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Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Exports have become more diversified in the past 10 years due to the growth of the high-tech manufacturing sector, which is dominated by the microprocessor industry. Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism. Foreign investors remain attracted by the country's political stability and high education levels, as well as the fiscal incentives offered in the free-trade zones. Costa Rica has attracted the second largest amount of foreign direct investment in Latin America. Poverty has remained around 20% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans estimated to be in Costa Rica legally and illegally are an important source of - mostly unskilled - labor, but also place heavy demands on the social welfare system. The government continues to grapple with its large internal and external deficits and sizable internal debt. Reducing inflation remains a difficult problem because of rising import prices, labor market rigidities, and fiscal deficits, though lower oil prices will decrease upward pressures. The Central Bank is moving towards a more flexible exchange rate system to focus on inflation targeting by 2010. The US-Central American Free Trade Agreement (CAFTA) will enter into force in January 2009, after significant delays within the Costa Rican legislature. Nevertheless, economic growth will slow in 2009 as the global slowdown reduces export demand and invesment inflows.
Costa Rica Ranked 5th Cleanest Globally
On the Environmental Protection Index (EPI) developed by Columbia and Yale Universities, Costa Rica has been ranked #5 worldwide, best in the Americas and far ahead of the US. Costa Rica was bested only by famously clean European countries like Switzerland, Norway, and Sweden. Costa Rica even placed ahead of pristine New Zealand. The U.S., once a leader in environmental protection, failed to keep pace. Its overall EPI score of 81 puts it in 39th place on the list.
With a per capita income $11,600, far below the developed countries that dominated the top ten, Costa Rica accomplished more than any other country globally on a cleanliness-per-dollar basis. Its strong ranking was thanks to its high percentage of permanently protected lands, ongoing reforestation, clean air except in its capital, and its fight against global warming. Costa Rica also has very strict environmental regulations, including those on new real estate development.