Panama vs. Costa Rica

I’ve been visiting Costa Rica since 2002, and since that time I’ve spent more than 24 months of my life there. I view Costa Rica as one of the most wonderful places in the world to live in and travel to.

But Costa Rica is not perfect — and no country is, really. But sometimes the shortcomings of Costa Rica are frustrating, so I’ve also looked into Panama, Costa Rica’s most affluent neighbor.

After three trips to Panama and a lot of research on the subject, I think the two countries have a lot in common, but also important differences.

Which place is better to live? It will be up to you to decide but here are the most important differences:

Pros for Costa Rica

Let’s start with where Costa Rica excels.

No Artifical Ingredients”

Costa Rica has positioned itself to the world tourism market as an “eco-tourism” destination. “No Artificial Ingredients” is the advertising slogan. While it’s not always true, I can say that overall there’s a lot more environmental awareness in Costa Rica than in most places in the world. In large part, this is due to the influx of eco-loving expats that have bought huge tracks of lands in order to protect it.

A lot of the locals have also realized that they can make more money by bringing tourists to their area rather than clear-cutting forests or hutting endangered animals. Costa Rica protects over 25% of its territory in national parks.

Costa Rica is overall cleaner, especially when compared to Panama City. Panama City is three times the size of San Jose, so that brings advantages when it comes to conveniences but disadvantages when it comes to cleanliness.

San Jose is a pleasant city that looks more like a large sprawling town. The air is fresh and clean (which wasn’t so much the case years ago when toxic diesel fumes filled the air), and also considerably cooler than steamy Panama City.

Beyond “tree hugging”, Costa Rica feels more pristine and ridiculously beautiful. Panama has many amazing treasures and beautiful areas, but they are more remote and less accessible than Costa Rica, where tourism is a major industry.

More Tourism

Costa Rica gets over 2 million visitors per year, whereas Panama just about 800,000 (and a lot of them are business visitors going to Panama City). That’s a huge difference and it shows when you visit the country.

In Costa Rica, literally every beautiful area has been discovered and there are hotels of all classes to cater the tourism market. I find that an advantage in a certain way because there’s always something new to do in Costa Rica. I’ve been coming here for many years and I still haven’t visited every place I wanted to visit, nor done every tour or visited every attraction I wanted to see.

You can’t really get bored in Costa Rica, so it’s probably a better place to come for a short vacation than Costa Rica.

This also means that Costa Rica tends to be more expensive, and certain popular areas are overrun by tourists. But even in extremely popular places like Lake Arenal, I don’t find that to be a problem.

More Expats

More North American expats live in Costa Rica than almost any other country in the world. The country offered tempting incentives for retirees to come spend the rest of their lives back 20 or 30 years ago. Now most of these incentives are gone, but the country still remains open for retirees and many take advantage of the warm climate and lower cost of living.

There’s a lot of services available for expats, and more possibility to mingle with people who speak your language, which again can be viewed as an advantage of disadvantage.

More Fruit

For raw-food enthusiasts like me, it’s hard to beat the variety and quality of fruit you can find in Costa Rica. Panama has a lot to, but not nearly as much variety as Costa Rica. There are more farmer’s markets in Costa Rica all over the country where you can buy really fresh produce.

Organic produce is rare (compared to the States), but available if you know where to look for it. In Panama, every type of fruit I tasted was delicious (melon, pineapple, etc.), but the variety is more limited, unless you grow your own or can buy from local gardens.

No army

Simon Black, of the “International Man” newsletter writes:

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.


Pros for Panama

Lower cost of living

Panama is cheaper than Costa Rica, by about 10 to 25%. For example, a plate of food at a local cafeteria in Panama will cost you around $2. In Costa Rica, the same would be $3-4. A medium to small watermelon at a farmer’s market in Panama is about $2. In Costa Rica, it’s $3-4 for the same size of watermelon.

The expat and tourist markets in Costa Rica have driven up the prices, so almost everything is a bit more expensive than Panama, from Real Estate to water bottles.

Also, Costa Rica has a fairly protectionist economy. They derive a lot of their tax income from import taxes on luxury items like cars, electronics, appliances, etc. It’s nearly impossible to find a good refrigerator in Costa Rica from a name brand you can trust, unless you go to the tax-free port of Golfito, where you’re allowed to get $500 worth of goods every year, tax-free.

Cars are also much more expensive because of these extreme import taxes. Panama also has import taxes, but not as high as Costa Rica’s. That’s also why almost every imported item is cheaper in Panama.

US Dollar

One major advantage of living in Panama is the US dollar (especially when you are getting paid in US dollars, like me). Simon Black, writes:

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.

A side benefit of using the dollar is the “change” situation. In Costa Rica, there’s a lot of heavy coins that take a lot of space for all these crazy amounts of colones you have to pay every day. For example, one dollar is worth about 550 colones at the time of the writing, and there’s no 500 colones bill. So you end up with a large amount of change that weighs a lot, but is worth almost nothing! In Panama, the one-dollar bill and small US coins solves the situation. I love that!

Way Better Infrastructures

The current president of Costa Rica, Oscar Arias, recently said “we’re a country of five-star hotels and one-star highways”.

He’s exactly right when admitting a big shortcoming of Costa Rica: the infrastructures. But I can say that in the last 6 years, the roads have improved at least 200%. But they still can’t compared to the Americanized, excellent roads of Panama.

Costa Rica is also burdened by a centralized, socialized public utility company called ICE (pronounced EE-SAY) that handles everything from cell phones to electricity to Internet. It handles everything… poorly!

The cell phone system in Costa Rica is at least 5 years behind the rest of the world, and even though the Internet works and you can get high-speed, truly fast Internet (In my books: 3+ MB per second) is impossible to find in most areas.

If one day your Internet crashes and you need help from ICE, all I can say is “good luck.” I’ve been lucky because I’ve rented places where the owners would handle the situation and wouldn’t mind standing in line for hours at ICE’s offices, but others have often waited several weeks often to get someone to come over.

Want to get a cell phone in Costa Rica? Good luck if you’re not a resident. You’ll need to open a local corporation and put the cell phone it the corporation’s name. Same for many utilities which are difficult to get as a non-resident.

What about the same in Panama? Just walk to the cell phone store and walk away 30 minutes later with your own phone that works!

Less Bureaucratic

Panama overall is less bureaucratic and more business friendly. It’s still quite corrupt like most Latin American countries, but getting things done is easier.

It’s also easier to immigrate to Panama and get your residency under a variety of programs.

Other Random Differences

Here are other little differences I noticed between the two countries.

Safety: I cannot say for sure which country is safer. But I can say that Costa Rica is currently fighting a rising crime situation. Although I’ve never had any problems myself and I feel safe even in San Jose, increased crime seems to be a problem. I cannot tell for sure whether Panama has more or less crime, but some people say that Panama is at least better at fighting it.

Taxi: The taxis are definitely better in Costa Rica. They use a meter (and are obliged to do so by law) so you know what you’re paying. In Panama, there are no meters and unless you know the exact fare, you can easily get ripped off.

Noise. In Panama City, there’s a big honking problems. All drivers seem to be angry and impatient and constantly and madly honk. Costa Rica is at least 1000% better. However, Costa Rica has more dogs that bark all night.

Society. Panama is a more conservative society, whereas Costa Rica is more Americanized in that regard. In Costa Rica, women wear provocative and revealing clothing (which does not suggest that they are promiscuous, but it’s just the local trend), whereas this would be frowned upon in Panama. In Costa Rica, you can wear shorts in the city and nobody will look twice at you, whereas in Panama wearing shorts in the city will quickly label you as an ignorant tourist or a hobo.

Both countries have a lot to offer. When we come back to Central America in 2011 after our trip around the world, we might consider Panama as our place of choice. But it would also be hard to leave beautiful Costa Rica behind. We’ll see then!

As part of my course “How to Move to a Tropical Paradise”, I have reviewed both countries in detail. Check it out here.

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