Panama vs. Costa Rica

January 27, 2010
El Valle, Panama

For a future expat, there are three places worth seriously considering in Central America– Panama, Nicaragua, and Costa Rica.  Much is written about Panama, and rightfully so; the country is the most stable, economically liberal, and business oriented.

Not to be completely ignored, though, Costa Rica has its own merits that are certainly worth an honorable mention.

First, to understand Costa Rica, you need to get a feel for the country’s life cycle.  The original North American expatriate movement started with Mexico right around the time of US prohibition.  Everything fun in the United States became illegal practically overnight, and Mexican border towns became a rally point for the disillusioned.

Mexico’s expat domination lasted for several decades until finally, around the 1980s, people became dissatisfied with the large number of foreigners living in Mexico, as well as the rising cost of living.  They sought greener pastures further south.

Costa Rica became the obvious choice– Panama was a complete disaster between Torrijos and Noriega, Nicaragua was embroiled in civil war, and Honduras was quietly exterminating its socialists.

Initially there were only a handful of expats living in Costa Rica, but eventually the word got out that living in Costa Rica was cheap, beautiful, and spiritual… it was like the India of the western hemisphere, cheap drugs and all.

For the next two decades, the steady inflow of North American tourists created steady demand, and new developments sprouted up all over the country. In time, the ‘cheap’ cost of living in Costa Rica had risen sharply, rivaling that of Mexico.

That’s when the expatriate market turned its sights on Panama in the early 2000s– the Canal had been turned over to the Panamanians without disaster, and the country had managed to build a stable government and society in the 15-years post-Noriega. At the time, Panama was much, much cheaper than Costa Rica as well.

Today, I find the costs of living in both countries to be comparable, as well as the real estate prices. But I find that, putting the two countries head-to-head, Costa Rica has the following advantages:

1) Costa Rica has no military. Technically Panama has no military either, but with so many national police (green uniforms), tourist police (tan uniforms), and Presidential guard (black uniforms) running around the country with automatic weapons, they might as well be an army, albeit a poorly trained, dysfunctional one.

I doubt that the Panamanian police forces have the capability or iron will to go house-to-house against the locals, but Costa Rica lacks the manpower resources altogether.

2) Environmental sustainability is much more prevalent in Costa Rica– and I’m not necessarily just talking about tree hugging… Costa Rica is simply cleaner, especially compared to Panama City.

Panama City’s boom has come so quickly that the city has experienced significant growing pains– notably with its infrastructure challenges. You see a lot of garbage, sewage, etc. piled up where the city hasn’t figured out how to deal with its problems.

To be fair, it’s not the same outside of Panama City, but head-to-head, I would still say that Costa Rica is cleaner and more pristine.

So what are Costa Rica’s chief flaws compared to Panama?

1) Currency– Panama is dollarized, but Costa Rica has its own currency (the colon); you might think this is a good thing, but the colon is so small and thinly traded that it essentially follows the dollar, without necessarily getting any of the benefits of being the world’s reserve currency.

The bottom line is that the Costa Rican colon (CRC) is essentially the worst of both worlds, and in a currency crisis, the country will likely be hit hard between the eyes.

2) Costa Rica’s main city, San Jose, is small, ugly, and devoid of anything interesting to do. Panama City, on the other hand, is vibrant, exciting, and open for business. This is central to Costa Rica’s personality– it is designed for one thing: eco-tourism. Panama, conversely, is multifaceted with both business and tourism opportunities abundant.

As a consequence of this, Costa Rica is overrun with tourists, week-in, week-out, doing the same zip-line, bird-watching snorkel tour over and over again. Plus, there is a noticeable lack of available products and services in Costa Rica when compared to Panama.

3) Costa Rica is far more bureaucratic. In Panama, obtaining a residency visa, importing household goods, and buying property is a much easier process than in Costa Rica, which usually has much stiffer fees and taxes associated with everything that you do. Just getting the cable turned on in San Jose can be a nightmare.

Based on my experience between the two countries, and given the relative cost comparison, I would definitely recommend Panama over Costa Rica unless your sole priority is environmental purity… in which case you should go to the Maldives.

Tagged as: Costa Rica, expatriation, foreign real estate, panama