The ratio of investment to GDP has increased sharply in recent years; However, savings did not increase at the same time, creating a gap filled by foreign direct investment, particularly in the tourism and retail sector. In addition to ownership restrictions, which mainly affect certain services, Costa Rica`s investment legislation is neutral, free of restrictions or incentives exclusively available to foreign investors. Dominican Republic – Free trade between Costa Rica and the Dominican Republic was created following the signing of one of Costa Rica`s former multi-country free trade agreements. As a result of the establishment of free trade relations between Costa Rica and the Dominican Republic, total merchandise trade between the two countries has increased by an average of 10.2% since 2002. Extending free trade agreements is a top priority for President Laura Chinchilla, who will step down on May 8. In addition to the abolition of tariffs with its European trading partners, Chinchilla visited Colombia in February to announce that Costa Rica would take steps to become a full member of the Pacific Alliance, a trading bloc of the major Latin American economies of Mexico, Colombia, Peru and Chile. The recent increase in taxes and tariffs could help reduce short-term budget and current account deficits. If successful, it may be possible to ease monetary policy and lower interest rates, paving the way for more sustainable growth with low inflation. However, if Costa Rica chooses to reduce the budget deficit by placing more emphasis on higher tax revenues than on public sector reforms, it will likely retain some opportunities to improve resource allocation and maintain existing structural rigidities that unders root for chronic current account deficits. In addition, tariff increases create uncertainty about the stability of trade products, curb structural changes and sacrifice higher trade profits.
The Canada-Costa Rica Free Trade Agreement (CCRFTA) is a free trade agreement between Costa Rica and Canada. It was signed on April 1, 2001 in Ottawa, Ontario and came into effect on November 1, 2002. This is the first bilateral free trade agreement that includes innovative independent trade procedures. 87% of all tariffs on agricultural products were abolished either immediately or over a period of 7 to 14 years. Tariffs on many other sectors, such as automobiles and goods, have also been abolished. Several sectors of agriculture have been excluded from the treaty; Eggs, dairy products, poultry and beef were excluded and Costa Rica decided to leave the potatoes in the free trade agreement. The two nations agreed to apply World Trade Organization rules on health and plant health issues (known as the SPS Agreement).  Costa Rica`s trade regime has undergone significant liberalization over the past decade, including efforts to deregulate and strengthen competition in the domestic economy. Reforms initiated in 1986 and strengthened in 1990 with Costa Rica`s accession to the GATT were strengthened last year as the country prepared to become a member of the WTO. In January 1995, Costa Rica – Central America`s largest trading nation – introduced a new export promotion program aimed at increasing exports to $5 billion by the year 2000. Costa Rica also maintains preferential trade agreements with the Dominican Republic and Panama; The latter covers a large part of the trade flows between the signatories. In the area of foreign direct investment, Costa Rica has concluded 14 bilateral investment agreements, five of which are with EU Member States such as Spain, France, the Czech Republic, the Netherlands and Germany.