Nicaragua versus Costa Rica?

Overview: Today I want to look at Nicaragua versus Costa Rica from both a destination for retiree’s standpoint and for potential investment interest.  First I’ll provide some basic facts on each country including history, geography, people and economy.  Then I’ll offer you my personal assessment of what I have witnessed over the past 15 years.

As one ponders the thought of where to live and/or invest as we reach retirement, there are many considerations we have to make. Climate, cost of living, safety, medical services, language, accessibility, cultural difference, etc.  I have included a variety of photos in this post to help you see just how wonderful this region really is and why so many foreigners now call it home.

Nicaragua history: Nicaragua was settled as a Spanish colony from Panama in the early 16th century. Independence from Spain was declared in 1821 and the country became an independent republic in 1838. Britain occupied the Caribbean Coast in the first half of the 19th century, but gradually ceded control of the region in subsequent decades. In the early 1970’s opposition to the Washington-backed Samoza government spread to all classes and by 1978 a short-lived civil war occurred bringing the Sandinista party to power in 1979. They went on to win the Nicaraguan general elections in 1984. Free elections in 1990, 1996, and 2001, saw the Sandinistas defeated, but voting in 2006 announced the return of former Sandinista President Daniel Ortega Saavedra. He won again in the 2011 election with over 62% of the vote. Nicaragua is considered a democratic republic.

Costa Rica history:  Christopher Columbus first discovered Costa Rica in 1502.  Settlement began by Spain in 1522 and the area at the time was under the control of Guatemala.  They gained independence from Spain in 1821 when a federation of Central American states was formed, but Costa Rica left the federation in 1838.  Costa Rica became truly democratic in 1869 and other than a brief period between 1917 and 1919, has remained a democratic republic ever since.  In 1948 the ruling dictator was removed under an armed civil war whereupon the military was abolished. The country ratified it’s constitution in 1953.  They have term limits for most offices and have elected their 16th president since adopting their constitution.  A professional Coast Guard was established in 2000.

Geography: Both countries are located next to each other in Central America.  Nicaragua is to the north and located between 11 degrees and 14 degrees north of the equator while Costa Rica is south of Nicaragua and between 10 degrees and 8 degrees north of the equator.  Both countries have many similarities, but both also have many differences. 

Nicaragua, the largest country in Central America, is roughly 120,000 square kilometers of land and about 10,000 kilometers of water, primarily contained in Lake Nicaragua which is the largest body of fresh water in Central America.  It is about the size of New York State. Nicaragua has 910 kilometers of coastline and about 1,200 kilometers of border (roughly 900 km with Honduras and 300 km with Costa Rica).  Costa Rica has 51,100 square kilometers of land and 1,290 kms of coastline and 948 km of border (roughly 300 kilometers with Nicaragua and 640 with Panama).  Both countries are located in the “ring of fire”. Nicaragua has a number of active volcanos with Cerro Negro being the most active.  It erupted in 1999 and caused localized damage to farm land and buildings, but there were no injuries reported. Nicaragua is below the hurricane belt, though sometimes the north east experiences heavy rain as a result of hurricanes.  Costa Rica has a number of active volcanos with Arenal being the most active.  Arenal erupted in 1968 and destroyed the town of Tabacon.  Being one of the most active volcanos in the world, it has had a few major eruptions since 1968 with the last major one in 1998.  Costa Rica is not susceptible to hurricanes, but sometimes suffers coastal flooding from the rain bands from large storms.

People:  Nicaragua’s population is roughly 6 million.  Ethnicity is primarily a mix of colonial Spanish and indigenous population called Mestizo (69%) White (17%) Black (9%) and Amerindian (5%),   The Black and Amerindian ethnic groups include Mayangna, Miskitu, Garifuna and Creole.  Most of these other groups are located on the east coast and were migrants of the Caribbean islands of Jamaica, Belize and other British Caribbean territories. More and more North Americans are retiring to or buying a second home in Nicaragua as the public perception is replaced by the pleasant reality. The median age is 24 years and the median life expectancy is 75 years.  The literacy rate is 80% (increasing rapidly) and they spend 3.1% of GDP, or about $500,000,000 million dollars total spent for education. They attend school for an average of 11 years.

In 2009 Costa Rica had an estimated population of a little over 5 million people. Together, whites and mestizos make up a 94% of the population, 3% are black, 1% Amerindians, 1% Chinese, and 1% other. There is also a large North American population in Costa Rica.  Few of the native Indians survived European contact; the indigenous population today numbers about 29,000 or less than 1% of the population.  Median age is 30 year and life expectancy is 78 years.  Costa Rica spends 5% of GDP on education, attends school an average of 12 years and has a 96% literacy rate.

Economy:  Nicaragua is one of the poorest countries in Central America and poverty and unemployment is still widespread (mostly in rural areas) similar to Costa Rica at around 8%).  Starting in 1991, the government initiated ambitious reforms to support Nicaragua’s transitions from war to peace, from dictatorship to democracy, and from central planning to a market economy. Fortunately, the Nicaraguan economy has been growing substantially and has recently received lots of attention, having grown 30 percent since 2006, when the Sandinistas came back into power. Also, the GDP per capita has increased to $4,554. Recently, the Nicaraguan government has signed a lucrative memorandum of understanding with a telecommunications company from China to fund and build an inter-oceanic canal that is said to rival the Panama Canal.

Because of all of this news in the last five years, extreme poverty (measured by a familial income of less than $1.25 per day) in Nicaragua has fallen from 11.2 percent to 5.5 percent. In 2011, Nicaragua was reported to have an economic growth of 5.1 percent, which was the highest in Central America.  Exports include fruits, vegetables and raw commodities.  There are roughly 3 million cell phones in use in Nicaragua, 310,000 land lines and 185,000 internet users.  Nicaragua has one international airport in Managua but 11 airports with paved runways.  International investment in Nicaragua has grown under Ortega and the economy has continued to grow accordingly. Presently, about 16% of Nicaragua’s land area is set aside as preserved.

Costa Rica’s economy been growing by around 3.4% per year for the last 5 years.  Costa Rica did suffer a contraction in GDP in 2009 as a result of global issues. The economy has experienced a rebound since 2010 with a 3.6% GDP growth rate up to $12,942 per capita. Costa Rica enjoys the region’s highest standard of living, an unemployment rate of 7.7% and tourism is the largest source of income. Consumer price inflation is 5% in 2015. From a statement issued by the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP):  6 out of 10 companies have faced significant increases in production costs over the last year (2014) and over 60% have ruled out generating jobs and new investment. Costa Rica’s major economic resources are its fertile land, frequent rainfall and its well-educated population.  Costa Rica is known worldwide for its conservation efforts with more than 26% of its land under protection, thus safeguarding more than 5% of the entire world’s biodiversity.  Costa Rica’s economy benefits from high tech jobs.  A huge number of multinationals have manufacturing facilities there and 99% of the country’s electricity comes from renewable resources.

What does all this mean to an expat considering relocation to either country?   If you want to live in a stable country, Nicaragua and Costa Rica can both fulfill that requirement.  If you want a more cost-effective opportunity, go to Nicaragua.  When you consider risk; political, social and economic, Costa Rica looks much better than Nicaragua on the surface but the reality may crumble that perception.  The economic situation in Nicaragua, though behind Costa Rica at the moment, is improving with no sign of foreign investment declining.  There are many US and international firms with manufacturing facilities in both countries.

Both countries offer similar benefits to foreigners for moving there, but Costa Rica has fallen behind with things like import taxes where Nicaragua is still doing an aggressive job in attracting foreigners to their soil.  In 2012 the murder rate per 100,000 in Costa Rica was 9 and Nicaragua’s rate was 11.

The availability of amenities that North Americans desire has differences between the two countries.  Costa Rica has better telecomunications and better internet service, while health care options are very similar. You can’t own ocean front in Costa Rica, but you still can in Nicaragua, so if you have your heart set on owning beach front property, you can still have it.