Foundations for Growth and Competitiveness 2026

Costa Rica

Costa Rica is making gradual progress in closing the large economic gap in GDP per capita with the upper half of the OECD economies. However, productivity levels remain relatively low. The post-COVID recovery saw a boost in investment – driven largely by foreign direct investment (FDI) – which contributed to the creation of high-productivity formal jobs. Despite this, the positive impact on aggregate productivity was offset by a decline in the labour force participation rate and stagnation in overall employment levels. Both labour force participation and employment rate remain well below those of the upper half of OECD economies.

Reducing the mismatch between the skills demanded by the private sector and those available in the labour market would boost productivity. Improving access to early childhood education and care would enable more women to participate in the labour market, boosting overall employment. Investing in transport and digital infrastructure is essential to support economic development, improve connectivity, and reduce regional disparities. Accelerating current efforts to advance the digital transformation of public services would enhance the efficiency, transparency, and quality of service delivery. Expanding and diversifying the renewable electricity generation capacity will be crucial to meet Costa Rica’s decarbonisation goals.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Physical infrastructure: Improve transport infrastructure

Costa Rica faces significant infrastructure gaps across nearly all modes of transport. Chronic underinvestment, weak governance and lack of institutional capacity have led to severe infrastructure gaps, which constrain economic activity and pose a barrier to sustainable growth. Substantial investment and improved project execution are essential to enhance transport infrastructure and better connect regions and firms to global markets, but international tenders for infrastructure projects and Private-Public Partnerships (PPPs) are rarely used.

Recommendations

✓ Enhance institutional capacity to strengthen the assessment of infrastructure projects, also transferring the assessment and management of infrastructure projects to an independent public agency. Improve the budget management to ensure more effective allocation and execution of public funds.

✓ Explore opportunities for private investment, including through Public-Private Partnerships (PPPs), to leverage additional financing and implement strategic projects.

✓ Promote greater participation of international firms in public procurement processes to increase competition and bring in global expertise by increasing the value of procurement projects and by eliminating regulatory provisions that unduly favour local firms.

Human capital: Strengthen the quality and relevance of education and training

The mismatch between the skills demanded by the private sector and those available in the labour market remains a significant obstacle to Costa Rica’s economic development. Firms frequently report difficulties in finding qualified workers, particularly technicians and graduates in STEM (Science, Technology, Engineering, and Mathematics) fields. At the same time, many people leave the education system before completing secondary school, further limiting the pool of skilled labour.

Recommendations

✓ Enhance and expand VET and upskilling training programmes in areas in high demand, such as advanced manufacturing, ICT and the semiconductor sector, also by strengthening the work practice component and approving the reform of the National Vocational Training Institute.

✓ Expand digital and English proficiency to build a skilled workforce capable of driving the country’s integration into global value chains and attract investment.

✓ Identify underperforming primary and secondary students and provide them with targeted and early tutoring support provided by well-trained teachers, prioritising those from vulnerable groups.

Labour market: Boost female labour participation

Despite Costa Rica’s 2017 National Policy for Gender Equality in Training, Employment, and the Enjoyment of the Benefits of Science, Technology and Innovation, and a strong performance in several gender equality dimensions, such as a relatively low gender pay gap and high levels of political representation, female labour force participation remains significantly lower than that of men. Domestic and caregiving responsibilities disproportionately fall on women and limit their ability to participate in the workforce or work full-time particularly for low-income households. A key contributing factor is the limited access to affordable early childhood education and care. Enrolment rates for children aged 3 to 5, as well as for younger children, are among the lowest in the OECD. Coverage reaches only about 40% of households living in poverty, further constraining women’s opportunities to engage in paid work.

Recommendations

✓ Expand the coverage of early education for children below four years, giving priority to low-income families.

✓ Strengthen the National Care System, including by extending Costa Rica’s four-hour primary school day, and ensuring safe transportation to workplaces and care centres.

✓ Promote shared responsibility in dependent care through parental leave policies and provide incentives for companies to offer telework and flexible arrangements.

Digitalisation: Enhance e-government and close connectivity gaps

Costa Rica lags other OECD countries and regional peers in digital government. Accelerating the digitalisation of the public administration would enhance the efficiency and quality of public service delivery. Progress in e-government also depends on addressing existing digital infrastructure gaps. Connectivity expansion is currently hindered by burdensome regulations, particularly at the municipal level, which slow down deployment and limit access.

Recommendations

✓ Coordinate and harmonise IT standards and administrative procedures across government agencies and improve the adoption by citizens of the digital signature.

✓ Streamline and harmonise regulations to facilitate digital infrastructure deployment, also by creating a one-stop digital shop for infrastructure deployment processes as proposed by the Telecommunication Infrastructure Action Plan 2024-2025, strengthening regulations on duct infrastructure sharing and expediting the resolution of infrastructure sharing disputes.

Energy and Environment: Open the electricity market to greater competition

Costa Rica generates nearly all of its electricity from renewable sources, with hydropower accounting for up to 70% of total production. However, this heavy reliance on hydropower is becoming increasingly problematic due to the impacts of climate change. Electricity prices remain high, in part due to strict regulatory barriers that limit competition in a sector dominated by a state-owned utility. Opening the electricity market to greater competition could help diversify renewable energy sources, enhance energy security, reduce energy prices and maintain Costa Rica’s appeal for foreign direct investment, particularly in electricity-intensive industries such as semiconductors.

Recommendations

✓ Expand and diversify renewable electricity generation capacity.

✓ Increase competition in the electricity sector by lightening regulatory barriers such as the restrictions on private sector participation and foreign ownership to encourage investment and innovation in the electricity sector.

Recent progress on structural reforms

A legislative proposal aimed at reforming the electricity market in line with OECD recommendations has been presented to the Legislative Assembly but is yet to be approved. The Employability and Human Talent Strategy, which started in 2024 and that includes the participation of several public institutions, aims to increase students’ employability skills by aligning school curricula with industry needs and strengthening training in STEM areas. An open tendering in January 2025 assigned 5G spectrum frequencies to telecommunication operators and is expected to help the deployment of 5G networks. In May 2025, Costa Rica issued its National Talent Training Framework in Cybersecurity aimed at developing a skilled workforce to meet growing cybersecurity demands. The National Digital Technology Code, launched in June 2025, seeks to harmonise and standardise IT systems across public administration.