Although explored by the Spanish early in the 16th century, initial attempts at colonizing Costa Rica proved unsuccessful due to a combination of factors, including disease from mosquito-infested swamps, brutal heat, resistance by natives, and pirate raids. It was not until 1563 that a permanent settlement of Cartago was established in the cooler, fertile central highlands. The area remained a colony for some two and a half centuries. In 1821, Costa Rica became one of several Central American provinces that jointly declared their independence from Spain. Two years later it joined the United Provinces of Central America, but this federation disintegrated in 1838, at which time Costa Rica proclaimed its sovereignty and independence. Since the late 19th century, only two brief periods of violence have marred the country's democratic development. In 1949, Costa Rica dissolved its armed forces. Although it still maintains a large agricultural sector, Costa Rica has expanded its economy to include strong technology and tourism industries. The standard of living is relatively high. Land ownership is widespread.
Since 2010, Costa Rica has enjoyed strong and stable economic growth - 4.3% in 2016. Exports of bananas, coffee, sugar, and beef are the backbone of its commodity exports. Various industrial and processed agricultural products have broadened exports in recent years, as have high value-added goods, including medical devices. Costa Rica's impressive biodiversity also makes it a key destination for ecotourism.Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the free-trade zones; Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America. The US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR), which became effective for Costa Rica in 2009, helped increase foreign direct investment in key sectors of the economy, including insurance and telecommunication. However, poor infrastructure, high energy costs, a complex bureaucracy, weak investor protection, and uncertainty of contract enforcement impede greater investment.Costa Rica’s economy also faces challenges due to a rising fiscal deficit, rising public debt, and relatively low levels of domestic revenue. Poverty has remained around 20-25% for nearly 20 years, and the government’s strong social safety net has eroded due to increased constraints on its expenditures. Costa Rica’s credit rating was downgraded from stable to negative in 2015, upping pressure on lending rates - which could hurt small business, on the budget deficit - which could hurt infrastructure development, and on the rate of return on investment - which could soften foreign direct investment (FDI). Unlike the rest of Central America, Costa Rica is not highly dependent on remittances - which represented just 0.7% of GDP in 2015, but instead relies on FDI - which accounted for 4% of GDP.