Can Costa Rica make a turnaround for its expats?

Is Costa Rica moving forward or backward for expats? Is the country killing the golden goose?Is it too late to turn things around for foreigners? Are taxes and the red tape getting to be too much for expats to live here?

Even Ticos are tired. That is one reason the new president, Luis Guillermo Solís, received so many votes. The country was trying to send a message to the current powers to reflect their discontent. Does the new man have what it takes to turn things around or will he be inheriting such a mess he will be doomed to failure? One thing for sure, he will have to deal with Costa Rica’s out-of-control national debt and dwindling internationals interest in the country.

Ten years ago, the government started talking about taxing people more and more. Over that time, they have put new computers in place and hired additional personnel to do so. They have added a luxury tax, a tax on companies, and a land-travel exit tax to name a few.

On the new president’s agenda, there is a list of new tax proposals to raise more money for the country:

1.) Widening sales taxes to include services;

2.) Increasing sales taxes from 13 to 15 percent;

3.) Making a new scale to include more people who earn service fees;

4.) Capital gains taxes;

5.) Tax on world income; and the list goes on and on.

Last week the municipality of San José notified bar owners they would have to pay an additional assessment of 400,000 colons (about $740) per quarter to stay in business for bars over 60 square meters.  For those under 60 they will have to pay 200,000.

Surprises like these never cease. And, they probably will not, because the country keeps on spending more and more like money is going out of style.

Where is Costa Rica in its development life cycle common to tourist destinations? The phases to the cycle are exploration, involvement, development, consolidation, stagnation and, decline and/or rejuvenation. Where does this country lie in this model? Does the life cycle model even apply to Costa Rica anymore?

Panamá on the other hand is burning up the metrics. The country’s growth last year was an astonishing 7.0 per cent of gross domestic product (GDP in English and PIB in Spanish). Costa Rica’s was only 3.4 percent, near the bottom of the list for Central America and the Caribbean. Panamá also has reduced poverty 12.6 percent in the past six years.

What is the difference? Panamá is working at attracting investors and retired people while Costa Rica seems to be shooing them away.  Years ago, Costa Rica had great benefits, too, before the Hacienda ministry started taking them away one benefit at a time, until there were none left.  International Living ranked Panamá the best retirement destination in the world not once or even twice, but seven times in a row.

The World Bank is not forecasting a very rosy future for the country over the next few year either. Annual GDP growth is projected to stagnate or decline while debt will continues to rise. This may change if the new administration is strong enough to do so.

There seems to be a fundamental difference in philosophies between Panamá and Costa Rica. Panamá seems to building itself up as a corporate inviting country as well as one for tourists and retired people. Costa Rica on the other hand does not seem to doing much to keep the latter.

Panamá invites retired residents who can show an income of $1,000 a month. Costa Rica requires much more and takes years in some cases to process the file.

Baby boomers retiring from the work force are
looking outside the United States for a welcome place to hang their hats. What message is Costa Rica sending to them? Over the past five years expats who once where very happy in this country have sold cheap and left. One woman who had a beautiful house in Nosara sold it for one-third its value. She said at the closing, “I came here to live and not to be hassled. Living in Costa Rica is not fun anymore. I am moving back to the United States because it seems easier than living here now.”

Costa Rica is a beautiful country, unique in the world. However, politicians must believe it is so unique retire people will live here regardless of what they do. Here is a wake up call. There are other very nice places in the world. They need to learn that squeezing every nickel out expats and Ticos alike is not a good economic policy.

Garland M. Baker is a 44-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community.  Reach him at  Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica.  Find the collection at, a complimentary reprint is available at the end of each article.  Copyright2014, use without permission prohibited.

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