Alberto González Pandiella
OECD
Alessandro Maravalle
OECD
OECD Economic Surveys: Costa Rica 2025
Abstract
The economy is growing solidly, driven by a strong performance of the export sector and improvements in domestic activity. Inflation turned negative in 2023 due to the reversal of external price shocks and is now gradually rising, although it remains below the Central Bank’s tolerance band. The financial sector has shown resilience in the face of recent shocks, but high financial dollarization poses challenges. The fiscal situation has improved significantly, thanks to a strong commitment to spending restraint in line with the fiscal rule. Looking ahead, Costa Rica's key priority is to further reduce public debt by ensuring strict adherence to the fiscal rule, redoubling efforts to enhance public spending efficiency and broadening tax bases. These efforts would reinforce the country’s commitment with fiscal prudence and create additional fiscal space to meet spending needs.
1.1.1. Exports are rising and domestic demand is trending up
Costa Rica has consistently grown more than the OECD and regional peers over the last three years (Figure 1.1). The export sector, after a quick recovery after the pandemic, has performed strongly, with activity in the free trade zones growing steadily (Figure 1.2, panel A) and medical devices representing a growing share of the exports basket. The domestic part of the economy is also improving (Figure 1.2, panel B). Low inflation, which turned negative in 2023 mainly due to the reversal of external price shocks, has boosted real disposable incomes. This, together with improving consumer confidence, has supported private consumption. Private investment is on the rise, as the economy continues to receive a solid pipeline of foreign direct investment. Government consumption remains flat, as fiscal consolidation continues.
The labour market has also improved, albeit more gradually than economic activity. The unemployment rate has fallen and is now below its pre-pandemic level (Figure 1.3, panel A). Private sector wages have increased, both in nominal and real terms, reflecting the robustness in economic activity and low inflation. Conversely, nominal public sector wages have been frozen since 2019 due to fiscal policy constraints. Labour participation decreased significantly after the pandemic shock, particularly among women and youth. It has recently increased slightly, but it remains below its pre-pandemic level, both for men and women (Figure 1.3, panel B). The decrease in men’s participation is notable among young (aged 19-25) and older workers (above 60). The fall in women’s participation spans across all ages. The proportion of women citing care responsibilities as the reason for being out of the labour force has risen significantly since the pandemic. School closures in Costa Rica were lengthy during the pandemic, leading to an extended period where many women had increased care responsibilities. This prolonged additional care burden may explain the current lower participation of women. Expanding access to early education and childcare services is essential to accelerating women's reintegration into the labour market, as further discussed in Chapter 2 in this Survey.
Real GDP, Index (2019-Q4=100), s.a.
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: OECD Economic Outlook (database).
Source: Banco Central de Costa Rica.
Note: In Panel A, the “underemployment” category refers to the share of economically active individuals aged 15 and over who have the ability and desire to work more hours than their current occupation permits.
Source: INEC (2024) Encuesta Continua de Empleo (ECE); and OECD Labour Force Statistics (database).
Total employment has returned to its pre-pandemic levels, with employment in the formal sector steadily increasing and informal employment decreasing during 2023 (Figure 1.4). Employment among young workers has particularly fallen, with a 39 percentage points drop in informal employment since the pandemic that was not matched by an equivalent increase in formal employment (Figure 1.5). Sufficiently timely data on enrolment in educational programs is not available to ascertain whether these young individuals not anymore in employment have returned to education. However, the share of youth not in education, employment, or training is relatively high in Costa Rica (Figure 1.5). Formal employment is increasing, but many new jobs demand specialized and technical skills. This contrasts with the fact that many Costa Ricans are leaving the education system before completing secondary education (OECD, 2023[1]). Surveys to Costa Rican employers signal skills mismatches as a growing barrier to boost their operations. Skill mismatches are particularly large in knowledge intensive services and high-tech manufacturing (Box 1.1). Upskilling Costa Rica’s workforce is critical to compete in a globalised economy and contribute to keep attracting foreign investment and boosting exports, as further analysed in Chapter 4 of this Survey and in the 2023 Economic Survey.
Index (2020-Q1 = 100)
Note: Informality is defined as the percentage of workers in employment meeting one of these conditions: 1) not contributing to the social security system, 2) unpaid workers or 3) self-employed workers and employers who have companies that are not registered in the National Property Registry and do not keep a formal accounting.
Source: INEC (2024), Encuesta Continua de Empleo (ECE).
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: INEC (2024), Encuesta Continua de Empleo (ECE); and OECD (2024), Education at a Glance 2024: OECD Indicators.
Skill mismatches arise when the skills that employers need do not match the skills of workers and job seekers. Mismatches are costly to firms, workers and governments. Firms may have to retrain under-skilled workers or scale back their activities if unable to find suitable workers. Quantitative indicators about the prevalence of skills mismatches in Costa Rica are scarce. Macroeconomic skills mismatch indicators (MSMI), which compare the skills of the population and the skills required by the labour market, can help to visualize to what extent different economic sectors are affected by skill mismatches ( (Quesada and Gonzalez-Pandiella, forthcoming[1]). They are computed as the absolute difference between the share of a skill group in employment and their share in the working age population, i.e.
where 𝐸𝑖 and 𝑃𝑖 are respectively the number of individuals with skill level i in employment and in the population; 𝐸𝑇 and 𝑃𝑇 are the total employment and the total population. Skill groups are proxied by educational attainment: low skills are defined as those with below secondary qualification, medium skills as secondary education or incomplete university education, while high skills are defined as tertiary education. The indicator is low if the skill composition of the employed reflects the population’s skill composition, while the indicator is high if education profiles of those employed differ significantly from education profiles in the population. Computing these indicators at sector level for Costa Rica reveals significant heterogeneity in skills mismatches across agriculture, manufacturing, construction, and services (Quesada and Gonzalez-Pandiella, forthcoming[1]). It also underscores the need to differentiate manufacturing activities by their technological intensity and services based by their value-added (Figure 1.6) when assessing the extent of skill mismatches in Costa Rica.
Skills Mismatch Index
Note: The classification of services based on their knowledge intensity adheres to the NACE Rev.2 framework for economic activities. Manufacturing is categorized into low-tech and high-tech sectors, determined by the complexity of the learning processes involved in production and the extent of technological spillovers they generate, following the methodology outlined by Law (2020).
Source: (Quesada and Gonzalez-Pandiella, forthcoming[1]) based on Labour Force Surveys data.
On the external side, the current account deficit has narrowed and continues to be comfortably financed by a stable pipeline of foreign direct investment (Figure 1.7). The services trade balance surplus has increased, representing around 10% of GDP (in comparison with 6% in 2000). This reflects both the recovery in tourism and a larger weight of knowledge-intensive services, such as business services. The deficit in the goods trade balance has shown a decreasing trend over time, with exports of medical devices displaying particularly strong growth (see also Chapter 4). External debt has recently moderated (Figure 1.8), alongside an increase in external reserves, which are currently at a comfortable level aligning with standard metrics.
Source: Banco Central de Costa Rica.
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: IMF World Economic Outlook (WEO) (database); and IMF International Financial Statistics (IFS) (database).
Inflation, which receded sharply and became negative in 2023 mainly due to the reversal of external price shocks, is gradually increasing toward the Central’s Bank tolerance band (Figure 1.9). Goods, particularly food, and fuel had the sharpest inflation fall. Both headline and core inflation remain low, at 1.1% and 0.6% respectively in January 2025. Inflation expectations have remained broadly anchored, although they have edged down to the lower limit of the tolerance band.
Note: The shaded area represents the Central Bank's inflation tolerance band. Inflation expectations are the median one-year ahead expectations according to a survey run by the Central Bank. The survey was not conducted between December 2020 and November 2021.
Source: Banco Central de Costa Rica; and OECD Contribution to year-on-year inflation by COICOP 2018 by country (database).
1.1.2. Growth is expected to remain solid
The economy is projected to expand by 3.8% in 2025 and 2026, after growing by 4.3% in 2024 (Table 1.1). Private consumption will be supported by formal job creation and low inflation. Government consumption will remain constrained by ongoing efforts to contain public spending. Private investment is expected continue to be bolstered by foreign direct investment inflows. Export growth is set to accelerate in line with improving global economic conditions. Headline inflation is projected to increase to an average 2.5% in 2025, thanks to ongoing gradual monetary policy easing. The outlook is subject to uncertainties and risks. Increasing foreign currency borrowing could heighten the financial sector's vulnerability. Inflation may turn out lower than expected, necessitating larger cuts in interest rates than anticipated, which could increase risks of abrupt exchange rate fluctuations. An escalation of geopolitical tensions would weigh on foreign demand and could lead to renewed supply chain disruptions. Additional events that could lead to major changes in the outlook include extreme weather events (Table 1.2), which could particularly impact the agriculture sector, and further escalation of crime and violence, which could deter investment and tourism. Like other countries in the region, crime has been on the rise, largely driven by the activities of organized groups. On the upside, nearshoring could boost investment and exports beyond assumed in these projections.
1. Contributions to changes in real GDP, actual amount in the first column. 2. Consumer price index excluding volatile items: agricultural, energy and tariffs approved by various levels of government. 3. Based on national employment survey.
Source: Updated OECD Economic Outlook (database).
As in other OECD countries, Costa Rica experienced a sharp increase in inflation in 2022 and the Central Bank raised interest rates up to 9% (Figure 1.10 and Table 1.3). The inflation rise was mainly caused by external prices increases, as the fiscal package put in place by Costa Rica during the pandemic was modest given that fiscal space was limited. Inflationary pressures receded sharply in 2023 (Figure 1.11), following monetary policy tightening, and in line with the reversal of external price shocks, a strong appreciation of the colon with respect to the dollar (Figure 1.12). The Central Bank reacted again decisively by reducing the restrictiveness of monetary policy. With a first cut in March 2023, the Central Bank has delivered so far a decrease of 500 basis points until reaching the current rate of 4%. Latest estimates indicate that the real neutral rate is around 1.4% (BCCR, 2024[2]), suggesting that the current rate is closed to the neutral rate. The passthrough of policy rates cuts to interest rates faced by firms and households has been visible in deposit rates, while changes in lending rates have been so far small.
Source: Banxico; CEIC; Banco Central de Colombia; and Banco Central de Costa Rica.
Source: Banco Central de Costa Rica; and INEC.
Monetary policy should continue to support the gradual rise of inflation towards target. This requires maintaining a data-driven and prudent monetary policy stance and easing further if necessary to ensure that inflation returns to the 3% target. Headline and core inflation are gradually strengthening but remain low, at 1.1% and 0.6%, respectively, in January 2025 (year-to-year). Gradual and data-driven monetary policy easing would help guide inflation expectations, which have fallen to the lower limit of the tolerance band, get back to the 3% target. Inflation risks include the gap in interest rates between the United States and Costa Rica, which could originate sharp changes in the exchange rate, with significant impacts on inflation. Climate risks are also high, with dry seasons hindering hydro electricity generation (see Chapter 3) and increasing electricity prices. The low passthrough of policy rates cuts to interest rates faced by firms is dampening monetary policy effectiveness.
In line with recommendations in previous OECD Surveys ( (OECD, 2018[3]), (OECD, 2016[4])), the exchange rate has been allowed to move more flexibly in response to market conditions. The central bank, as stipulated by its organic law, has limited its interventions in the foreign exchange market to meeting public sector foreign exchange requirements and mitigating volatile fluctuations in the exchange rate. Throughout 2023, the colon significantly appreciated vis a vis the US dollar (Figure 1.12, panel A). The appreciation could be attributed to factors such as interest rates higher than in the United States, improving macroeconomic fundamentals, the solid pipeline of foreign direct investment inflows, a surplus in the services trade balance, and the robust performance in the tourism sector. The colon appreciation took place despite the Central Bank buying international reserves, which are now at a comfortable level and in line with standard metrics (Figure 1.8). The appreciation triggered strong concerns from various groups, pointing to its detrimental impact on competitiveness. In real effective terms, the colon remains at a similar level as in 2017 (Figure 1.12, panel B), suggesting that medium-term competitiveness has remained broadly unchanged after the exchange rate depreciation in 2020-21 and the appreciation in 2023. Flexible exchange rates are particularly advantageous for open economies like Costa Rica's, enabling natural adjustments to economic shifts and promoting macroeconomic stability. They serve as a buffer against external shocks and play a crucial role in inflation control. By promoting macroeconomic stability and a less discretionary and more rule-based economic environment, a flexible exchange rate also enhances attractiveness for foreign direct investment and bolsters competitiveness.
Note: A decrease implies a depreciation of the Costa Rican colón and indicates an improvement in competitiveness. Real effective exchange rates (Panel B) are calculated using constant trade weights.
Source: OECD Short-term Indicators (database); and OECD Economic Outlook (database).
During the OECD accession process, Costa Rica took important measures to strengthen the monetary policy framework (OECD, 2020[5]), such as delinking the designation of the Governor of the Central Bank from the political cycle and clarifying the Governor’s dismissal rules. While the Central Bank has been acting independently, further steps to buttress its autonomy are appropriate at this juncture. Now, a simple majority in Congress is sufficient to modify key Central Bank legislation, such as the law specifying its mandate. This could be avoided by enshrining the autonomy and operational independence of the Central Bank in the Constitution, as done in several OECD countries, such as Germany, Switzerland and Portugal, and regional peers, such as Mexico, Colombia and Chile. Constitutional provisions can offer a higher level of legal autonomy, enhancing Central Bank’s credibility.
1.3.1. Increasing financial dollarization poses challenges
The financial system has been stable and resilient to recent shocks. It maintains capitalisation levels in line with other OECD countries (Figure 1.13, panel A), liquidity levels above regulatory requirements (Figure 1.13, panel D), and non-performing loans are contained (Figure 1.13, panel C). According to the financial supervisor’s latest stress tests, the financial system, including private, state-owned banks and participating credit cooperatives, would be resilient to adverse economic events (SUGEF, 2024[6]).
Note: Bank capitalisation refers to the capital adequacy, regulatory tier 1 capital to risk-weighted assets. LAC is a simple average of Chile, Colombia, Mexico, Brazil, and Peru.
Source: IMF Financial Soundness Indicators (database).
Recent steps such as the publication of stress test results bank by bank in January 2024, a long-standing OECD recommendation (OECD, 2020[5]) have enhanced financial supervision. However, the intervention of two small financial institutions in May 2024 and August 2024, due to mismanagement and improper accounting of non-performing loans, signals that there is a need to foster financial supervision further. This includes evaluating the impact of regulatory reforms undertaken in recent years and buttressing asset valuation practices. Efforts to strengthen governance and enforce existing criteria to ensure that board members in financial institutions, including cooperatives, have the necessary qualifications and experiences, are also warranted. A bill was submitted to the Legislative Assembly in May 2024 to improve the resolution scheme for supervised financial institutions, by expediting their resolution and enabling early intervention and changes in the management of affected entities. The bill also gradually removes the blanket state guarantee to public banks, another long-standing OECD recommendation (OECD, 2020[5]). Implementing the measures foreseen by the bill would buttress financial stability. Plans are also underway to enhance cybersecurity regulations and to stress test the financial sector against climate-change risks.
Private debt is relatively low (Figure 1.14) but high financial dollarization continues to pose challenges. Credit and deposits in dollars represent around 35% of the total (Figure 1.15). Regulators indicate that two thirds of the dollarized debt is unhedged. The recent reduction in foreign exchange market interventions can over time facilitate a better internalisation of exchange rate fluctuations risks by economic agents, reduce moral hazard and contribute to reduce currency mismatches and unhedged positions. In the short term, the interest rate differential between operations in colones and in dollars could foster dollarization, requiring strict monitoring. Credit in dollars has been increasing strongly in recent months (Figure 1.16). The risk weight for foreign exchange credit to unhedged borrowers was increased in January 2024. However, in view of recent large increases in foreign currency lending, recent macroprudential measures should be evaluated and, based on this evaluation additional prudential measures to discourage foreign currency borrowing should be considered.
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source IMF Global Debt (database).
% of total credit
Source: Banco Central de Costa Rica.
Credit to the private sector by currency, y-o-y growth rate, %
Source: Banco Central de Costa Rica (2024), Informe de Política Monetaria Enero 2025.
1.3.2. Removing distortions in the financial system
Financial stability could also be further buttressed by correcting several distortions, affecting both state-owned and private banks and also state-owned and private insurance companies. These distortions fragment financial markets, hinder competition, and hamper the transmission of monetary policy. They also decrease banks’ lending capacity and their ability to innovate and invest in technology. Key distortions include the so-called “banking toll” (peaje bancario), by which private banks must make transfers to a fund administered by state-owned banks. The transfers correspond to 17% of their 30-day or shorter-term deposits and are remunerated at an interest rate which is half of the basic deposit rate set by the Central Bank. Conversely, state-owned banks are subject to a number of contributions to several state institutions, such as the National Institute of Cooperative Development (Instituto Nacional de Fomento Cooperativo) (10%), the National Commission for Education Loans (Comisión Nacional de Préstamos para Educación) (5%), the National Commission of Risk Prevention and Emergency Response (Comisión Nacional de Prevención de Riesgos y Atención de Emergencias) (3%) and the Regime for Disability, Old Age and Death (El régimen de Invalidez, Vejez y Muerte) (15%). Correcting these distortions, as recommended in previous OECD Economic Surveys, would facilitate that banks increase their efficiency and their capacity to adapt to the changing global financial landscape and improve the transmission of monetary policy changes. It would also have an economy-wide positive impact by facilitating access by firms and households to financial services at lower costs. Institutions currently financed in part by these contributions should transition to full funding through the national budget.
1.3.3. Broadening financial inclusion
Increasing financial inclusion remains a pending challenge (Figure 1.17). Access to bank accounts increased significantly after the pandemic, to 90% of the population in 2023, according to more recent Central Bank information (BCCR, 2023[7]), but there is much room to increase access to credit or other financial instruments. The cap on interest rates is causing financial exclusion. It was introduced in June 2020 to limit the cost of credit, but it is constraining access to credit, particularly for the most vulnerable and high-risk individuals, because financial institutions are less willing to lend to these groups due to the limited potential returns in relation to the higher risks involved. Informal and predatory credit channels, which often charge exorbitant interest rates and are sometimes connected to criminal groups, have instead recently increased. One possibility to address the challenges posed by the existing cap is to instead apply tiered caps based on the risk profile of the borrower, allowing for higher rates for higher-risk loans. Reducing information asymmetries through a more comprehensive credit registry can also be a more effective way to facilitate access to finance. The credit registry in Costa Rica covers around 35% of the adult population, against 50% in Chile or 80% in Brazil. Expanding the scope of the registry, to incorporate information from non-supervised entities that are performing lending activities, would facilitate creditworthiness assessments by banks. Boosting competition in the financial sector and ensuring sound consumer protection would also contribute to boost financial inclusion and be more effective than the cap. The potential of Fintech to boost financial inclusion remains so far unrealised, as legal barriers remain in place (OECD, 2020[5]).
% aged 15+ with an account at a financial institution
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: World Bank Global Findex (database).
1.4.1. The fiscal situation has improved
After the widening fiscal deficits in the 2010s, Costa Rica has improved its fiscal situation (Figure 1.18). By adhering to the prudent fiscal targets set by the fiscal rule introduced in the fiscal reform enacted in December 2018 (Box 1.2), the country has set its debt-to-GDP ratio on a declining trajectory. This improvement has led to a notable reduction in sovereign risk premia (Figure 1.19). The government aims to further improve the fiscal situation. The central government fiscal balance is estimated to be at -3.8% in 2024, with the primary balance at 1.1% of GDP. This marks a slight deterioration compared to 2023, attributed to a retroactive public wage increase from 2020 that was not applied then, because of the aggravated fiscal situation created by the pandemic, and that was finally executed in 2024.
Note: Data refer to central government only. Total revenues do not include social security contributions.
Source: Ministry of Finance.
Emerging-market bond yield spreads, basis points
Note: ICE BofA emerging markets USD-issued sovereign bond option-adjusted spreads are the yield difference over US Treasuries, in basis points. Embedded options are provisions included with some fixed-income securities that allow the investor or the issuer to do specific actions, such as calling back the issue. The OAS helps investors compare a fixed-income security's cash flows to reference rates while also valuing embedded options against general market volatility.
Source: OECD calculations.
The fiscal rule limits the growth of nominal spending depending on the level of public debt, as follows:
When central government debt at the end of the previous fiscal year is under 30% of GDP or the current expenditure to-GDP ratio is below 17%, the annual growth of current expenditure should not exceed the average nominal GDP growth in the past four years.
When debt at the end of the previous fiscal year is between 30% and 45% of GDP, the annual growth of current expenditure should not exceed 85% of the average nominal GDP growth in the past four years.
When debt at the end of the previous fiscal year is between 45% and 60% of GDP, the annual growth of current expenditure should not exceed 75% of the average nominal GDP growth in the past four years.
When debt at the end of the previous fiscal year is above 60% of GDP, the annual growth of total expenditure should not exceed 65% of the average nominal GDP growth in the past four years.
The fiscal rule law, part of the fiscal reform approved in December 2018, established that the spending of all non-financial entities of the public sector is subject to the rule. This includes the central government, all deconcentrated bodies, the legislature, the judiciary, or non-financial public companies. The fiscal rule law also established different conditions under which institutions can apply for a derogation. Derogations are possible in the case of the declaration of a national emergency or when the country is going through an economic recession (or projections of growth below 1%). As a result of the pandemic shock, several institutions such as Health Ministry, Education Ministry, or the Social Protection Institute (IMAS), were granted derogations.
The government’s medium-term fiscal plan appropriately lays out continued gradual reductions in the central government's fiscal deficit, in line with the fiscal rule, with a target of 3.2% of GDP in 2025 (Table 1.4). The reduced deficit would mainly be driven by public sector wage restraint and the containment of transfers to public entities. OECD projections indicate that if the fiscal plan is fully implemented, the debt to GDP ratio will steadily decline (dashed line in Figure 1.21). A key factor in achieving this outcome is reducing the public sector wage bill overtime, which requires strict implementation of the public employment law (see also public spending efficiency section in this Chapter). Interest spending is expected to have peaked at 4.8% of GDP in 2024 (Figure 1.20), and gradually diminish afterwards, in line with the decline in the public debt stock. However, additional spending needs, such as those related to respond to increasingly frequent climate events, buttressing social policies or improving transport and water infrastructure, could strain debt dynamics (red line in Figure 1.21). Enhancing spending efficiency and boosting tax revenues (Table 1.5) are essential to meeting these spending needs while keeping debt on a downward trajectory. Complementing these efforts with an ambitious structural reforms package (Table 1.6) would accelerate the reduction in the debt ratio (blue line in Figure 1.21).
% of GDP
Note: Central government unless otherwise specified. Data for 2025-2027 are projections and based on Finance Ministry passive scenario. Other revenues include non-tax revenues and transfers. Some rows may not add up due to rounding.
Source: Medium-term fiscal framework (Marco Fiscal de Mediano Plazo) 2024-2029.
Interest paid on public debt, % of GDP, 2023 or latest
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil and Peru.
Source: Ministerio de Hacienda; and IMF Public Finances in Modern History (database).
Central government debt, % of GDP
Note: The “Current government fiscal plans” scenario assumes GDP growth as in Table 1.1 until 2026, with a gradual transition to OECD long-term model estimates of potential output thereafter. Inflation is projected as in Table 1.1 until 2026 and a gradual convergence to 3% thereafter. Fiscal assumptions are those outlined in Table 1.4 and in the government fiscal plan until 2029. Thereafter the fiscal primary balance continues to evolve in line with the fiscal rule. The “Structural reforms” scenario assumes the implementation of reforms described in Figure 1.5. Both “Current government fiscal plans” and “Structural reforms” scenarios assume full implementation of the fiscal rule. The scenario “Higher spending” assumes that the fiscal rule is not met and that primary spending is 1.5% of GDP higher than in current government fiscal plans, as an illustration of spending pressures related to climate change and increased spending on social policies and security, and that revenues remain as in current government fiscal plans. In all scenarios the evolution of the interest rate paid on new debt issued is a function of the 10 years US sovereign yield and a risk spread that depends on the ratio of debt-to-GDP. All scenarios include ageing costs in the form of higher pensions and health costs as estimated by (Pessino and Ter-Minassian, 2021).
Source: OECD calculations.
Note: Numbers in this table are estimates and subject to uncertainty. Implementation would take several years.
Source: OECD calculations.
Illustrative estimated impact of selected reforms on potential GDP per capita after 10 years
Note: Simulations based on the OECD long-term growth model (Guillemette and Château, 2023[1]). The scenarios assume that female employment rates, education outcomes or infrastructure quality indexes reach the OECD average by 2050, and that regulatory burden converges to the OECD average by 2030. The individual reform effects do not sum up to the effect of the ambitious reform scenario due to non-linear effects in the model.
Source: Simulations using the OECD long-term model.
Since its approval in December 2018, the perimeter of the rule has been gradually narrowed by exempting certain public agencies. Most recent modifications to the rule coverage were approved by the Legislative Assembly, despite the government's objections. With interest spending amounting to nearly 5% of GDP and debt levels high in relation to tax revenues (Figure 1.22), further legislative changes weakening the rule should be avoided, as they risk undermining the ongoing progress in public debt reduction and the gradual restoration of fiscal space.
Public debt, % of total tax revenue, 2023 and 2022 or latest
Note: Data refer to central government for 2023 for Costa Rica, and to general government for 2022 or latest for all other countries.
Source: Ministerio de Hacienda; OECD Revenue Statistics (database); and OECD (2023), Government at a Glance 2023.
1.4.2. Improving the quality of spending to support growth and equity
Important steps to boost public spending efficiency have been taken, including the 2018 fiscal reform and the ongoing implementation of the public employment law (Figure 1.23). The law has standardized salary structures across the public sector and introduced performance-based incentives. Implementation has begun within the central government, with plans to extend it to additional public sector agencies. Full implementation of the bill is a critical pillar supporting the government’s medium-term fiscal strategy. Substantial opportunities remain to improve the quality of spending to better foster economic growth and equity. Education is a high priority for Costa Rica, devoting around 6.5% of GDP, a larger share of spending than the average OECD economy, yet educations outcomes are relatively weak (Figure 1.24). Improving universities responsiveness to labour market needs and prioritising vocational programmes providing technical skills would improve efficiency in the education sector, as analysed in the thematic Chapter of the 2023 Economic Survey and in Chapter 4 of this Survey. Conversely, Costa Rica also devotes a larger share of spending to health, resulting in good health outcomes, including a life expectancy in line with the OECD average This indicates that there remains significant heterogeneity in public sector spending efficiency across different areas. Regularly carrying out spending reviews, increasingly adopted by many OECD countries (Box 1.3), but not yet implemented in Costa Rica, could help Costa Rica to identify areas in need of improvement and inform the necessary prioritisations and reallocations of spending. Integrating them in the budget process would foster economic growth and equity. Spending prioritisations and reallocations will become increasingly important as population ageing will gradually put further pressure on some categories of social spending, particularly pensions.
Compensation of employees by general government, % of GDP
Note: OECD is an unweighted average of 31 OECD member countries with available data.
Source: OECD National Accounts at a Glance (database).
Efforts to boost public sector efficiency, including through spending reviews, require information and evidence to support the reallocation of resources or reformulation of programmes that are not delivering the expected results or may no longer reflect the priorities of citizens. To that end, increasing the availability, sharing and use of data is critical, as illustrated by several OECD countries (Box 1.4), that have used data to improve policy design, while safeguarding data confidentiality and security. Access to relevant and disaggregated data is a key bottleneck to policy making across several policy areas in Costa Rica, as outlined in this Survey. For example, more timely information about enrolment in vocational and university education would allow to better assess latest labour market developments and design policies helping youth get jobs. Ensuring access to individualised and identifiable microdata by the Central Bank would also help to better monitor financial risks. In some cases data are available and efforts should focus on facilitating access and sharing. Legislative changes limiting data access and sharing, including to individualised and identifiable microdata, such as the ones submitted to the Legislative Assembly in April 2024, should be avoided, as it would hamper evidence-based policy decisions.
Note: In Panel A, data refer to 2023 for Colombia and Israel, and to 2021 for Costa Rica. OECD average excludes Canada, Mexico, New Zealand, and Türkiye. In Panel B and C, LAC is an unweighted average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: OECD National Accounts (database); OECD Health Statistics (database); and OECD PISA 2022 (database).
Social policy is an area in which data availability has increased over the years creating good grounds to improve policy design. A common database on social policy programmes, SINIRUBE, was created in 2013, and has been evolving since then, merging all registries from social programmes. This database has the potential to significantly improve the targeting of social programmes, eliminating existing overlaps and reaching eligible beneficiaries not yet covered by social programmes. Now, public agencies in charge of delivering social programmes freely select beneficiaries. This results in overlaps and poor targeting, with some social programmes having more than 20% of beneficiaries in the two highest income quintiles (OECD, 2023[8]). Making SINIRUBE the tool to select beneficiaries in all social programmes will ensure better targeting and wider reach of social programmes. SINIRUBE could also be used to evaluate the effectiveness of social programmes, to identify which programmes have positive outcomes and should be expanded and which ones should be reformulated or phased out. Plans to further improve SINIRUBE are welcome and include the interoperability of the underlying databases, to ensure that the registry is always based on the most recent available information. Social programmes also suffer from institutional fragmentation, with 21 institutions in charge of providing more than 35 social programmes. Ongoing plans to concentrate all social programmes in the Social Policy Institute (IMAS) and to grant it ministerial status could reduce fragmentation. There are also promising plans to create a one stop facility, helping individuals to have a unique contact point to access social programme support, which could improve the reach and coverage of social programmes.
Spending reviews provide a strategic approach for governments to enhance the sustainability of public finances by systematically analysing existing expenditures. They also provide opportunities to align spending with government priorities and improve its effectiveness While the scope and implementation of spending reviews vary by country, and require customized institutional setups, experiences from OECD countries suggest key best practices, including:
Formulating clear objectives, including saving targets.
Gradually covering a significant portion of the budget and government priorities.
Developing expertise to conduct spending reviews both at finance ministries and within line ministries.
Establishing clear governance arrangements.
Ensuring alignment with the budget and the medium-term fiscal framework.
Concluding reviews with clear recommendations and monitoring their outcomes.
The availability and sharing of data within the public sector are key to enhancing public policies design by enabling better-informed decision-making, reducing duplication, improving resource allocation, and enhancing transparency and accountability. Estonia and Finland are good examples where data are central to policy design.
Estonia's e-Government system, known as X-Road, is a decentralized data exchange platform that allows secure and efficient communication between various government agencies. Each citizen has a unique digital ID that facilitates secure access to public services and personal data management. This system enhances transparency and reduces administrative burdens, enabling real-time data exchange for personalized services and data-based policymaking.
Finland employs a national data exchange layer, similar to Estonia's X-Road, which enables secure and interoperable communication between different public sector systems. Legislation supports data sharing while protecting privacy, allowing agencies to use personalized data to design targeted social services, healthcare, and education policies.
Government’s ability to deliver high-quality public services and reduce costs could also increase by accelerating the digitalisation of the public administration. This could improve efficiency in areas like education, health, and legal services while reducing bureaucracy. Costa Rica lags other OECD countries and regional peers in terms of digital government (Figure 1.25). Accelerating the digitalisation of the public administration would require better coordination and harmonisation of IT standards and administrative procedures across government agencies. Improving the adoption by citizens of the digital signature (see Chapter 2) would also be a key building block. Costa Rica has also room to better align the delivery of policies and services to user needs (OECD, 2024[6]). The planned social programmes one-stop facility is a good example of how to deliver public services with the users' needs in mind, rather than being driven by administrative considerations. The use of Artificial Intelligence could also help Costa Rica to enhance government internal processes. Artificial Intelligence is already being utilized by 66% of the governments in OECD countries (OECD, 2024[9]). Artificial Intelligence can particularly help to automate document processing, helping to extract relevant data and to process it in the appropriates databases, being a useful complement to recommended efforts to increase the use and sharing of data across the public sector. By automating routine tasks, Artificial Intelligence can also free up government employees to focus on more complex issues. Costa Rica has recently established an Artificial Intelligence national strategy to integrate Artificial Intelligence efficiently in the public administration.
Efficiency gains and cost-reductions could also be obtained by centralizing liquidity arrangements across the public sector into a single public entity. Now every public agency has its own liquidity arrangements, which implies higher operational costs, multiplicity of bank fees and higher interest rate payments. A proposal by the General Comptroller to centralize fund management is estimated to generate savings equivalent to 1% of GDP. While this estimate is subject to some uncertainty, improving and centralising liquidity management in the public sector can render several benefits beyond the cost savings. By making use of the electronic payment system, it can foster digitalization across the public sector. By ensuring transparent financial transactions, it can foster oversight and accountability.
Digital Government Index, 0-1 (or "stronger foundations for digital government")
Note: The data collection period for this edition of the DGI is from 1 January 2020 to 31 October 2022. Data for Germany, Greece, the Slovak Republic, Switzerland, and the United States are not included.
Source: OECD (2024), 2023 OECD Digital Government Index: Results and key findings.
1.4.3. Broadening tax bases and improving the tax mix
Tax revenues increased after 2018’s tax reform but remain 8 percentage points lower than the average OECD country (Figure 1.26). The effects of 2018’s tax reform have now fully materialized and more recent data show that tax revenues have started to decelerate. There are challenges in advancing another tax reform, as recent government efforts, such as the proposal for a dual personal income tax system, have faced difficulties gaining the necessary political support in the Legislative Assembly. A more viable path for mobilizing more tax revenues could be increasing the revenue-raising capacity of some existing taxes and improving the tax mix (Figure 1.27), relying less on social security contributions and more on other general taxes, such as personal income and immovable property. Such rebalancing of the tax mix would contribute to reduce informality (see also Chapter 2), which would, by increasing formal employment, broaden tax bases. Given low tax revenues and the limited scope for advancing a tax reform, it will be important not to further erode tax bases, therefore legislative changes granting large tax exemptions must be avoided.
Tax revenue, % of GDP
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru. Data for Australia and Japan refer to 2022. Tax revenues in this chart include social security contributions and therefore differ from the tax revenues shown in Table 1.4, which only reflect central government figures.
Source: OECD Global Revenue Statistics (database).
% of total tax revenue, 2023
Note: LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru. OECD and LAC average refer to 2023 or latest. Tax revenues in this chart include social security contributions and therefore differ from the tax revenues shown in Table 1.4, which only reflect central government figures.
Source: OECD Revenue Statistics in Latin America and the Caribbean (database); and OECD Revenue Statistics (database).
Broadening tax bases by reducing exemptions could increase revenues without raising rates and the ability of the tax system to reduce income inequality, which is currently low. The Ministry of Finance has started publishing an annual report that provides quantitative and detailed information on tax exemptions and can serve as a robust basis for gradually eliminating regressive exemptions. Total tax expenditures account for 4.6% of GDP (MinHac, 2022[10]). Many of them benefit particularly affluent taxpayers, such as certain VAT tax expenditures resulting from taxing some goods and services at reduced rates. Tax expenditures from reduced rates alone amount to 2.2% of GDP. Exemptions for private education and healthcare are particularly regressive, primarily benefiting high-income households (Figure 1.28). Starting to tax the income of cooperatives, which remain exempt despite some of them being large multinational corporations, enjoying trade protection and monopolistic conditions, should also be considered and would yield additional revenues.
There are also opportunities to broaden the personal income tax base, which currently generates a lower share of revenues than in OECD and regional peers (Figure 1.29, panel A). Options to increase revenues in a progressive way include phasing out tax exemptions of the 14th monthly salary for public employees (Salario escolar) and of the additional salary or "bonus" paid in December of each year (Aguinaldo). Another option to increase revenues is to lower the personal income threshold to start paying taxes. Currently the threshold is set at nearly double the average wage, compared to 0.6 times in Mexico or just 0.3 times the average in OECD countries. The newly taxable income brackets could be subject to a lower entry tax rate. For example, in Mexico the entry tax rate is 1.9%, against a 10% entry tax rate in Costa Rica.
Note: In Panel B, “NR” refers to non-residents.
Source: Ministerio de Hacienda, Subdirección de Estudios Económicos.
Tax exemptions granted to free trade zones amount to 1.5% of GDP per year. Existing evaluations suggest that free trade zones have brought economic advantages to the country, including an increasingly diversified export basket (Alfaro, 2024[11]), productivity increases (Vega-Monge, 2023[12]) and job creation (Procomer, 2023[13]). The scheme should continue to be regularly evaluated to assess its costs and benefits, in particular how much additional investment, employment and productivity it generates. Costa Rica’s free-trade-zone regime is one of the elements in its strategy to attract foreign direct investment. To maintain its competitive edge, updating domestic tax regulations in alignment with evolving international standards is essential. This would ensure maintaining attractiveness for FDI and reinforcing Costa Rica’s reputation for transparency and international cooperation on tax matters. As the global minimum corporate effective tax rate is progressively implemented, other factors in Costa Rica's FDI strategy, such as the availability of a highly skilled workforce (see Chapter 4), will become increasingly important.
Additional revenue collection could also come from recurrent taxes on immovable property (Figure 1.29, panel B), which have a significant redistributive power, are efficient and can deliver significant revenue increases. They deliver 1% of GDP in revenues in the average OECD country against 0.4% in Costa Rica. The central government is responsible for building and maintaining the cadastre while the local governments are responsible for the valuation of property. Valuation rules across local governments are very heterogeneous. Providing support to local governments to ensure that market-valuation rules are applied across all municipalities would prevent unfair competition (OECD, 2017[14]) and increase revenue collection. Exempting low value properties and establishing different tax rates depending on the property value could ensure progressivity.
Note: LAC is an unweighted average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru. OECD and LAC average refer to 2023 or latest.
Source: OECD Global Revenue Statistics (database).
Environmental tax revenues, at 2.3% of GDP, are above the OECD average and regional peers but there is still room to green the tax system further. Diesel is taxed at a rate that is 60% that on gasoline, despite its higher polluting nature. The tax on bunker fuel is also 10% that on regular gasoline. Gradually aligning the rates on diesel and bunker fuel with the gasoline rate would be a first step to use the tax system more forcefully to support the energy transition (see also Chapter 3). Fuel excise taxes are the only way GHG emissions are priced in Costa Rica. An additional step to green the tax system would be to introduce a carbon pricing scheme. This could take the form of a carbon tax element of the fuel excise levy (OECD, 2023[15]), and it would involve adjusting the fuel excise tax to account for the carbon content of the fuel. Its rate could be set at a low level and gradually raised according to a pre-determined schedule. Introducing a carbon tax of EUR 120 tCO2, a mid-range estimate of carbon costs in 2030 for OECD countries, would yield revenue equal to 0.3% of GDP (OECD, 2022[16]). Increasing the carbon price implies political economy challenges, as diesel is largely used in agriculture and public transportation. Phasing in the increase gradually, and temporarily supporting vulnerable households with targeted transfers could facilitate buy-in.
Improving the tax administration and collection efforts could also provide additional revenues (Table 1.5) and reduce tax evasion. There remains room to reduce fragmentation in the collection and administration of taxes. Numerous public agencies are involved in the collection of taxes. Besides the Finance Ministry, municipalities, the Social Security Institute, the National Insurance Institute, the Central Bank, pensions and insurance operators, several SOEs and professional associations, all are involved in tax collection (CGR, 2021[17]). For the existing 99 taxes, there are 93 different IT platforms used by 143 public institutions. Moving towards a more centralised, digital and less fragmented tax payment and collection system could offer significant efficiency gains and savings that could reach 1% of GDP (CGR, 2021[17]).
Expediting the resolution of tax liabilities would also boost public revenues by ensuring quicker collection and reducing the accumulation of unresolved cases that delay government funding. There is also room to foster tax compliance and reduce tax evasion by ensuring a greater use of electronic invoicing. Electronic invoicing refers to the issuance of an invoice in digital format, documenting commercial transactions electronically. It was introduced in Costa Rica in 2003, and it became compulsory in 2018, except for firms registered under the Simplified Taxation Regime (which tend to be microenterprises in some sectors, such as agriculture or fishery). Compliance has been nevertheless low. Around 43% of those obliged to issue electronic invoices are not complying with this requirement. The successful deployment of e-invoicing in Chile (Box 1.5) suggests that supporting SMEs with free electronic invoicing tools that they could directly use and with training can facilitate a greater use of electronic invoicing. It would also be a valuable step to enable a greater use of pre-filled tax returns, which have been successful to facilitate tax compliance across the OECD, including in Chile.
Chile was the first Latin American country to implement an e-invoicing system in 2003, as part of its Digital Agenda. By 2017 more than 80% of firms filling taxes were issuing electronic invoices. This successful take-up was facilitated by the gradual adoption process developed by Chile’s tax administration. Initially, e-invoicing was voluntary, but it later became mandatory through a phased four-year process, with requirements and timelines tailored to firms' characteristics, such as size and location (urban versus rural). To support compliance among SMEs, Chile’s tax authorities introduced MiPyme, a free electronic invoicing portal designed to ease the transition. Although originally targeted at SMEs, the portal was eventually made available to all businesses. By 2023, more than 90% of firms were using the tax authority’s platform. In addition, tax authorities launched extensive information campaigns to promote the benefits of e-invoicing and provided training tools, such as manuals, online videos, and a helpdesk team offering telephone support. E-invoicing has brought numerous benefits to Chile, including simplifying tax compliance and reducing tax evasion. For instance, the data from electronic invoices is used by the tax authorities to prefill VAT returns, a process that benefited 93% of all taxpayers in 2022 (OECD, 2022). This system has significantly reduced compliance costs for taxpayers, cutting the time and expense associated with filing returns. Additionally, the increase in tax revenues from the prefilled returns system has been estimated to be 31 times greater than the budgetary cost of its implementation (IDB, 2023[11]).
1.4.4. Enhancing the fiscal framework
The fiscal rule, enacted in December 2018 and effective since 2020, is the key building block of Costa Rica’s fiscal framework. It has provided the necessary spending discipline while allowing flexibility during the pandemic's economic shock. Despite a challenging political environment marked by numerous and continuous requests from public agencies for exceptions, the rule has successfully contained spending, reduced debt, and restored fiscal credibility in Costa Rica. In the medium term, a thorough review of the fiscal rule, drawing from the lessons learned during its implementation in recent years, could help refine its design and ensure it continues to deliver a prudent fiscal stance and sustainable debt dynamics.
Costa Rica has gradually enhanced its fiscal framework. The annual publication of the "Medium-term Fiscal and Budgetary Framework" (Marco Fiscal Presupuestario de Mediano Plazo) by the Ministry of Finance has significantly evolved beyond short-term forecasts, now incorporating detailed medium-term projections, scenario analysis and contingent liabilities quantifications. This framework can serve as a robust foundation for adopting a fully-fledged multi-year expenditure system, as done by many OECD countries. This would help to avoid the current focus on next year’s spending allocation and would help to align budgetary decisions with long-term policy goals.
Costa Rica’s fiscal framework has also started to account for additional expenditures related to contingent liabilities arising from disaster events, including those linked to climate-related events. For the first time, the April 2024 edition of the medium-term fiscal framework included quantitative analyses of climate transition risks. Information systems are being upgraded to enable classification of climate-related expenditures in the budget, facilitating prioritization of investments in adaptation and mitigation (see also Chapter 3). Efforts to operationalize gender budgeting are also underway, including monitoring gender-related spending execution throughout 2024.
Costa Rica’s fiscal framework would be further buttressed by setting-up an effective and independent fiscal council, as recommended in previous OECD Economic Surveys. Fiscal councils in other countries in the region, such as Chile and Colombia, have recently been reinforced, yielding significant benefits. These institutions contribute to more informed fiscal policy debates by providing independent and expert analysis that helps to communicate fiscal risks and policy options. Their independent assessments promote greater public trust in government actions by enhancing accountability and transparency. By offering forward-looking assessments of the fiscal situation, fiscal councils can support finance ministries in their communications with both domestic and international stakeholders, including investors and credit rating agencies. This forward-looking approach helps build trust and confidence, which can lead to improved borrowing conditions. The executive decree to establish an independent fiscal council was approved in March 2020, but more than four years later, the council has not started to operate. OECD experience suggests that providing the fiscal council with independent technical support is critical (Caldera et al., 2024[18]). Defining explicitly at which moments in the process of preparation of the medium-term fiscal plan the council is consulted and by when it should issue its assessment would help the council to fulfil its role. Mechanisms to ensure that there is some follow-up of the council assessment and opinions would also be valuable.
Sound management of public debt, by promoting market confidence and medium-term fiscal sustainability, is also essential in a solid fiscal framework. With interest payments nearing 5% of GDP, sustained efforts to enhance debt management are particularly crucial for Costa Rica. Costa Rica has significantly improved debt management over the years, lengthening its maturity and reducing roll-over risks. However, debt management continues to suffer from institutional fragmentation, with different departments overseeing local and external debt, leading to overlaps and inefficiencies. A law approved in August 2024 establishes a unified debt management agency. As analysed in previous OECD Economic Surveys (OECD, 2020[5]) (OECD, 2016[4]), this would help to better take advantage of market funding opportunities and improve risk assessments and management, as evidenced by several OECD countries (Box 1.6). Debt management has also suffered from a complex process to issue debt in foreign currency. Presently, issuing debt in foreign currency requires specific approval by the Legislative Assembly, which causes delays and increases sovereign funding costs, as the timing of issuance depends on when exactly the Assembly approves, rather than on market opportunities. The government has recently proposed a constitutional reform to establishes that the annual approval by the Legislative Assembly of issuing debt in foreign currency would take place at the same time as the approval of the total debt ceiling. This change would facilitate debt management and could reduce sovereign funding costs, as the approval would be obtained earlier, allowing to adapt the precise timing of debt issuance to market conditions.
During the 1990s, Portugal implemented significant reforms to enhance public debt management and adapt to evolving European debt markets. Prior to these reforms, the Ministry of Finance had two separate departments managing central government debt: the Treasury Department, responsible for external debt and the issuance of treasury bills, and the Public Credit Department, responsible for domestic debt (excluding treasury bills). Following the reform, all operational activities associated with central government debt management, including debt servicing, were centralized in a newly created debt agency, IGCP (Agência de Gestão da Tesouraria e da Dívida Pública). According to its legal framework, IGCP was empowered to negotiate and carry out all financial transactions related to the issuing of central government debt and the active management of the debt portfolio, in compliance with the guidelines approved by the Minister of Finance. IGCP submits a detailed quarterly report to the Minister of Finance, outlining all transactions executed during the period and presenting the cost and risk figures of the debt portfolio. Additionally, an annual report is published, detailing the activities carried out throughout the year and presenting the financial debt accounts.
1.4.5. Reducing and preventing corruption
Continuing the fight against corruption is also essential to enhance fiscal sustainability. Corruption erodes public trust, weakens tax compliance, diverts public resources, and impairs the efficient delivery of public services. Costa Rica has recently made good progress to enhance anti-corruption measures. This includes efforts to strengthen public procurement, an area in which Costa Rica faced the largest corruption scandals in the past. Stricter requirements for awarding direct government contracts have been established, and the Integrated Public Procurement System has become the default procurement tool in the public sector. These improvements can yield significant savings, potentially reaching up to 1.5% of GDP (CGR, 2019[19]). Key pending challenges to reap the benefits of the integrated procurement system are increasing coordinated purchases, to avoid higher costs associated to fragmented purchases, and increasing the pool of bidders, to boost competition and reduce costs (CGR, 2024[20]). In line with previous OECD recommendations, a law establishing specific mechanisms for the protection of whistleblowers and witnesses of acts of corruption was enacted in 2024. Efforts to strengthen the capacities of the Prosecutor Office and the Judicial police to investigate corruption and money laundering crimes are also ongoing.
One important area where Costa Rica has room to reinforce its anticorruption and public integrity framework concerns lobbying activities (Figure 1.30). Such activities are unregulated in Costa Rica, which implies a risk that certain groups can benefit from undue influence, leading to policies that are inefficient and do not serve the public interest. Around half of OECD countries have regulations that define lobbying activities and who qualifies as lobbyists (OECD, 2024[21]). Establishing sanctions, an authority to oversee compliance with lobbying regulations and a public lobbying register are key building blocks of a robust lobbying framework. Introducing stronger regulations that allow citizens to request access to public information, such as adopting an 'open by default' policy for government data, would enhance public information transparency. In this vein, a law approved in October 2024 facilitates access to public information by establishing procedures and making the release of public information compulsory. Continuing the fight against money laundering has become also particularly important, given the rising activities of organized crime groups in Costa Rica.
Note: Panel B shows the point estimate and the margin of error. Panel C, Corruption RMA = Corruption risk-management and audit. Panel D shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country's measures are effective against 11 immediate outcomes. "Investigation and prosecution¹" refers to money laundering. "Investigation and prosecution²" refers to terrorist financing. LAC is a simple average of Chile, Colombia, Mexico, Argentina, Brazil, and Peru.
Source: Transparency International (database); World Bank Worldwide Governance Indicators (database); OECD Public Integrity Indicators (database); and OECD calculations based on OECD Financial Action Task Force (FATF).
References
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