Costa Rica and the Shift in U.S. Power: Challenges and Opportunities on the International Stage

The recent election of Donald Trump as President of the United States poses a complex outlook for Costa Rica, given the deep economic and political ties between the two countries. The historical relationship, built on economic interdependence, security cooperation, and trade, positions Costa Rica to strategically adapt to an incoming U.S. administration likely to emphasize protectionist policies under the “America First” banner. Costa Rica’s response, as outlined by Minister of Foreign Trade Manuel Tovar, underscores a pragmatic and proactive approach to safeguarding this critical relationship while advancing policies to enhance competitiveness and diversify its economy.

1. A Balanced Approach to Trade Relations

The United States remains Costa Rica’s main trade partner, accounting for 46% of Costa Rican exports and contributing 73% of foreign direct investment. Tovar’s statements reveal a pragmatic and strategic approach to this relationship, recognizing the need to update the Central American Free Trade Agreement (CAFTA-DR) to align with potential U.S. policy shifts. This stance not only seeks to preserve current trade ties but also aims to expand Costa Rica’s engagement in high-tech sectors like semiconductors and medical devices, areas in which the country is developing a growing competitive edge.

2. Preparing for an “America First” Policy

Potential policies incentivizing the repatriation of U.S. companies present a direct challenge for Costa Rica. To address this, Costa Rica has bolstered its competitiveness in key sectors like technology and advanced manufacturing, ensuring that the country remains an attractive destination for foreign investment. Free trade zones play a vital role in this strategy by offering favorable conditions for foreign companies that generate local employment and contribute to economic growth.

3. Market Diversification: Beyond U.S. Dependence

In response to its economic dependence on the U.S., Costa Rica has intensified efforts to diversify its trade partnerships. Negotiations with countries such as Japan and the United Arab Emirates, along with interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), aim to broaden export options and establish strategic alliances in high-potential regions. This approach allows Costa Rica to reduce its vulnerability to U.S. policy shifts and build a more resilient global trade network.

4. Cooperation in Security and Crime Prevention

Security cooperation with the U.S. has been a cornerstone of the bilateral relationship, particularly in combating drug trafficking and organized crime. Costa Rica anticipates that this collaboration will either remain steady or increase under the Trump administration, understanding that a secure environment benefits not only Costa Rica but regional stability. Continuing cooperation in this area strengthens the investment climate and reinforces national security.

5. Challenges and Opportunities in Sustainability and Climate Change

Trump’s skepticism about climate change and preference for fossil fuels may challenge collaboration on sustainability initiatives—a field where Costa Rica has been a regional leader. With over 99% of its energy sourced from renewables, Costa Rica has gained an international reputation as a sustainability leader. Although direct cooperation on environmental issues may be limited, Costa Rica remains committed to its green model, which attracts investments aligned with sustainable practices.

Conclusion: Towards Sustainable and Resilient Development

Trump’s election introduces uncertainties in U.S.-Costa Rica relations, yet it also emphasizes the need for a resilient approach. Costa Rica is uniquely positioned to continue developing a diversified and sustainable economy based on the following pillars:

1. Strengthening Competitiveness and Value Proposition: Costa Rica must continue to enhance its appeal as a foreign investment destination, especially in high-tech and advanced manufacturing sectors.
2. Market Diversification and Strategic Alliances: Pursuing new trade agreements and partnerships is a priority to reduce dependence on the U.S. and maximize opportunities in emerging markets.
3. Commitment to Sustainability and Stability: Costa Rica should continue its leadership in sustainability, reinforcing its stability to attract companies that value a safe, sustainable environment.

Costa Rica faces a future shaped by international challenges but also marked by significant opportunities. With a strategy rooted in adaptability, innovation, and diversification, the country is well-positioned to secure inclusive, sustainable development that ensures U.S. relations remain a source of growth and stability amid an evolving global context.

Jorge Gutiérrez Guillén

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