Political and Economic Situation

		Background

Costa Rica is a politically stable Central American country of 4.3 million people with a relatively well-developed economy. Arias Administration

Oscar Arias, a former president (1986-1990) and Nobel-laureate, was elected president in February 2006. Throughout his term, President Arias has advanced so-called "third-way" policies, embracing his party's traditional support for social welfare programs while rejecting state-led development in favor of market-oriented economic policies. Arias has sought to complement Costa Rica's considerable economic growth with moderate social welfare programs. These social investments, combined with substantial economic growth, have provided Costa Rica's citizens with a relatively high standard of living. Economic and social conditions have deteriorated recently, however, as a result of the global financial crisis and U.S. recession. Analysts assert that Costa Rica's economy showed signs of recovery in late 2009, and expect the country to rebound in 2010 with GDP growth of 3.3%. Former Vice President and Minister of Justice Laura Chinchilla (2006-2008) of the ruling PLN was elected president with 46.9% of the vote, well above the 40% needed to avoid a second-round runoff. Prospects for the Chinchilla Administration

Chinchilla is closely tied to President Arias' centrist faction of the PLN and is expected to largely continue the Arias Administration's policies. Throughout much of the electoral campaign, Chinchilla focused on improving public security. Costa Rica's unicameral National Assembly will present Chinchilla with considerable challenges in implementing her policy agenda. Environmental Leadership

Successive Costa Rican administrations have sought to address extensive deforestation and environmental degradation that resulted from decades of logging and agricultural expansion. The country's strong conservation system and innovative policies have done much to restore Costa Rica's environment and ecotourism has provided a significant source of economic growth. Costa Rica's efforts also have led many observers to recognize it as a world leader in environmental protection and have enabled the country to play an outsized role in the formulation of global environmental policies. Despite these accomplishments, some maintain that there are a number of environmental problems that must still be addressed by the country. U.S.-Costa Rican Relations

Relations between the United States and Costa Rica traditionally have been strong as a result of common commitments to democracy, free trade, and human rights. Costa Rica finally implemented CAFTA-DR in January 2009. U.S. Assistance

For more than a decade, Costa Rica has not been a large recipient of U.S. assistance as a result of its relatively high level of development; however, this is likely to change somewhat as a result of the "Mérida Initiative" and its successor program, the Central America Regional Security Initiative (CARSI). Free Trade Agreement

In August 2004, the United States Trade Representative (USTR) and the trade ministers from the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).
Costa Rica is a politically stable Central American nation with a relatively well-developed economy. Former president (1986-1990) and Nobel-laureate Oscar Arias of the historically center-left National Liberation Party was elected President in 2006. Throughout his term, Arias has advanced so-called "third-way" policies, embracing his party's traditional support for social welfare programs while rejecting state-led development in favor of market-oriented economic policies. Considerable economic growth and social protection programs have provided Costa Rica's citizens with a relatively high standard of living, however, conditions have deteriorated recently as a result of the global financial crisis and U.S. recession. Although Costa Rica's economy contracted and poverty increased in 2009, analysts believe President Arias' ambitious fiscal stimulus and social protection plan and improving global economic conditions should aid recovery in 2010.
On February 7, 2010, former Vice President Laura Chinchilla (2006-2008) of the ruling National Liberation Party was elected president, easily defeating her competitors. Chinchilla, who is closely tied to President Arias and the centrist faction of her party, will be Costa Rica's first female president. Throughout the campaign, Chinchilla pledged to maintain the Arias Administration's economic and social welfare policies while improving public security. She will need to form cross-party alliances to implement her policy agenda, however, as her party will lack a majority in Costa Rica's unicameral National Assembly. Chinchilla and the new legislature are scheduled to take office in May 2010.
Successive Costa Rican administrations have sought to address extensive deforestation and environmental degradation that resulted from decades of logging and agricultural expansion. The country's strong conservation system and innovative policies have done much to restore Costa Rica's environment and ecotourism has provided a significant source of economic growth. Costa Rica's efforts also have led many observers to recognize it as a world leader in environmental protection and have enabled the country to play an outsized role in the formulation of global environmental policies. Nonetheless, some maintain that a number of environmental problems in Costa Rica remain unaddressed.
The United States and Costa Rica have long enjoyed close relations as a result of the countries' shared commitments to strengthening democracy, improving human rights, and advancing free trade. The countries have also maintained strong commercial ties, which are likely to become even more extensive as a result of President Arias' efforts to secure ratification and implementation of CAFTA-DR. On April 28, 2009, the House of Representatives passed H.Res. 76 (Burton), which mourns the loss of life in Costa Rica and Guatemala that resulted from natural disasters that occurred in January 2009. The resolution also expresses the senses of the House, that the U.S. government should continue providing technical assistance relating to disaster preparedness to Central American governments.
This report examines recent political and economic developments in Costa Rica as well as issues in U.S.-Costa Rica relations. For additional information, see CRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), by [author name scrubbed] and CRS Report R40135, Mérida Initiative for Mexico and Central America: Funding and Policy Issues, by [author name scrubbed].