Costa Rica is the most durable and stable democracy in Latin America, with an almost uninterrupted democratic rule since 1889 and escaping the political turmoil that engulfed much of Central America in the 1980s. Unconstitutional changes of government remain highly unlikely and the country is not at risk of political instability. Political developments, especially in the legislative branch, are characterized by slow processes. While this can be detrimental when addressing pressing issues, it ensures policy predictability.

A largely pro-business stance has encouraged significant investments in high-tech manufacturing, telecommunications, and tourism. Costa Rica is one of the safest investment destinations in Latin America and governments will continue to embrace a pro-business philosophy. However, extractive industries such as mining and oil have faced considerable resistance from civil society over environmental grounds and have resulted in the suspension of projects, such as the 2010 suspension of the Las Crucitas mining project, close to the border with Nicaragua.

Controversial points of the economic agenda, particularly in the context of economic recovery, include fiscal adjustments and sector-specific concerns relating to environmental impacts. The aforementioned will continue to lead to political infighting. However, it is unlikely to result in increased political instability as core fundamentals, such as maintaining a business-friendly approach, will prevail. Moreover, the Costa Rican government will likely maintain its commitment to sustainable development as it is a key component of the country's international profile. 

Regarding the fiscal deficit issue, Alvarado has pledged to reduce the fiscal deficit to 3% of GDP by the end of his administration in 2022. On 4 December 2018, the unicameral Legislative Assembly approved the Strengthening of Public Finances Law project, which has the objective of alleviating the deficit of money suffered by the government to pay their expenses. However, the Legislative Assembly signed a tax relief law meant to counteract the economic effects of the pandemic on 19 March. The law places a moratorium on the implementation of the tax reform approved in December 2018, including the payment of Value-Added taxes (until 31 December), income tax (until July), tariffs (until 31 December), and VAT for commercial establishments (until July). While tax reform by itself will not be enough to address the unsustainable fiscal deficit, further adjustments to rein in public spending and debt will remain controversial during Alvarado’s time in office (until 2022). 

Costa Rica is considered a Full Democracy in the 2020 Democracy Index, developed by The Economist Intelligence Unit (EIU), where the country ranks 19 out of 167 countries scored.

The country ranks 62 at the 2020 Human Development Index developed by the United Nations Development Programme.

The operating environment in Costa Rica remains broadly positive for investment with no major operational risks to foreign investors in Costa Rica, though successive administrations have failed to address persistent concerns such as infrastructure deficit and a slow-moving judiciary. The civil code legal system is generally fair and independent of government influence, but a significant backlog of cases can result in delays for foreign businesses. Labour unrest risks are greatest for resource development, public transit, and fiscal issues. However, such demonstrations would not normally undermine Costa Rica’s propitious investment climate. Skilled labor is readily available and the level of unionization in the private sector is relatively low. Environmental awareness is high and development projects are closely monitored by international and national organizations. Improving infrastructure, particularly highways, is currently a focus for the government amid repeated reports of degradation, but a number of major projects have faced delays.

Corruption is not as pervasive as in other Latin American countries, and foreign businesses do not consider it a major obstacle to doing business. However, corruption is more likely at municipal levels and has affected the country’s buoyant tourism sector with regards to securing concessions and operating in the restricted maritime coast.

Labour activism is well organised and unions are particularly sensitive in cases of privatisation and perceived threats to the environment, with the oil and gas, and mining sectors being the most targeted. Although the government maintains its commitment to improving the ease of doing business, the business environment remains restricted by burdensome regulations.     

Restrictions imposed in response to the COVID-19 pandemic are likely to cause significant operational disruptions in the coming months. Given that Costa Rica does not have a standing army, no curfew or national quarantine have been enacted. However, the government ordered remote work options for state-controlled institutions and has encouraged the private sector to do the same since early March. There are also restrictions on vehicle transport, and the suspension of schools as well as of major cultural and sporting events. 

The need to improve the overall state of infrastructure is widely acknowledged by the political class, but the government’s need to alleviate the high fiscal deficit has prevented large-scale infrastructure investment projects. Infrastructure development, especially for roads, will be one of the priorities of the Alvarado administration, mainly through the enhancement of public-private partnerships (PPPs). Roads are often in mediocre condition. Poor road conditions and reckless local driving habits contribute to high fatality rates on the road. 

Overall, Costa Rica ranks 74 out of 190 countries scored at the 2020 Doing Business Index by the World Bank and 42 out of 198 at the 2020 Corruption Perception Index by the Transparency International Organization.

Security risks are moderate. Crime rates are lower than elsewhere in Central America, but have recorded a gradual increase. The northern area of the country sees higher crime rates because of the presence of Nicaraguan and local armed criminal gangs. Car theft is increasingly common, particularly in the capital. Terrorism does not pose a threat, while social unrest has little impact on business apart from occasional traffic delays.

Crime rates in Costa Rica are lower than those in other neighboring countries but rose steadily from 2012 to 2017, with the homicide rate reaching historic levels of 12.1 per 100,000 residents in 2017. However, there has been a gradual improvement under the administration of President Carlos Alvarado. In 2018, the rate decreased to 11.7, and in 2019 to 11 per 100,000 residents. The main crime risks for foreigners include armed robberies, drug-related incidents, and assaults. Car theft has become a growing problem because of growth in the stolen-car market in neighboring countries. The theft of cargo incidents is mainly concentrated in Limón province but has slightly decreased over the past year. Opportunistic theft will remain the most significant security threat for foreign personnel in the country.

Public unions stage regular protests over planned public spending cuts, fiscal reforms, and environmental concerns. However, demonstrations are generally peaceful and are not large enough to threaten the government’s stability. Protests are also sporadically close to the Limón port and block motorway access to the capital. Protest locations are likely to include motorways and border crossings, such as route 27 between San José, Santa Ana, Route 32, the Panama crossing at Paso Canoas, and government buildings in San José. Occasional trucker protests can delay traffic on main roads and at border crossings. Protests are likely to re-emerge once the COVID-19-virus pandemic abates because of job losses and further austerity measures.

There are no known terrorist groups in Costa Rica with the intention or capability to target private, military, or government-owned assets. However, explosives were used in mid-2019 against government buildings, which is unusual in the country. There is a modest but growing presence of international drug-trafficking organizations that do not have an interest in conducting terrorist attacks, although their presence is contributing to high violent crime rates. Dissidents of the demobilized Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia: FARC) are unlikely to present a direct crime or terrorism risk.

Costa Rica abolished its military in 1948 but remains protected by an active national security force and through international co-operation with the United States. The risk of interstate war remains low despite an ongoing border dispute with Nicaragua along the San Juan River. Occasional incursions into contested areas are likely as both countries pursue infrastructure projects along the San Juan River and Nicaragua seeks to expand offshore oil exploration. Major disputes between Nicaragua and Costa Rica will probably manifest themselves through diplomatic channels.

Overall, Costa Rica ranks 32 out of 163 within the 2020 Global Peace Index by the Institute for Economics and Peace.

Proof of vaccination against yellow fever is required for travelers over nine months of age arriving from a country with risk of yellow fever (YFV) transmission (with the exception of Argentina, Panama, and Trinidad and Tobago ) and for travelers who have been in transit for >12 hours in an airport located in a country with risk of YFV transmission.

Costa Rica ranks 62 out of 195 within the 2019 Global Health Security Index, a project of the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHU), developed with The Economist Intelligence Unit (EIU).

Conditions are wet and tropical along the Caribbean coast but drier inland and along the Pacific. The dry season lasts from January until May and the rainy season from April until December. Rainfall is the heaviest along the Atlantic and Pacific coasts (intense but brief showers). Costa Rica's Central Valley has a temperate climate throughout the year. Temperatures are very high along the Pacific coast in the summer and slightly cooler along the Caribbean coast (30°C).

Costa Rica is vulnerable to natural disasters, including seismic activity. The risk is highest on the Nicoya Peninsula (north) and the Osa Peninsula (south).

Eruptions of the Turrialba Volcano, located approximately 35 km (25 miles) east-northeast of San José, are relatively common and can lead to flight disruptions at San José's Juan Santamaria (SJO) and Tobías Bolaños (SYQ) international airports, including full airport closures. The volcano also regularly drops potentially hazardous ash over the Central Valley, home to 60 percent of Costa Rica's 4.3 million residents as well as on San José (see HEALTH section). Various other active volcanoes are present in Costa Rica, including Irazú, Rincon, and Poás.

In the event of nearby volcanic activity, keep abreast of the situation and take the necessary precautions if in affected areas, such as stocking up on drinking water, wearing respiratory masks, and wearing covering clothing to protect skin from abrasive ash. Be prepared to evacuate if such an order is given.

Thunderstorms and downpours are common during the rainy season, which lasts from May through November with a peak of precipitation in September and October. Flooding and landslides, and consequent travel disruptions, are possible during this period.

Any emergency situation can be monitored by the Comisión Nacional de Prevención de Riesgos y Atención de Emergencias (CNE).