the payment

of interest on the internal debt that withdrawn from the market in advance, before the expiration

date.

Reverse Auction Operations

(Total Amount in millions of US dollars )

Source: Tesoreria Nacional.

On the other hand, the debt swaps were introduced by the the Ministry of Finance as a

usual practice in the market, in December 2006, with the realization of swaps in titles with

variable rate not standardized that are currently maintained, but with a mayor regularity and

acceptance by the local market. In debt markets, an exchange of securities takes place, in which

investors buy new securities and pay for the transaction with securities in their possession that

circulate in the market.

76

The following graph shows the results obtained by the Ministry of Finance in the debt

swaps carried out in the years between 2011 and 2017. During this period, the Ministry of

Finance has exchanged domestic debt securities maturing in the short term for new medium and

long-term debt securities, in order to achieve a softening of the maturity profile of the internal

debt.

In 2017, the Ministry made 10 standardized debt swaps for a total amount of US$1.1

billon. This shows a greater acceptance of these operations by investors because it allows

restructuring and diversifying their portfolio, which leads to an improvement in the liquidity and

valuation of their investments.

Exchange Transactions

(Total Amount in millions of US dollars)

Source: Tesorería Nacional.

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