Agricultural Policy Monitoring and Evaluation 2023

11. Costa Rica

Support to agriculture

Agricultural support for producers (Producer Support Estimate, PSE) in Costa Rica amounted to 4% of gross farm receipts in 2020-22, well below the OECD average and down from 8% in 2000-02. Agricultural support comes almost entirely (89%) from market price support (MPS), one of the most trade- and production-distorting forms of support, generated through border measures (tariffs) and domestic measures (minimum reference prices). Products with price support notably include rice, pig meat, poultry meat, and sugar. On average, border protection and price interventions inflated producer prices by 4% relative to international prices in 2020-22. The remaining producer support (worth 0.4% of gross farm receipts) comes through credit at preferential rates for the agricultural sector, input subsidies for agricultural equipment and machinery, payments for environmental services, and support to organic production, among others.

Spending on general services (General Services Support Estimate, GSSE) was equivalent to 1.3% of the value of agricultural production in 2020-22, a small increase from 2000-02. Nevertheless, this share remains well below the OECD average. In 2020-22, GSSE expenditures were mainly allocated to three areas: (1) the agricultural knowledge and innovation system, particularly extension services; (2) inspection and control; and (3) development and maintenance of irrigation and rural roads infrastructure. Total support to the sector (Total Support Estimate, TSE) corresponded to 0.4% of Gross Domestic Product (GDP) in 2020-22, a significant decline from 1.2% in 2000-02.

Recent policy changes

Costa Rica undertook reforms to the price system and import tariffs for rice in 2022. These are part of the Rice Path: a new strategy to promote greater competition in the rice market and improve the quality of local production. As the first actions under this plan, the reference price scheme was dismantled, and the most-favoured-nation (MFN) import tariffs for paddy and milled rice were reduced from 35% to 4.5% and 5%, respectively. The Rice Path includes actions to promote research and technology transfer, and provide training on topics such as proper crop management, sustainable use of natural resources, and improvement and reduction in the use of agrochemicals. Technical assistance and training will also be available for producers who need to change activities.

A public policy for the agricultural sector for 2023-32 was launched in January 2023. It aims to improve the sector’s competitiveness; foster the creation of value-added; generate employment; and improve the population’s living conditions through actions to increase productivity, sustainability and resilience, and adaptation to climate change. The policy foresees measures to modernise the numerous institutions governing the sector, strengthen their co-ordination, and improve the quality of their services.

Costa Rica signed a Trade Association Agreement with Ecuador in March 2023, expected to enter into force in 2024. It aims to consolidate and improve market access for Costa Rican exports and create a legal framework to continue promoting and developing investments and strategic alliances between the countries. Once in force, it will add to the network of agreements under which Costa Rica conducts most of its agro-food trade.

Assessment and recommendations

• The National Climate Change Adaptation Plan 2022-26 is a step towards adopting a longer-term perspective to align with climate change goals and improving institutional co-ordination, as recommended by the OECD (2017[1]). While the plan includes numerous measures to improve the adaptation of agriculture, many are contingent on external funding. This uncertainty might impede implementation of new initiatives or affect the continuity of existing programmes. The government should prepare a contingency plan in case external funds are not forthcoming in a timely manner.

• The new public policy for the agricultural sector for 2023-32 sets a general framework for the sector’s climate adaptation. A more detailed outlining of concrete actions foreseen under this policy will be key to assessing its potential impact. This is an opportunity for Costa Rica to better align agricultural and climate policies, and to implement OECD recommendations such as linking existing voluntary programmes and direct payment schemes with adaptation, integrating adaptation into existing technical assistance programmes and extension services, and systematically monitoring and evaluating adaptation efforts.

• Despite the relatively large contribution of agriculture to greenhouse gas (GHG) emissions, Costa Rica has not established a sector-specific mitigation target. The agricultural Nationally Appropriate Mitigation Actions (NAMAs) have achieved GHG emission reductions in the coffee and livestock sectors. There are plans to develop NAMAs for other sectors, such as rice and bananas, but their progress depends on the availability of external funding. Implementing additional agricultural NAMAs could mitigate GHG emissions and promote the adoption of good practices in important agricultural activities.

• Recent reforms of the reference price and import tariffs for rice – following OECD recommendations – are important steps towards improving the affordability of a basic staple food. To promote a transition to more sustainable and resilient production, and protect farmers’ livelihoods, the government must ensure that all measures included in the Rice Path are adequately implemented. This includes providing technical assistance to small and medium-sized rice producers, helping small-scale farmers who wish to cease rice production, and actions to use water more efficiently and reduce the use of agrochemicals.

• Beyond rice, price transfers (measured by market price support) continue to account for the largest share of producer support. For example, several agro-food products are subject to higher-than-average import tariffs. Costa Rica should continue its efforts to reduce transfers that distort domestic markets and trade, constrain competition, productivity and competitiveness, and risk harming the environment.

• Support to general services has increased in the last two decades, including investments in the agricultural innovation system. However, relative to the value of agricultural production it continues to be below the OECD average. The low expenditure, a fragmented research agenda, and limited information sharing with extension services constrain innovation. Strengthening investment in innovation and knowledge transfer could create an enabling environment to improve productivity and unlock untapped potential in Costa Rican agriculture.

• The estimated agricultural Total Factor Productivity (TFP) decreased on average 2% per year in 2011-20. Streamlining the institutional structure governing the sector could improve the delivery of public policies and contribute to improving productivity (OECD, 2023[2]). The new sector policy for 2023-32 represents an opportunity in this regard. Investments are also required to reduce the infrastructure gaps that limit the sector’s competitiveness, such as the poor quality of rural roads.

Figure 11.1. Costa Rica: Development of support to agriculture

 

 

 

 

 

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 11.2. Costa Rica: Drivers of the change in PSE, 2021 to 2022

Note: % change of nominal Producer Support Estimate expressed in national currency.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 11.3. Costa Rica: Commodity-specific transfers as a percentage of commodity gross farm receipts, 2020-22

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 11.1. Costa Rica: Estimates of support to agriculture

Million USD

	2000-02	2020-22	2020	2021	2022p
Total value of production (at farm gate)	2 209	5 217	5 086	5 259	5 305
of which: share of MPS commodities (%)	79.20	89.28	85.37	89.93	92.54
Total value of consumption (at farm gate)	1 114	2 329	2 210	2 257	2 520
Producer Support Estimate (PSE)	175	212	301	207	127
Support based on commodity output	164	189	278	183	106
Market Price Support1	164	189	278	183	106
Positive Market Price Support	164	189	278	183	106
Negative Market Price Support	0	0	0	0	0
Payments based on output	0	0	0	0	0
Payments based on input use	10	22	23	23	20
Based on variable input use	4	10	11	10	9
with input constraints	1	10	11	10	9
Based on fixed capital formation	1	7	7	7	6
with input constraints	0	1	1	1	1
Based on on-farm services	5	5	6	5	5
with input constraints	3	0	0	0	0
Payments based on current A/An/R/I, production required	0	0	0	0	0
Based on Receipts / Income	0	0	0	0	0
Based on Area planted / Animal numbers	0	0	0	0	0
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	1	1	1	2	1
Based on long-term resource retirement	0	1	1	2	1
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	1	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	7.90	3.98	5.90	3.92	2.38
Producer NPC (coeff.)	1.08	1.04	1.06	1.04	1.02
Producer NAC (coeff.)	1.09	1.04	1.06	1.04	1.02
General Services Support Estimate (GSSE)	20	68	65	74	66
Agricultural knowledge and innovation system	10	28	31	27	25
Inspection and control	3	19	12	23	22
Development and maintenance of infrastructure	7	20	20	23	18
Marketing and promotion	0	1	1	1	1
Cost of public stockholding	0	0	0	0	0
Miscellaneous	0	0	0	0	0
Percentage GSSE (% of TSE)	10.47	24.65	17.67	26.34	34.30
Consumer Support Estimate (CSE)	-189	-239	-334	-233	-149
Transfers to producers from consumers	-156	-172	-252	-171	-93
Other transfers from consumers	-34	-67	-83	-62	-57
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	0	0	0	0	0
Percentage CSE (%)	-16.93	-10.10	-15.12	-10.30	-5.93
Consumer NPC (coeff.)	1.20	1.11	1.18	1.11	1.06
Consumer NAC (coeff.)	1.20	1.11	1.18	1.11	1.06
Total Support Estimate (TSE)	195	280	366	281	193
Transfers from consumers	189	239	334	233	149
Transfers from taxpayers	40	108	114	110	100
Budget revenues	-34	-67	-83	-62	-57
Percentage TSE (% of GDP)	1.23	0.42	0.59	0.44	0.28
Total Budgetary Support Estimate (TBSE)	32	91	88	98	87
Percentage TBSE (% of GDP)	0.20	0.14	0.14	0.15	0.12
GDP deflator (2000-02=100)	100	368	354	361	389
Exchange rate (national currency per USD)	331.77	616.93	584.68	621.35	644.77

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Costa Rica are: rice, sugar, milk, beef and veal, pig meat, poultry, bananas, coffee, palm oil and pineapple.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database). http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Costa Rica’s agricultural policy has developed in three phases (Table 11.2). Up to the 1980s, the country pursued import substitution, supported by government market interventions and capitalising on its natural comparative advantages through the export of traditional products such as coffee, bananas, sugar and bovine meat.

Between the mid-1980s and the mid-2000s, Costa Rica followed an outward-oriented growth strategy, which influenced the development of agricultural support policies. Market intervention decreased significantly, combined with continued domestic reforms and trade liberalisation, marked by Costa Rica’s accession to the General Agreement on Tariffs and Trade (GATT) in 1990 and, subsequently, to the World Trade Organization (WTO) in 1995. Price controls were eliminated (except in the case of rice), export taxes removed and import tariffs lowered. Costa Rica entered into free trade agreements that granted duty-free treatment for imports from many trading partners, although tariffs still apply to some agricultural products (OECD, 2017[1]).

The food price crisis of 2007-08 fuelled food security concerns, leading to the establishment of programmes seeking to increase productivity of staple foods, particularly through extension services targeting small-scale farmers. The administered price for rice that had been maintained for decades was reformed in 2015 and converted to a minimum reference price, which was eliminated in 2022 together with tariff reductions on rice imports. Costa Rica’s policies continue to emphasise export-oriented agriculture, which has resulted in some asymmetries between exporters and producers for the local market. In addition, greater policy focus is now directed at promoting sustainable productivity with an emphasis on small-scale farmers (OECD, 2017[1]).

Table 11.2. Costa Rica: Agricultural policy trends

Period	Framework	Changes in agricultural policies
Prior to 1980s	Closed economy	Import substitution approach; price interventions on agricultural products, particular emphasis on guaranteed price for rice; high tariffs on agricultural imports Creation of the National Production Council (CNP) in the 1940s to promote agricultural and industrial production, control agricultural prices and own public infrastructure for the collection, storage, transport and distribution of grains
1980s-2007/08	Gradual shifts to open the economy	Dismantling price interventions (but minimum price for rice continued) Reduction of trade barriers (import and export tariffs) Reforms to CNP end most functions, keeping only the Institutional Supply Programme (PAI), which purchases food from small and medium farms for consumption in public institutions Strengthening agricultural exports via product diversification and development of destination markets; several FTAs signed; incentives (including in agriculture) to domestic and foreign companies to attract FDI, such as the Free Trade Zone Regime (FTZ) providing tax benefits and preferential port rates Creation of agricultural institutions for animal health (SENASA), plant health (SFE), agricultural innovation (INTA) Creation of the Rural Development Institute (IDA/INDER)
Since 2008	Open economy with a focus on sustainability and small-scale farmers	Emphasis on extension services for small-scale farms; promotion of good agricultural practices Small and limited payments to farmers for environmental services Import tariffs persist for some agricultural products Major rice policy reforms in 2022: elimination of the reference price and lower tariffs

Producer support has fluctuated between 2% and 11% of gross farm receipts over the last decades. This volatility can be partly explained by fluctuations in export and import unit values or in the international reference prices for some MPS commodities. Costa Rica’s PSE consists mainly of market price support (MPS), which accounts for around 90% and concentrates on rice and livestock products. In contrast, budgetary support to producers is limited and has changed little over time (Figure 11.4). Around 75% of total budgetary allocations are in the form of general services to the sector. Agricultural research and development (R&D), extension services, inspection and control, and rural infrastructure account for most of these expenditures. Costa Rica does not provide budgetary transfers to consumers.

Figure 11.4. Costa Rica: Level and PSE composition by support categories, 1995 to 2022

Notes: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

Until the end of 2022, the agricultural policy framework of Costa Rica was guided by the 2019-22 Policy Guidelines for the Agricultural, Fishing and Rural Sector, which sought to improve the well-being of people employed in agriculture, achieve a competitive and sustainable agriculture, and strengthen the sector’s resilience, with a cross-cutting axis of climate action and risk management. A new public policy for the agricultural sector (Política pública para el sector agropecuario costarricense 2023-2032) was unveiled in January 2023 (see below).

Market Price Support (MPS) is the most important component of overall agricultural support. Costa Rica maintains a wide range of border measures, including tariffs and sanitary and phytosanitary (SPS) measures. The average applied most-favoured-nation (MFN) tariff on agricultural imports in 2021 was 11.6%, above the 4.6% faced by non-agricultural products. Certain sectors face significantly higher MFN average rates, such as dairy (50.9%), animal products (20.8%) and sugars (18.9%) (World Trade Organization, 2022[3]).

Budgetary policy instruments predominantly focus on providing general services to agriculture, including extension services, research and development (R&D), and plant and animal health services, with a significant emphasis on environmental protection. The National Institute for Innovation and Transfer of Agricultural Technology (INTA) manages agricultural research, development and innovation. Together with the MAG’s National Directorate of Agricultural Extension, INTA also operates technology transfer and extension services to farmers. The National Animal and Health Service (SENASA) and the National Phytosanitary Service (SFE) are in charge of animal and plant health services.

Farmers also receive a number of specific payments and subsidies, including implicit subsidies through credit at preferential interest rates, and some subsidies for fixed capital formation mostly directed to small-scale farmers.

The National Seed Policy for 2017-30 is implemented by the National Seed Office with the participation of stakeholders from the seed production sector. The strategic actions of this policy include the development of varieties, the production of seeds and the assurance of their quality, the extension of seeds’ use, the development of seed-producing companies, and ensuring security in the supply of seeds.

The National Groundwater, Irrigation and Drainage Service (SENARA) constructs and manages irrigation infrastructure, and maintains and upgrades existing infrastructure. It carries out actions such as:

• Providing training and assistance to producers for the proper use of water resources.

• Construction works for drainage and flood control in the regions with the highest levels of rainfall. This regulates soil moisture, which favours production and prevents losses from flooding.

• A programme for research and management of groundwater resources, generating information on the availability of water for its sustainable use.

Costa Rica has committed to a completely decarbonised economy by 2050 and established annual goals for reducing greenhouse gas (GHG) emissions. The overall goal is composed of two objectives: (1) maximum 9.11 MtCO₂eq net emissions, with emissions per capita of 1.73 net tonnes by 2030; and (2) absolute maximum net emissions of 106.53 MtCO₂eq for 2021-30 (OECD, 2022[4]). While agriculture contributes 21% to the country’s GHG emissions, almost twice the OECD average, the country does not have an agriculture-specific target.

Nationally Appropriate Mitigation Actions (NAMAs) for agriculture were developed in collaboration with public institutions, producer organisations, the private sector and academia, supported by international co‑operation funds. Currently, two agricultural NAMAs are active for coffee and livestock. Low-emission production of coffee is done on an estimated 24 770 hectares, which has led to a reduction of 71 763 tonnes of CO₂eq between 2014 and 2022. The livestock sector reduced emissions by 175 000 tonnes of CO₂eq in the same period, and overall captured more GHGs than it generates. While the planning and development of additional NAMAs for other sectors such as bananas and rice has started, their implementation is highly dependent on the availability of international co-operation funding.

Costa Rica’s agri-environmental policy also includes the Payment for Environmental Services Programme. Its projects on agroforestry services provide financial compensation to small and medium-sized agricultural or livestock producers who plant trees interspersed with crops or pastures. This programme seeks to maintain, recover, and develop forest ecosystems, increase carbon sequestration, improve the rural landscape and the environmental conditions of cattle farms, and generate additional economic resources through the sale of wood from the trees planted.

The Recognition of Organic Environmental Benefits programme, managed by the Department of Organic Production of the Ministry of Agriculture and Livestock, consists of a direct payment for producers that are certified organic or in the transition period. The incentive is provided in a base amount per year for a maximum of three years.

Costa Rica has entered into 16 free trade agreements (FTAs) with trading partners across the world. Most trade is conducted under these agreements: as of 2017, FTAs covered almost 93% of the country’s total exports and 83% of imports (Ministerio de Comercio Exterior, 2017[5]). An important policy to promote agricultural exports is the DESCUBRE programme, operated through a public-private partnership led by the Ministries of Agriculture and Foreign Trade and the export promotion agency PROCOMER. DESCUBRE links farmers to export markets and value chains and promotes investments in rural and coastal areas. Its activities include providing seed funding and technical assistance to help small producers become providers of larger exporting companies in selected agro-food value chains.

Climate change adaptation policies in agriculture

The National Climate Change Adaptation Plan 2022-26 was presented in April 2022. This plan defines the actions required to implement the National Climate Adaptation Policy (launched in 2018). It is closely linked to Costa Rica’s updated Nationally Determined Contribution (NDC), submitted at the end of 2020, which includes a National Communication on Adaptation that sets concrete guidelines and goals. The adaptation plan covers six areas: (1) knowledge management; (2) territorial planning; (3) ecosystem management; (4) public services; (5) productive systems; and (6) investment and financial security. It includes 232 concrete adaptation actions to be undertaken by 49 institutions.

Most actions that concern the agricultural sector in the national adaptation plan are grouped under its Axis 5, “Adapted and eco-competitive production systems”. Some examples include: developing a strategy for rainwater-harvesting and irrigation technologies in productive agricultural systems; developing a programme for training and technology transfer in practices that strengthen resilience and promote ecosystem-based adaptation at different scales (small, commercial, and agro-industrial); and establishing a seed bank with crop varieties from different Costa Rican regions. Many of the proposed actions are contingent on external funds.

In 2021-22, the National Seed Office implemented the Project for Strengthening Capacities in Seed Production for Adaptive and Resilient Agriculture, supported by international co-operation funds. This project seeks to improve the capacities of family farms producing seed, promote the use of superior-quality seeds, and increase the productivity of these systems while taking climatic variables into consideration. It also contributes to the National Biodiversity Strategy (2016-25) by promoting the management and conservation of seeds of native species for food and reforestation by indigenous people and local communities.

The NAMAs for the coffee and livestock sectors also include adaptation actions. The NAMA-coffee aims to improve resource-use efficiency in production and processing. Work is being done to implement the National Coffee Strategy for Low Emissions and Resilience to Climate Change. Other actions include training model farms, producers, and public and private extension professionals in sustainable production, and planting trees in agroforestry systems in coffee farms. Coffee processors also receive financial incentives to reduce their emissions and their electricity and water use.

In the case of the NAMA-livestock, the National Institute for Innovation and Transfer of Agricultural Technology (INTA) provides research support covering topics such as: Voisin Rational Grazing1 and its potential to improve productivity and re-carbonise soil in pastures; developing bovine genetics adapted to the country's climate and production scales; the rational use of nitrogen in the fertilisation of pastures and the use of fertigation techniques with slurry in pastures; and fodder conservation systems.

During 2022, the National Directorate of Agricultural Extension provided incentives for climate change adaptation and mitigation in farms. The Recognition of Benefits for Good Agricultural and Livestock Practices programme grants a monetary incentive to agricultural producers, covering 20% to 30% of investments with a positive environmental effect, such as live fences, fodder banks, biodigesters, or organic waste-treatment systems. In addition, the Ecological Blue Flag (Bandera Azul) for the agricultural sector is a voluntary programme recognising farmers that implement practices in areas such as water management, soil conservation, consumption of agricultural inputs, fossil fuels and electricity, and actions to improve climate adaptation and resilience.

Domestic policy developments in 2022-23

A new public policy for the agricultural sector for the period 2023-32 was launched in January 2023. It aims to improve the competitiveness of the sector (including crops, livestock, fisheries, and agro-industry) through actions oriented to increase productivity, sustainability and resilience, and adaptation to climate change, to improve the international competitiveness of Costa Rican products, create employment and improve living conditions in rural areas (Ministerio de Agricultura y Ganadería, 2023[6]). The policy identifies four major action areas:

• Modernising and strengthening the sector institutions and improving co-ordination, using technology to simplify procedures and improve regulations.

• Improving competitiveness through the availability of information for producers and decision-makers, better infrastructure and plant and animal health services, and improved access to financing and insurance.

• Improving productivity and sustainability through the promotion of good agricultural practices and technologies that optimise resource use, the development of economic incentives for producers who implement actions that contribute to the decarbonisation goals, the implementation of the National Adaptation Plan for agriculture, and the promotion of research and knowledge transfer.

• Improving value added and marketing channels through the promotion of value addition and production linkages, identifying new market niches, and developing physical and virtual marketing channels. This action area also includes a food and nutritional security component that seeks to promote the access and availability of balanced foods for the population, and actions for the management and use of waste.

A new strategy for the rice sector was presented in the second half of 2022. The strategy, known as the “Rice Path”, was developed by an inter-institutional team that included the vice-president and the ministers of agriculture, economy, and foreign trade. The strategy proposes actions to improve the quality of production and promote greater market competition. The first actions under this strategy were to eliminate the reference price scheme and reduce the MFN import tariffs on paddy rice from 35% to 4.5% and on milled rice from 35% to 5%.2 This reform follows past OECD recommendations to Costa Rica about the reduction of market price support for rice, which highlighted the need to address the perverse incentives created for rice production and the policy’s negative impact on poor households (OECD, 2017[1]). It is expected that this reform will help reduce the cost of the basic goods basket (OECD, 2023[2]).

The Rice Path strategy also includes research and technology transfer, promoting the use of seeds and supplies suitable for the country's conditions, and training farmers on topics such as proper crop management, sustainable natural resource use, and rationalising agrochemical use. Technical assistance and training will also be provided to producers who need to change activities. These actions will be developed by the Ministry of Agriculture and Livestock (MAG) and the National Institute for Innovation and Transfer of Agricultural Technology (INTA) starting in 2023. They are expected to benefit about 490 small and medium-size rice producers.

In 2022, Costa Rica established the legal framework for the cultivation, production, industrialisation, and trade of cannabis for medical and therapeutic purposes and of hemp for food and industrial uses. It regulates and allows the production and use of psychoactive cannabis and its derivatives (exclusively for medical and therapeutic uses), as well as the production, industrialisation, and commercialisation of hemp for industrial and food uses. The framework gives the MAG the authority to issue licences and authorisations for cultivation, production, and related activities, and to provide technical assistance to small and medium producers for the development of crops. Both activities are expected to promote economic and social development in rural areas.

A reform to the registration process of new agrochemicals entered into force in February 2023. The new regulation allows to homologate the registration of Technical Grade Active Ingredients (TGAI) with OECD members and other adherents to the OECD System for Mutual Acceptance of Chemical Safety Data. This reform eliminates a bottleneck that had delayed the registration of new molecules for decades. It is expected to significantly reduce the time needed for registration and modernise the agrochemicals authorised in the country, making available newer molecules that are more friendly to the environment and human health (Servicio Fitosanitario del Estado, 2023[7]).

Trade policy developments in 2022-23

In March 2023, Costa Rica and Ecuador signed a Trade Association Agreement. It aims to consolidate and improve market access for Costa Rican exports and create a bilateral legal framework to continue promoting and developing investments and strategic alliances between both countries. The agreement is expected to enter into force in 2024.

In May 2022, Costa Rica lifted the restrictions on imports of fresh avocados from Mexico that had been the subject of a WTO dispute initiated in 2017. The panel found that Costa Rica’s restrictions were inconsistent with the Agreement on Sanitary and Phytosanitary Measures. To bring the measures into conformity with its legal obligations, Costa Rica repealed the resolutions that had been found incompatible with WTO provisions (Servicio Fitosanitario del Estado, 2022[8]).

Several developments related to agricultural import tariffs took place in 2022. They include lower tariffs on paddy and milled rice approved in August, and the expiration in March of an antidumping measure consisting of additional import duties on unrefined crystal white sugar imports from Brazil (World Trade Organization, 2022[9]).

A safeguard measure increasing the import tariff on refined white sugar, which was in force since August 2020 (OECD, 2021[10]), expired in August 2023. Following concerns raised by Brazil and its decision to suspend concessions by raising tariffs on certain agricultural products from Costa Rica (World Trade Organization, 2020[11]), in October 2022 Costa Rica opened a tariff rate quota of 4 437 metric tonnes of refined sugar from Brazil not subject to the safeguard duty, in exchange for Brazil ending the tariff increase on Costa Rican products.

Contextual information

Costa Rica is a small country with a population of 5.2 million. Its long democratic tradition and political stability have underpinned its economic progress and the development of its agricultural sector. Agriculture still plays a relatively important role in the economy, contributing 12% to employment. While the share of agriculture in GDP is above the average of covered countries, it has halved in the last two decades, reflecting the diversification of the economy. Costa Rica’s GDP per capita almost tripled between 2000 and 2021 and is now close to the average across all countries covered by this report (Table 11.3).

Table 11.3. Costa Rica: Contextual indicators

	Costa Rica		International comparison
	2000*	2021*	2000*	2021*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	32	117	0.08%	0.10%
Population (million)	4	5	0.09%	0.10%
Land area (thousand km2)	51	51	0.06%	0.06%
Agricultural area (AA) (thousand ha)	1 840	1 762	0.06%	0.06%
			All countries1
Population density (inhabitants/km2)	78	101	52	64
GDP per capita (USD in PPPs)	7 796	23 320	9 350	23 401
Trade as % of GDP	38.2	25.3	12.3	15.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	10.2	4.7	2.9	3.9
Agriculture share in employment (%)	16.3	11.7	-	-
Agro-food exports (% of total exports)	31.0	37.2	6.2	7.9
Agro-food imports (% of total imports)	7.6	13.3	5.5	7.2
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	76	73	-	-
Livestock in total agricultural production (%)	24	27	-	-
Share of arable land in AA (%)	11	14	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

After a marked recovery from the economic contraction associated with the COVID-19 pandemic, real GDP growth in 2022 declined to 4.3%, closer to typical pre-pandemic growth rates. Despite this lower growth, unemployment declined between 2021 and 2022, although it remains above its pre-COVID-19 levels. After years of fluctuating between zero and 2%, inflation had an important increase in 2022, reaching 8% (Figure 11.5).

Figure 11.5. Costa Rica: Main economic indicators, 2000 to 2022

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

Costa Rica is a net exporter of agro-food products, which accounted for 37% of the 2021 value of goods exports. Around 45% of Costa Rica’s agricultural exports are primary crops for final consumption, such as bananas and pineapples, while a third of exports are processed products for final consumption. Agro-food imports are almost equally distributed between products for final consumption and products for industry (Figure 11.6).

Figure 11.6. Costa Rica: Agro-food trade

 

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Costa Rica’s estimated Total Factor Productivity (TFP) decreased by 2% per year during 2011-20. The output growth of 1% p.a. between 2011 and 2020 resulted from the increasing use of primary factors and, to a lesser extent, variable inputs (Figure 11.7). Area expansion into less productive land, ongoing farm fragmentation and limited financial and physical infrastructure were among the key contributing factors to the TFP decline.

Figure 11.7. Costa Rica: Composition of agricultural output growth, 2011-20

Note: Primary factors comprise labour, land and capital (livestock and machinery). Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Agriculture is the main user of water resources. It accounts for almost two-thirds of total freshwater abstractions, a share that has doubled in the last two decades. The overall water stress indicator (intensity of freshwater resource use) increased3 between 2000 and 2021, although it remains well below the OECD average. In the last two decades, there have been improvements in some agri-environmental indicators such as the nutrient balances and the sector’s share in total energy use and GHG emissions (Table 11.4). However, the share of agricultural GHG emissions and the phosphorus balance are above the OECD average. Environmental regulations have led to an important increase in the country’s forest cover, which is approaching 60% (World Bank, 2022[12]). As of 2022, 26% of the country’s land area is protected (OECD, 2023[13]).

Table 11.4. Costa Rica: Productivity and environmental indicators

	Costa Rica		International comparison
	1993-2002	2011-2020	1993-2002	2011-2020
			World
TFP annual growth rate (%)	0.8%	-2.0%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2021*	2000*	2021*
Nitrogen balance, kg/ha	36.0	33.7	32.2	30.4
Phosphorus balance, kg/ha	12.1	9.9	3.3	3.0
Agriculture share of total energy use (%)	6.6	2.0	1.7	2.0
Agriculture share of GHG emissions (%)	29.2	20.5	8.6	10.5
Share of irrigated land in AA (%)	5.6	9.0	-	-
Share of agriculture in water abstractions (%)	32.5	66.2	46.6	49.7
Water stress indicator	0.1	2.8	8.3	7.4

Note: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[6] Ministerio de Agricultura y Ganadería (2023), Política pública para el sector agropecuario costarricense, http://www.mag.go.cr/bibliotecavirtual/E14-11132.pdf.

[5] Ministerio de Comercio Exterior (2017), Informe de evaluación global de resultados de los acuerdos comerciales vigentes en Costa Rica, https://www.comex.go.cr/media/6621/informe-de-evaluaci%C3%B3n-global-de-resultados-de-los-acuerdos-comerciales-vigentes-en-costa-rica-2017.pdf.

[2] OECD (2023), OECD Economic Surveys: Costa Rica 2023, OECD Publishing, Paris, https://doi.org/10.1787/8e8171b0-en.

[13] OECD (2023), Protected areas (dataset), https://stats.oecd.org/Index.aspx?DataSetCode=PROTECTED_AREAS (accessed on 31 March 2023).

[4] OECD (2022), Agricultural Policy Monitoring and Evaluation 2022: Reforming Agricultural Policies for Climate Change Mitigation, OECD Publishing, Paris, https://doi.org/10.1787/7f4542bf-en.

[10] OECD (2021), Agricultural Policy Monitoring and Evaluation 2021: Addressing the Challenges Facing Food Systems, OECD Publishing, Paris, https://doi.org/10.1787/2d810e01-en.

[1] OECD (2017), Agricultural Policies in Costa Rica, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264269125-en.

[7] Servicio Fitosanitario del Estado (2023), Rigen reformas a proceso de registro de agroquímicos (press release), https://www.sfe.go.cr/Prensa_2023/02%20Rigen%20reformas%20a%20proceso%20de%20registro%20de%20agroqu%C3%ADmicos.pdf (accessed on 2 March 2023).

[8] Servicio Fitosanitario del Estado (2022), Resolución DSFE-004-2022. Establece los requisitos fitosanitarios para la importación de frutos frescos de aguacate (Persea americana Mill) para consumo, https://members.wto.org/crnattachments/2022/SPS/CRI/22_3490_00_s.pdf.

[12] World Bank (2022), Costa Rica’s Forest Conservation Pays Off, https://www.worldbank.org/en/news/feature/2022/11/16/costa-rica-s-forest-conservation-pays-off (accessed on 31 March 2023).

[9] World Trade Organization (2022), Committee on Anti-Dumping Practices - Semi-annual report under article 16.4 of the Agreement - 1 January to 30 June 2022 - Costa Rica (G/ADP/N/370/CRI).

[3] World Trade Organization (2022), World Tariff Profiles 2022: Costa Rica, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/CR_e.pdf.

[11] World Trade Organization (2020), Notification of Brazil to the Council for Trade in Goods and the Committee on Safeguards (G/L/1364/Suppl.1; G/SG/N/12/BRA/4/Suppl.1).

Notes

← 1.  This grazing-management approach was proposed by French biochemist André Voisin in the 1950s. It comprises four principles: (1) allowing grass to recover between grazing intervals; (2) setting occupation periods short enough to keep cattle from grazing the same grass a second time; (3) allowing animals with the highest nutritional requirements to harvest large quantities of the best-possible quality grass; and (4) maximising milk yields by moving cows to a different paddock after a maximum of three days.

← 2.  MFN tariffs for imports into Costa Rica reflect the sum of an ad valorem duty (Derecho Arancelario a la Importación - DAI) and a 1% import tax (Law 6946). The reduction for paddy and milled rice applies to the DAI, which decreased to 3.5% and 4% respectively.

← 3.  The large variation between 2000 and 2020 is partly explained by the use of a more accurate data source (public water supply operators) starting in 2016. Nevertheless, total freshwater abstraction in Costa Rica grew at an average yearly rate of 3.5% between 2016 and 2021.