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Why Costa Rica Is Winning Central America
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Mar 31, 2025
Costa Rica has become a HUGE success story for Central American countries. It has a stable, long lasting democracy, a thriving tourism industry, a growing middle class, and better infrastructure than most other countries in the world. But Costa Rica's situation is markedly different from its northern neighbors who have experienced decades of authoritarian rule, revolutions and rebellions, and foreign interference. So why has Costa Rica been so successful, and why haven't its neighbors been able to replicate it success?
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Costa Rica is an incredibly successful country with a healthy economy, a booming tourism industry, and a stable democracy
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This is despite its nearest neighbors, El Salvador, Honduras, and Nicaragua, struggling throughout the years
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So why is Costa Rica so successful when its neighbors deal with civil wars, authoritarian dictators, and intervention from larger powers
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As it turns out, geography has something to do with it. Central America holds a unique place within the Americas
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In some ways, it's neither North America nor South America. Its physical geography reflects this uniqueness by acting as a slender bridge between these two larger land masses
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And because it's a bridge, this has ultimately impacted how all of these countries have developed through the decades
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as it has provided a crucial connection between the North and the South
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This region, which includes El Salvador, Honduras, Nicaragua, and then Costa Rica
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is characterized by dramatic mountain ranges, sprawling lowlands, and a tropical climate shaped by its proximity to both the Pacific Ocean and the Caribbean Sea
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So let's explore each of these countries' unique geographies. And we're going to start with the country that is called the land of volcanoes, El Salvador
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This country is more densely populated than any of its neighbors. In fact, El Salvador is more dense than the United Kingdom or Germany
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two European countries well known for their large, bustling cities. This is because the country is also heavily impacted by volcanic activity
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reducing the areas where people can live. This geography has endowed El Salvador with rich soils that support coffee cultivation
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a key export, but has also made it vulnerable to natural disasters such as earthquakes and volcanic eruptions
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Moving northeast, Honduras is also well known for its mountainous landscapes, which dominate much of the country and are complemented by narrow coastal plains
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along its Caribbean and Pacific coasts. The interior highlands are interspersed with fertile valleys
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making them ideal for farming, while the Mosquito Coast, a remote and largely undeveloped area
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highlights the geographic isolation that has shaped much of the country. Almost nobody lives in Honduras' eastern half
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Meanwhile, south of Honduras is Nicaragua, the largest country in the region at 130,375 square kilometers
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And unlike El Salvador and Honduras, Nicaragua is not nearly as dominated by mountains
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Instead, it boasts vast plains and a unique combination of freshwater lakes
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such as Lake Managua and Lake Nicaragua. In fact, due to its relative flatness
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Nicaragua was almost selected as the site of the c connecting the Pacific and Atlantic Oceans
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Obviously, the c was ultimately built in Panama, but it was and still is given serious consideration
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Without a c, though, Nicaragua primarily relies on its fertile soils, particularly around the volcanic regions that have made agriculture a cornerstone of its economy
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And finally, in the far south is Costa Rica, which, though small in size
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is actually made up of a unique, balanced combination of everything the other three countries offer
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The country is divided by a central mountain range with fertile valleys
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lush rainforests, and pristine beaches on both coasts. And unlike its neighbors to the north, its physical geography is relatively mild
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with fewer active volcanoes, less seismic activity, and fewer serious storms. This stability, coupled with a climate that supports diverse ecosystems
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has played a significant role in the country's ability to attract ecotourism and maintain sustainable development
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Each of these countries is a product of its physical geography, and those physical geographies have shaped how each country has developed through the decades
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In many ways, the histories of El Salvador, Honduras, Nicaragua, and Costa Rica are completely
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connected because each was shaped by the Spanish who originally colonized them
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That said, as each country developed into their own country, differences emerged
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Originally, the region was united under the Captaincy General of Guatemala, a vast administrative division of the Spanish crown that governed much of Central America
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And like with other colonies, the Spanish established a system based on resource extraction
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focusing on exploiting the fertile lands and labor in areas like El Salvador, Honduras, and Nicaragua
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Costa Rica, on the other hand, didn't have easily exploitable wealth, which left it more as a peripheral colony
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This would end up working out much better for Costa Rica in the end. During the mid-1700s, the colonial economy relied heavily on large land holdings
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controlled by a small elite, especially in the fertile areas of Nicaragua and El Salvador
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In these regions, agricultural production became increasingly tied to cash crops such as cacao, indigo, and later coffee
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These systems entrenched sharp class divisions and created a society dominated by powerful elites
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Honduras, though similarly structured, was less agriculturally productive and became more reliant on mining, adding another layer of exploitation to its colonial legacy
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Costa Rica's colonial economy, while also agricultural, was more modest in scale and
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less dominated by elites, fostering a smaller farming tradition that would influence its future
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Then, in 1821, independence came to the region in the wake of Mexico's own independence movement
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Central America declared independence as a united entity, briefly joining the Mexican Empire
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before forming the short-lived United Provinces of Central America in 1823. However, this union quickly fell apart due to deep-seated divisions among member states
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By 1841, after two civil wars and multiple rebellions, Costa Rica, Nicaragua, Honduras
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and El Salvador had emerged as independent republics breaking free from Guatemala
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But despite being their own countries, the post-independence era was marked by political instability and economic struggles
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El Salvador, with its dense population and concentration of wealth among a few land-owning families
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developed into an oligarchic state that suppressed dissent while profiting from coffee exports
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Honduras faced similar challenges, becoming a battleground for competing political factions and a target for foreign influence
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particularly from U.S. companies in the banana industry. And in Nicaragua rival factions vied for control with foreign powers frequently intervening to protect their interests Costa Rica by contrast was relatively isolated from the power struggles that plagued its neighbors
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Its small population and lack of a strong colonial elite allowed for the emergence of a more
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egalitarian society. While it also relied on coffee as a key export, the distribution of land
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was less concentrated, fostering the growth of a middle class. Which leads us to the final part of
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answering our original question. Why is Costa Rica still so much more successful today than
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any of its neighbors? By all accounts, Costa Rica is a far more successful country than El Salvador
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Honduras, or Nicaragua. In terms of GDP per capita at over $29,779, Costa Rica is more wealthy than
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the other three countries combined. And as far as the Human Development Index goes, Costa Rica is
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also ranked far higher at 64th in the world compared to El Salvador's 127th, Honduras' 138th
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and Nicaragua's 130th rankings. These rankings are not mere coincidences. Rather, they are due
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to Costa Rica having a completely different set of priorities than the others. Perhaps the most
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pivotal moment in Costa Rica's decision-making came in 1948 when the country abolished its
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military after a brief but decisive civil war. This decision, unique in the region, fundamentally
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reshaped Costa Rica's trajectory. Resources that might have gone towards maintaining an armed force
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were instead funneled into education, healthcare, and infrastructure. And over the decades
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this investment paid off, creating a more educated populace with higher life expectancy
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and better living standards. In contrast, Nicaragua, Honduras, and El Salvador maintained
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strong militaries, which often became tools for political repression and contributed to cycles of
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violence and instability. Nicaragua, to this day, is still controlled by a brutal dictatorship that
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regularly uses its military to oppress its people. Ultimately, and this can't be overstated enough
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the strength of Costa Rica's democratic institutions has been incredibly important in its success as a country. While Costa Rica has experienced its share of political challenges
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such as dealing with an increase in the cost of living, it has managed to uphold a stable, functioning democracy since 1948
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the longest of any country in the region. Regular elections, peaceful transfers of power
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and an emphasis on the rule of law have built trust in government institutions
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And it's this exact stability that has fostered an environment conducive to economic growth and foreign investment
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Of course, in the midst of all this stability, Costa Rica has been more thoughtful of its land
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and has leveraged its natural resources sustainably. Early on, the country recognized the economic potential
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of its biodiversity and positioned itself as a global leader in ecotourism
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Protected areas and national parks, such as Tortuguero and Chiripo, were established
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conserving more than a quarter of its land for wildlife. This commitment not only preserved Costa Rica's environment
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but also created a thriving tourism industry that now accounts for a significant portion of its GDP
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In 2019, Costa Rica attracted nearly 3.5 million international visitors, far more than any other country in Central America
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El Salvador, Honduras, and Nicaragua, while also having a bounty of natural areas
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have faced significant environmental degradation due to unsustainable agricultural practices, deforestation, and unchecked industrial expansion
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These issues, coupled with political instability, have limited their ability to attract similar levels of tourism or foreign investment
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Additionally reliance on traditional exports like coffee and bananas have left their economies vulnerable to price fluctuations and external pressures further hindering diversification and growth Finally and due to everything we already covered
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the region was severely destabilized due to the Cold War between the United States and the Soviet Union
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This would ultimately have a negative effect on each country. In Nicaragua, the Cold War played out most visibly in the Sandinista Revolution
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In 1979, the Sandinista National Liberation Front, a leftist group backed by the Soviet
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Union and Cuba, overthrew the long-standing Somoza dictatorship, which had been a close
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ally of the United States. Initially welcomed by many as a step towards reform, the Sandinista government's socialist
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policies and ties to the Soviet bloc drew the ire of the United States
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The U.S. would then fund and train the Contras, a rebel group that waged a brutal war against
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the Sandinista government throughout the 1980s. This conflict devastated Nicaragua's economy, displaced thousands, and left the country deeply polarized, effects that continue to influence its
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political landscape today. El Salvador also became an epicenter of Cold War tensions
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The Salvadoran Civil War pitted the leftist, ferrobundo Marti National Liberation Front
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against a government backed by the United States. The U.S., fearing the spread of communism in the
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region provided extensive military aid and training to the Salvadoran government, even as it was
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implicated in widespread human rights abuses, including massacres and assassinations. The war
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claimed over 75,000 lives, the majority of them civilians, and left a legacy of trauma and distrust
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The economic destruction and social fragmentation caused by the conflict have continued to hinder
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El Salvador's development. Honduras, while not the site of a full-scale conflict during this period
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became a key staging ground for U.S. operations in the region. The country hosted U.S. military bases
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and served as a primary base of operation for the Contras fighting in Nicaragua
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While Honduras avoided direct conflict on the scale of its neighbors, its heavy militarization and reliance on U.S. aid
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entrenched authoritarian tendencies and deepened its dependence on foreign powers. The militarization of Honduran society during this period
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left a legacy of corruption, weakened institutions, and created persistent inequality. issues that have continued to undermine its progress
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Meanwhile, Costa Rica avoided these conflicts almost entirely, in part because it got rid of its military early on
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and solidified its democracy in ways the other three countries didn't. As such, during this turbulent time for the region
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Costa Rica remained unscathed and relatively stable. Today, Costa Rica is home to a little over 5 million people
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which actually makes it the smallest country of the four. El Salvador is home to about 6 million
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Honduras has 9.5 million, and Nicaragua has 6.3 million people. But despite all of its success
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Costa Rica does have one big problem. The country's burgeoning wealth has not been felt equally
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To put it bluntly, it's getting very expensive to live there. Expats from Canada and the United States
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have dramatically increased the cost of living for Costa Ricans, many of whom aren't able to compete
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with their new, much wealthier neighbors. This means things like housing and food prices
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have increased for everyone, and that could ultimately hinder so much of Costa Rica's progress as a country
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Costa Rica is an amazingly beautiful part of the world, so it's not surprising that it's become a huge success
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And if you want to see a bit of what it looks like in person, well, you can. I've launched a brand new travel channel
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and you can go watch me experience Costa Rica in person. New videos come out every Saturday
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I hope you enjoyed learning all about Central America. If you enjoyed this video, why not check out this video all about why Jordan is so peaceful
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compared to its neighbors. And if you want to watch me in Costa Rica, then check out this video
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Thanks for watching. See you next week
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