By Patrick Connelly

Recently, legislation proposed by the Costa Rican government to dramatically increase the income requirements to become a CR resident have caused quite a stir within the expat and retiree population, and rightfully so. This is no miniscule rise by a few percentage points to boost the bottom line; these increases, including a five hundred percent increase in rentista income requirements, are not only unfeasible but also send out the wrong message. Has Costa Rica, the longtime destination for North American retirees and expats, hit the crest of the wave and no longer wants its gringo neighbors to keep moving southward?

Of course not. It is unrealistic that the government would – or could – sacrifice such a vital stream of revenue. For better or worse, the Costa Rican economy is largely based on the influx of outside dollars; to suddenly pass regulations that significantly inhibit this flow of money would be economic suicide. But that is what these new regulations would seemingly do. Pensioner requirements for residency are slated to increase from six hundred dollars to two thousand, or a mere nine hundred dollars more than the average U.S. pension. Those falling into the rentista category face similar changes, with requirements increasing from one thousand dollars a month to five thousand.

So what has caused this sudden shift in immigration policy? The government in San Jose says that the main reason is national security; with an ever increasing population of Nicaraguan migrant workers, Costa Rica is desperate to get the immigration situation under control before significant social problems arise. Which is a completely understandable goal, given the increased attention both Costa Rica and the U.S. have given to the drug trade on the coasts.

But if security is really the issue here, the government seems to be targeting the wrong crowd, and at the same time sending a negative message to established expats and retirees. If foreigners who cannot meet the proposed requirements – which, according to the U.S. Social Security Administration, would be most people outside of the super-rich – are deemed security risks by the Costa Rican government, what does that make those who made the move to the Central American country under the existing requirements? Are they a perceived security risk? Intentional or not, it is certainly a strange message coming from an usually meek-sounding government.

Costa Rica, of course, is a sovereign country and free to create and tinker with its policies as it sees fit. But the manner in which the government is trying to pass this legislature is flawed. First of all, the requirement increases are simply too great to be feasible, especially in today’s economic climate and with favorable living conditions developing in other countries in the region. If the core reason is money, then slight residency requirement increases would be met with far less opposition and still garner the same outcome: increased revenue.

Additionally, the Costa Rican government has been surprisingly blind to the long term economic consequences of hiked-up residency requirements. Regardless of their status, from expat to retiree, foreigners living abroad inevitably create job opportunity and revenue for the local population. It is similar to what the Detroit automakers are experiencing; close down a Ford factory, and the damage trickles down far past the auto factory workers, all the way to the company that supplies the nuts that go on the wheels. Significantly interrupting the expat and retiree flow will have the same negative effects, from construction labor to lumber and concrete to housekeeping jobs to the small local businesses where North Americans spend their hard earned dollars.

Foreign investments, another major vein of cash flow into Costa Rica, will also be pinched if these requirements are put into practice. Many in the expat community claim that outside investments will all but dry up; however, this seems a bit extreme. Nevertheless, a negative perception of the country stemming from an immigration policy that is practically impossible to obtain for the average retiree would inevitably have adverse effects on foreign investments.

There is nothing wrong, xenophobic, or mean-spirited about a country wanting to control its borders with a tight fist. It is simply good, responsible governing. But there are better ways to handle such a situation, ones that ruffle less feathers yet still accomplish the initial goals. Hopefully for the Costa Rican government, known for its centralism and level-headedness, a revamped version of the proposed legislation will come about that can satisfy both the Costa Rican people and the valuable expat and retiree community, all of which together have a strong and long-lasting relationship.

Read more about the state of Costa Rican immigration here