by Christopher Baker

Home : Travel : Costa Rica : CR Handbook : One Article

Although the past decade has been a rough ride for Costa Rica, its economy has, in many ways, been a model for developing nations. Highly efficient coffee and bananas industries, aided by high and stable world prices, have drawn in vast export earnings. Manufacturing has grown rapidly under the protection of external tariffs and the expanding purchasing power of the domestic market (per-capita income doubled between 1960 and 1979). And the nation for long avoided amassing a crippling foreign debt.

Overnight, Costa Rica's economy took a serious fall, however, in 1978. World coffee prices plummeted, slashing the country's income. The following year, oil prices rose sharply (Costa Rica spends the equivalent of its total coffee income for foreign oil every year) while foreign capital took to its heels with the outbreak of the Nicaraguan Revolution, which slowed commerce throughout the isthmus. Costa Rica is dependent on foreign investment. The welfare state established in the 1960s and 1970s was financed largely through foreign loans, and the industrialization policies of the 1970s based on import substitution were largely funded by foreign sources of investment capital.

In 1980, a large part of the foreign loans came due. Starved for money, the government of President Rodrigo Carazo (1978-82) began to soak up domestic bank credit, devalued the colón, and printed more money to meet its debts. Carazo's government was overwhelmed by the resulting crisis. Inflation soared to 100% by 1982. Industrial production went into decline. Official unemployment rose to 8.2%, with an additional 22.6% officially "underemployed" (unofficial figures were certainly higher). Real wages fell to pre-1970 levels, bringing impoverishment to much of the nation (35% of the nation's families were officially below the poverty line in 1991). By August 1981, when the nation's foreign debt reached US$4 billion, Costa Rica was forced to cease payment on its international loans.

The U.S. and International Monetary Fund (IMF) stepped in with a massive aid program which injected $3 billion into the economy between 1981 and 1984, equivalent to more than one-third of the Costa Rican government's budget and 10% of the nation's GNP for the period (Costa Rica was second only to Israel as the highest per-capita recipient of U.S. aid). Much of the U.S. government aid was tied to Costa Rica's support for the contra cause (see "Costa Rica and the Nicaraguan Revolution," pp. 66-67); IMF and World Bank assistance was tied to austerity measures designed to slash government spending, stimulate economic diversification, and sponsor competitive export industries.

Costa Rica must diversify to recharge an economy reeling under the impact of plummeting earnings from coffee--in 1991 coffee earnings plummeted to $180 million, down from $300 million the year before--and a debilitating international debt which today, at US$3.5 billion or $1200 for each of its three million citizens, is one of the world's highest per capita.

In spite of a steady growth in GNP during the past decade, real wages remain basically stagnant (inflation reached 27% in 1992), a growing proportion of resources goes to service the national debt, and the government has found it impossible to meet any of the IMF goals.

The current government of Rafael Calderón, under strong pressure from the IMF and World Bank, has pledged to balance the budget and rectify Costa Rica's structural weaknesses. Albeit halfheartedly, state-owned enterprises are being sold off, elements of the social welfare institutions are being dismantled, subsidies and tax exemptions--such as those for pensionados (foreign residents)--are being rescinded, and new taxes are being levied on income and savings. In the short run the social costs will be high. On the bright side: the current blossoming in tourism and nontraditional export items is pulling in hundreds of millions of dollars and will increasingly help alleviate the current crisis.


Manufacturing still plays a relatively small part in the Costa Rican economy (in 1990 earnings from industrial manufacturing were US$398 million--21.6% of GNP), and there is little to suggest that industrialization is going to transform the essentially agricultural economy in the near future. The market for manufactured goods is largely restricted to a small population with a relatively low purchasing power. Hydroelectricity, though well developed, is the only domestic source of power. Local industrial raw materials are restricted to agricultural products, wood, and a small output of mineral ores. Manufacturing is still largely concerned with food processing, although pharmaceutical and textile exports have risen dramatically in recent years. Major industrial projects also include aluminum processing, a petrochemical plant at Moín, a tuna-processing plant at Golfito, and an oil refinery at Puerto Limón.


Agriculture dominates the Costa Rican economy. The fact is obvious everywhere you go, particularly in the Central Highlands, where a remarkable feature of the land is the almost complete cultivation, no matter how steep the slope. Nationwide, some 12% of the land area is planted in crops, 45% is given to pasture, and only 27% is forested. Despite the ubiquitousness of small family farms, large-scale commercial agriculture is more important in terms of dollar value, even in coffee, where a relatively small number of large farms associated with the coffee beneficios (processing plants) have established their dominance.

Coffee--grano d'oro (golden bean)--is the most important crop in terms of area and export earnings (bananas, however, zipped into the lead as the biggest income earner in 1991, following the collapse of world coffee prices). The mist-shrouded slopes of the Meseta Central and southern highlands are adorned with green undulating carpets of coffee. The large hacienda is foreign to the traditions of the Meseta Central and the fabric of the rural landscape, with its thousands of small-sized farmsteads, is reminiscent of certain parts of peasant Europe.

Red-tiled and corrugated-roofed houses straggle along the web of farm roads and, by their pattern and numbers, indicate that pressure on the land has mounted. Some relief has been found by intensifying cultivation of coffee and, west of Alajuela and at lower levels, sugarcane; elsewhere in the higher, more temperate areas, carnations, chrysanthemums, and other flowers grow under acres of plastic sheeting, and dairying is becoming more important in a mixed-farming economy that has been a feature of the Meseta since the end of the 19th century. The situation is a far cry from the very limited economy of the Altiplano at similar elevations in Guatemala.

The vast banana plantations which swathe the Caribbean plains produce some 50 million boxes of bananas per year, accounting for 30% of the nation's export earnings in 1992 and making Costa Rica the second-biggest exporter of bananas in the world, behind Ecuador. Sugarcane is grown by small farmers all over the country but becomes a major crop on plantations as you drop into the lowlands (particularly rapid growth in sugar production occurred in the 1960s after the U.S. reassigned Cuba's sugar import quota; production has since gone into decline--in 1981 Costa Rica had to import sugar to meet domestic demand). And cacao, once vital to the 18th-century economy, is on the rise again as a major export crop; the trees, fruit hanging pendulously from their trunks, are everywhere, especially in large plantations around Limón and Upala and to a much lesser degree around Alajuela and increasingly around Golfito and the llanuras.

Recent attempts to stimulate nontraditional exports are paying dividends in agriculture. Cassava, papaya, the camote (sweet potato), melons, strawberries, chayote (vegetable pear), eggplant, curraré (plantain bananas), pimento, macadamia nuts, ornamental plants, and cut flowers are all fast becoming important export items.


By far the largest portion of agricultural land (70%) is given to cattle pasture. Despite its evolving complexion, Guanacaste remains essentially what it has been since midcolonial times--cattle country--and three-quarters of Costa Rica's 2.2 million head of cattle are found here. They are mostly humpbacked zebu, originally from India and now adapted over several generations; there are also herds of Charolais and Hereford. Low-interest loans in the 1960s and 1970s encouraged a rush into cattle farming for the export market, prompting rapid expansion into new areas such as the Valle de El General and more recently the Atlantic lowlands.

Although Costa Rica is today Latin America's leading beef exporter (it accounts for some five percent of U.S. meat imports), beef has never provided more than nine percent of Costa Rica's export earnings. Sadly, much of the land placed under cattle in recent decades has been on steep hill slopes that have been stripped bare of timber. The scoured slopes bear mute testimony to the greed and folly of man. Destructive floods now common in the terra caliente of the Pacific lowlands can be traced to "cattle mania." And the loss of the ready smile of the small farmers who have been driven from their land--cattle ranches need little labor--is a poignant reminder of a cancer that has slowly but inevitably eaten away at the land. All this so that North Americans can enjoy their hamburgers and TV dinners.


Costa Rica's banana industry, currently the country's number one earner of foreign currency, continues to expand to meet the demand of a growing international market. Some 32,000 hectares are currently planted, a 50% increase since 1985. At current rates of expansion, bananas will cover 45,000 hectares by 1995. Most growth is concentrated in the north Atlantic lowlands.

Bananas have been a part of the Caribbean landscape since 1870, when American entrepreneur Minor Keith shipped his first fruit stems--360 bunches--to New Orleans (see pp. 63-64). In 1899, his Tropical Trading & Transport Co. merged with the Boston Fruit Co. to form the United Fruit Co., which soon became the overlord of the political economies of the "banana republics." By the 1920s, much of the chaotic jungle south of Puerto Limón had been transformed into a vast sea of bananas.

Then, as now in some areas, working conditions were appalling, and strikes were so frequent that when Panama disease and then sigatoka (leaf-spot) disease swept the region in the 1930s and 1940s, United Fruit took the opportunity to abandon its Atlantic holdings and move to the Pacific coast, where it planted around Golfito, Coto Colorado, and Palmar (operated by United Fruit's subsidiary Compañia Bananera). Violent clashes with the banana workers' unions continued to be the company's nemesis. In 1985, after a 72-day strike, United Fruit closed its operations in southwestern Costa Rica. Many of the plantations have been replaced by stands of African palms (used in cooking oil, margarine, and soap); others are leased to independent growers and farmers' cooperatives who sell to United Fruit.

The Standard Fruit Co. began production in the Atlantic lowlands in 1956. Alongside ASBANA (the Asociación de Banañeros), a government-sponsored private association, Standard Fruit helped revive the Atlantic coast banana industry. Much of the new acreage, however, has come at the expense of thousands of acres of virgin jungle. (See "Bananas: Friend or Foe?," p. 350.)


Costa Rica's Meseta Central possesses ideal conditions for coffee production, and beans grown here are ranked among the best in the world. The coffee plant loves a seasonal, almost monsoonal climate with a distinct dry season; it grows best, too, in well-drained, fertile soils at elevations between 800 and 1,500 meters with a narrow annual temperature range--natural conditions provided by the Meseta Central. The best coffee--mild coffee commanding the highest prices--is grown near the plant's uppermost altitudinal limits, where the bean takes longer to mature.

The first coffee beans were brought from Jamaica in 1779. Within 50 years coffee had become firmly established; by the 1830s it was the country's prime export earner, a position it occupied until 1991, when coffee plunged overnight to third place in the wake of a precipitous 50% fall in world coffee prices after Brazil scuttled the International Coffee Agreement quota system in 1989. (Ticos can find satisfaction in the fact that their coffee has an unusually high "liqueur," or coffee essence, content of 86%; Brazilian coffee has a meager 29% content.)

Coffee exports earned $250 million in 1991, representing only 15% of the nation's commercial exports of $1.6 billion, and a loss of $100 million over 1990. This despite the fact that Costa Rica today has the greatest coffee productivity per acre in the world. In May 1992, Costa Rican coffee growers rioted in towns throughout the highlands; they even briefly suspended exports to protest the low prices. The decline has caused widespread distress for small farmers and the 45,000 poorly paid laborers who rely on work in the harvest season.

Population pressure on the land has induced the adoption of the most modern and intensive methods of cultivation, including high-yielding plants. The plants are grown in nurseries for their first year before being planted in long rows which ramble invitingly down the steep hillsides, their paths coiling and uncoiling like garden snakes. After four years they fruit. In April, with the first rains, the small white blossoms burst forth and the air is laced with perfume not unlike jasmine. By November, the glossy green bushes are plump with shiny red berries--the coffee beans--and the seasonal labor is called into action.

The hand-picked berries are trucked to beneficios (processing plants), where they are machine-scrubbed and washed to remove the fruity outer layer and dissolve the gummy substance surrounding the bean (the pulp is returned to the slopes as fertilizer). The moist beans are then blow-dried or laid out to dry in the sun in the traditional manner. The leather skin of the bean is then removed by machine, and the beans sorted according to size and shape before being vacuum-sealed to retain the fragrance and slight touch of acidity characteristic of the great vintages of Costa Rica.

A visit to a coffee finca (farm) is an interesting day-trip from San José. Cafe Britt (tel. 237-5044 or 238-4240, fax 238-1848) offers an hourlong "Coffeetour" of its finca and beneficio, including an English-language multimedia presentation on the "Story of Coffee." At San Pedro de Barva, 10 km north of Heredia, is a coffee research station and the Museo de Cafe (tel. 237-1975; hours Mon.-Fri. 7 a.m. to 3 p.m.). Aventuras Turísticas de Orosí (tel. 533-3030, fax 533-3212) offers an "Orosí Coffee Adventure" featuring a tour of a coffee farm and beneficio (three hours; $20).


Costa Rica is the world's fastest-growing destination for adventure and nature travel, and travelers of every other persuasion are pouring in, too. The resort industry is beginning to stir as the seductive potentials of Costa Rica are realized. Even the cruise lines are taking notice. And the country has recently been adopted as the darling of the ecotourist: the just reward for two decades of foresight and diligence in preserving its natural heritage in national parks and wildlife reserves.

Costa Rica gains more and more fans every year. Official statistics claim that in 1992, 610,093 tourists visited Costa Rica: an increase of 28% over the previous year. Tourism even scored a 16% increase in 1991, a remarkable figure for the year of the Gulf War, which devastated the travel industry throughout the rest of the world. Costa Rica expects one million visitors in 1995.

The nation's status as a "destination of the '90s" is a boon to the struggling economy. In fact, the government is relying on tourism dollars to help pull the country out of debt. In 1993, tourism will generate an estimated $500 million, boosting it past the banana industry to become the nation's prime income earner.

Costa Rica has tried to prepare for the growing flood in eager anticipation of the welcome injection of dollars. In May 1990, the country installed its first tourism minister, Luis Manuel Chacón, on the president's cabinet. To accommodate the growing number of visitors, he has made expansion of hotel rooms a priority: his goal is to increase by 50% the country's 12,000 rooms (1992) by the end of his tenure in 1994. At current rates of tourism expansion, the country needs to open 500 new rooms each month. While many a hotel corridor echoes in the rainy-season months, it is currently difficult to get beds Nov.-April, when a severe case of room shortage afflicts many of the more popular spots.

The Beach Resort Boom

In its haste to boost the influx of tourist dollars, the government of Rafael Calderón is promoting large-scale resort development. Over 50% of visitors in 1991 mentioned that they were visiting Costa Rica to pursue some interest in nature. Now, the government is trying to position Costa Rica as a comprehensive destination for the whole family, and particularly as a beach resort contender to Mexico and the Caribbean.

Sprawling resort complexes are beginning to sprout from the jungled shoreline. Chief among these is the Gulf of Papagayo project encompassing several beaches. The megaresort, being constructed by a host of European developers spearheaded by the Spanish developers Sol Melia, will be the largest "leisure city" in Central America, with rooms for 6,000 tourists in 2,000 rooms, 50 luxury villas, 400 family villas, and 700 apartments, replete with shopping center, golf course, and other supporting amenities. The first stage was completed in 1993.

Savvy tourism experts speak disparagingly of the so-called Cancun model because it encourages precisely the low-budget mass tourism that Costa Rica has long professed wanting to avoid.

The Down Side

There has been much debate about how to regulate the impact of tourism on Costa Rica. Concern about whether Costa Rica is growing too fast and shifting from its eco-tourism focus toward mass-market tourism led, in 1993, to a threatened boycott of the country's annual travel trade show, Expotur, by environmentally responsible tour operators and threatens to be a contentious issue for years to come. But everyone agrees on one point: the nation lacks any sort of coherent tourism development plan to control growth. Consequently, developers large and small are pushing up hotels along Costa Rica's 767 miles of coastline in total disregard of environmental laws.

In 1977, the country adopted the Maritime Terrestrial Zone Law, which declares the country's entire coastline to be public property, prohibits construction within 50 meters of the point halfway between high and low tides, and restricts construction within 200 meters of the same spot. It happens anyway without punishment. The sheer volume of violations, said a report in the Tico Times (29 May 1992), "bespeaks a massive lack of political will . . . Violations of the coastal law--most noticeably building within the `inviolable' 50-meter tide line--are out of control." Concerned environmentalists are calling for a prosecutor's office exclusively to enforce the Maritime Terrestrial Zone Law.

How bad is it? Consider this. Maurice Strong, the organizer of the Earth Summit held in Rio de Janeiro in June 1992, is among the accused. In June 1992, Costa Rica's Ministry of Natural Resources filed charges against Strong and Julio Garcia, his partner in Desarollos Ecologicos S.A., for building their 12-unit Villas del Caribe on land located in the KekoLdi Indian Reserve and Gandoca-Manzanillo Wildlife Refuge without official permits. And the Spanish developer Barceló was hauled into court and stoked the ire of environmentalists for flagrant and consistent breaches of environmental codes during construction of a 400-room resort at Playa Tambor, opened in 1992. The government seemed willing to close a blind eye (when Tourism Minister Manuel Chacón visited Berlin in March 1993, a German environmental group gave him the "Environmental Devil" award for the Costa Rican government's support of the Tambor project).

Unless a conscientious development plan is formulated soon, eco-tour operators warn that the government may kill the goose that lays the golden egg.

The Up Side

Costa Rica stands to gain much more than cash from the current boom. Firstly, optimists suggest that the profit potential of tourism encourages private landowners to regard natural areas as long-term assets rather than a source of quick cash, and that resort developers realize that the added expense of building around rather than through a forest pays ample dividends in the end. And the employment opportunities are huge. Tourism Minister Chacón has gained ground in training a broader segment of the Costa Rican population to work in tourism: his five-year goal is to train an additional 15,000 Costa Ricans for the tourism industry (27,600 were so employed in 1991).

The government is also pouring money into improving road access to popular destinations like Cahuita, Flamingo, Monteverde, Quepos, Sámara, Tamarindo, and Tambor--which are all sometimes difficult to reach in wet season. Unfortunately, where roads come so do the loggers. And local residents fear that if the roads that lead to more remote natural shrines are paved, more and more tourists will flock, thereby quickening the possible destruction of the very thing they come to worship.


Travel, like fashion, follows trends. In the 1990s the ecological movement has become something of a solar-powered steamroller, changing the way we travel. A 1986 study by the Costa Rican Tourism Institute found that 87% of tourists surveyed cited natural beauty as one of their main motivations for visiting Costa Rica, and 36% specifically cited eco-tourism.

More recently, eco-tourism--defined as responsible travel that contributes to conservation of natural environments and sustains the well-being of local people by promoting rural economic development--has become to the 1990s what the European Grand Tour was to the 1930s and adventure travel was to the 1980s. Many adventure enthusiasts of the last decade have discarded their wetsuits, mountain boots, and whitewater rafts; they still want to explore exotic regions, to peer beneath the veneer of the normal mass tourist experience, but in a more relaxed and socially acceptable manner. Bringing only their curiosity, the new wave of eco-tourists are leaving their footprints--and their cash.

Costa Rica practically invented the term. In October 1991 the country was chosen as one of three winners of the first environmental award presented by the American Society of Travel Agents (ASTA) and Smithsonian magazine. The award was designed to recognize a "company, individual or country for achievements in conservation and environmentalism." Costa Rica shared the prize along with the late Brazilian activist "Chico" Mendez and the country of Rwanda. In 1992 Costa Rica won the Golden Compass Award for its exemplary support of eco-tourism. "Since 1979, the country has been defining what conservation in Latin America is and should be," says Steve Cornelius, the Central American program officer for the World Wildlife Fund.

Just because a tour is labeled "eco-tour" doesn't mean that it is. The term has become catchy. "Everybody talks about eco-tourism to the point where the word is being prostituted," says Sergio Volio, a former Costa Rican national park ranger and now owner of the eco-tourism company Geotur. The term can have little meaning if a tour provider doesn't adhere to sound environmental principles.

Fortunately, many tour operators in this fledgling but fast-developing industry are honorable role models. One company has helped build trails that minimize erosion of fragile watersheds. Another makes tour members sign a contract that states they won't touch anything, not even a rock. Other companies hire local guides exclusively. And a key aspect of Seattle-based Wildland Adventures' program to the Caribbean coast is a stay at the Chimuri Lodge, near Puerto Viejo; the lodge is owned and operated by a Bribrí Indian, Mauricio Salazar, who leads groups on rainforest walks.

Filtering tourist dollars into the hands of locals is another problem. In January 1990, the World Wildlife Fund released a two-volume report which found that people interested in nature travel and in visiting fragile environments generally spend more money than other kinds of tourists. Yet Guillermo Canessa, a veteran conservationist and nature guide, found that less than three percent of the profits earned by the tour companies and hotels in Tortuguero actually benefit people of the local community. And conservationists claim that neither the foreigners who are flocking to the nation's protected areas nor the tour companies that bring them there are contributing their share to maintaining the parks. The entrance fee is currently $1.50; at press time, the National Assembly was studying a proposal to charge tour companies US$10 for every tourist they bring to each park.

In support of regulated eco-tourism and the Code of Environmental Ethics for Nature Travel established by Tsuli/Tsuli (the Costa Rican chapter of the National Audubon Society), the Institute for Central American Studies has formed a Department of Responsible Tourism. The DRT monitors the compliance of tour operators according to the code of ethics, as well as the impact that tourism has on local communities and development in Costa Rica. Based on these investigations, Tsuli/Tsuli and the DRT can recommend "responsible" tour operators and can research complaints about those who are not complying.

In the U.S., contact Ecotourism Society (801 Devon Place, Alexandria, VA 22314; tel. 703-549-8979, fax 703-549-2920), a watchdog body comprised of travel operators and conservationists. In Costa Rica, contact the Asociación Tsuli/Tsuli (Audubon de Costa Rica, Apdo. 4910, San José 1000, tel. 240-8775); the Department for Responsible Tourism (Apdo. 300, San José 1002; tel. 233-7112 or 233-7710); or the Eco-Institute of Costa Rica (Apdo. 8080, San José 1000, tel. 233-2200, fax 221-2801), which publishes the Sustainable Tourism Newsletter.