The Road to Development: Identifying upscaling opportunities for Costa Rica

Costa Rica has undergone a remarkable process of structural transformation since it embraced trade liberalisation during the 1980s. Open trade and foreign direct investment inflows have underpinned the transition from a rural and agricultural-based economy to one which is increasingly specialised in medium- and high-technology products and services. This paper combines the Theory of Economic Complexity of (Hidalgo and Hausmann, 2009[1]) with measures of “revealed relatedness” developed by Lebre de Freitas et al. (2015[2]) to provide an empirical assessment of the level of complexity of Costa Rica’s export basket and identify possible opportunities for Costa Rica to expand and upscale its production capabilities. The results show that most of Costa Rica’s upscale opportunities lie in the Machinery-Electrical and Chemicals-Plastics-Rubbers sectors. When comparing upscaling opportunities across Latin American countries, Mexico clearly stands out as all identified products are very highly complex. Like Costa Rica, Argentina, Brazil and Colombia have most of their upscaling opportunities in very high complexity products. By contrast, Costa Rica’s neighbours, as well as Peru and Chile, show fewer possibilities to specialise into products of high-embedded capabilities.