Investment Incentives as a Means of Encouraging Tourism Development: The Case of Costa Rica

Abstract

tourism makes to the development process in Third World nations (Lea, 1988: 37-50). Despite this, tourism has been viewed as a means of gaining foreign exchange, reducing unemployment, and providing funds for invest? ment in other sectors of the economy. Given the perceived advantages, it is not surprising that public officials in many developing countries have embraced tourism 'as a strategy for economic growth' (Mathieson and Wall, 1982: 41). In order to encourage such investment, governments of many poorer nations have provided incentives to the private sector in an effort to increase facilities available for tourists. These incentives can take many forms. Examples include credit at preferential rates of interest, providing for the availability of foreign exchange, waiving of import duties, income tax relief, and infrastructure improvement. Costa Rica is one country which has adopted a programme designed to encourage the development and expansion of tourist facilities. The pro? gramme consists primarily of economic benefits to the private sector in the form of tax abatements designed to make investment in the country competitive with other areas in the Central American-Caribbean region. The present essay examines recent changes associated with Costa Rica as a tourist destination, outlines the incentive programme intended to improve services for the country's tourists, and identifies some problems associated with the pro? gramme.