<strong>by Rod Hughes</strong>

Costa Rica’s economic condition, which looked so rosy last year, got some bad news today. Recently released figures show a widening trade deficit for the first three months of this year. In fact, in the 12-month period ending in March, the deficit rose to nearly 1.8 billion over the same period ending in March of 2007, a 60% increase.

This comes as little surprise to economists who had predicted that past economic gains that had allowed the country to trim the national debt over eight years would end as the economy of its largest export market, the United States, slowed drastically. Moreover, petroleum imports have added to the import-export gap as petroleum soared toward $140 per barrel. But, if misery loves company, this country has a great deal of company in non-oil-producing nations around the world.

Still, Costa Rica is in much better shape than many nations in being able to protect is currency against decline. As economist William Calvo notes, "Luckily, a comfortable international reserve of foreign currency exists to allow the Central Bank to intervene (to protect the colon)." Much of that dollar reserve comes from direct foreign investment in the country through real estate and by companies establishing branches here.The internal economy remains healthy because of a low unemployment rate and despite skyrocketing food prices.