Costa Rica: The Rising Beacon of the Bio-Economy in LATAM

Long before sustainability became a global concern, Costa Rica began implementing its green economy model, which has since become a role model for countries seeking to decarbonize. A key factor in this success has been the country's support for the bio-based private sector, combined with extensive conservation and sustainability policies. Costa Rica has also enhanced its standard of living by integrating local and global economic practices, human rights, and cultural heritage conservation. This holistic approach has driven unique economic growth and strengthened its global relationships. Notably, this strategy has boosted foreign direct investment (FDI) by emphasizing climate action alongside business development (1).

Costa Rica, home to 6% of the world’s biodiversity (2), has emerged as a major player in the global bio-economy. The country's innovative bio-economy strategies and sustainability commitments have positioned it as a leader in Latin America and beyond. Following the abolition of its military in 1949, Costa Rica redirected resources toward social programs such as education, healthcare, and environmental conservation. This shift has resulted in high human development indicators and a reputation as a leader in sustainable practices within Central America.

By the late 1980s, Costa Rica prioritized education in technology and English. Surveys from the 1990s revealed that investors valued the quality and adaptability of the Costa Rican workforce over labor cost advantages. This focus on education has been supported by consistent government investment, culminating in a constitutional mandate in 2011 to allocate 8% of GDP to education, including funding for five public universities (3).

Carola Medina, former Innovation Director at the Ministry of Science, Technology and Telecommunications of Costa Rica, highlights the country's abundant talent pool and its popularity amongst multinational corporations. Now working with CINDE—a non-profit organization promoting FDI in Costa Rica—Medina notes the life sciences sector as a key area of growth. With over 1,000 researchers and a strong entrepreneurial spirit, Costa Rica has become a hub for innovation. Programs supporting local life sciences innovators have helped entrepreneurs scale their ideas effectively.

Costa Rica’s skilled workforce has made it an attractive destination for FDI, particularly in microchips, medical instruments, and electronic devices. In 2020, the country launched its National Bio-Economy Strategy, aiming to foster fossil fuel decarbonization, competitiveness, sustainability, and inclusion. This strategy integrates productive development with environmental policies, ensuring balanced economic growth and conservation (4).

In 2022, the World Bank reported that Costa Rica became the first tropical country to reverse deforestation. With approximately 60% of its land covered by diverse rainforests, Costa Rica has become a global model for bio-based economies. The country’s ability to derive economic value from nature while protecting it has attracted significant FDI. This approach sends a clear message: businesses can thrive by preserving biodiversity rather than exploiting it (5). Costa Rica’s leadership has inspired regional efforts, such as Brazil’s forest conservation initiatives in 2023 and Colombia’s record-low deforestation levels in 2024 (6).

In 2023, Costa Rica recorded its highest FDI levels, reflecting its stable and attractive investment climate. The Biden Administration recognized this potential by selecting Costa Rica as the first of six countries to receive funding through the International Technology Security and Innovation (ITSI) Fund under the CHIPS Act. This partnership underscores Costa Rica’s skilled workforce, strategic location, and strong government support. The country’s sustainable supply chain has proven resilient during global disruptions like the COVID-19 pandemic (7).

While investment has been coming in from different corners of the life sciences, biotechnology, and electronics industries, a new wave of investments has been noticed. Recent years have seen a diversification in Costa Rica’s green financing sector. The United Nations Development Program (UNDP) partnered with Costa Rica’s bio-economy through the BioFin project, which helps secure financing for biodiversity targets (8). A notable example is the issuance of Costa Rica’s first blue bond by the National Bank of Costa Rica (BNCR) for $50 million (9). Blue bonds finance projects with environmental, economic, and climate benefits, further showcasing Costa Rica’s leadership in sustainable development.

Costa Rica’s success in building a bio-economy offers valuable lessons for Latin America. By integrating environmental sustainability with economic development, Costa Rica has demonstrated that growth can coexist with natural resource conservation. The country’s innovative policies and commitment to sustainability have made it a regional role model. As the world faces environmental and economic challenges, Costa Rica’s approach provides a blueprint for achieving sustainable and inclusive growth.

Importantly, Costa Rica has built its bio-based economy on a foundation of locally tailored policies. Its diversification in investment over the decades highlights the need for complementary actions to support green policies. As Costa Rica continues to lead the bio-economy in Latin America, it has a unique opportunity to address global climate issues while capitalizing on sustainable economic growth.

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Sources:

1. Green Business Benchmark: Costa Rica's Path to Sustainability

2. Embassy of Costa Rica in Washington D.C

3. Harvard Review of Latin America: The Evolution of Education in Costa Rica

4. OECD STIP Compass: Costa Rica National Bioeconomy Strategy

5. World Bank: Costa Rica's Forest Conservation Pays Off

6. The Guardian: Deforestation in Colombia falls to lowest level in 23 years

7. The White House: FACT SHEET: Two Years after the CHIPS and Science Act

8. World Bio Market Insights: Costa Rica’s world-leading bioeconomy strategy

9. Green Finance for Latin America and the Caribbean: IDB Invest supports Costa Rica’s inaugural blue bond

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Written by Tarun Masapeta, 2024-2025 PCFR Fellow.

The views expressed are solely those of the writer and not those of PCFR, which takes no institutional position on policy.

This is part of a series of articles written by PCFR fellows.