Israel and Costa Rica Set to Sign Free Trade Agreement, Boosting Economic Ties

Historic Trade Pact Nears Completion

Israel and Costa Rica are on the verge of formalizing a Free Trade Area Agreement (FTA) this week, marking a significant milestone in their bilateral economic relations. The agreement, which concluded its technical negotiation phase on November 13, 2025, is anticipated to be signed by Israeli Minister of Economy and Industry Nir Barkat and Costa Rican Minister of Foreign Trade Manuel Tovar Rivera.

The pact is a strategic initiative aimed at strengthening Israeli exports, deepening trade relations with one of Latin America's developing economies, and contributing to a reduction in the cost of living in Israel through substantial tariff reductions.

Key Provisions and Economic Impact

The Free Trade Agreement is designed to provide Israeli exporters with a competitive advantage in the Costa Rican market. Upon its entry into force, 99 out of 100 of Israel's main export products to Costa Rica are expected to receive relief, benefits, and broader market access. Similarly, over 90% of tariff lines will be immediately abolished, with approximately 95% of products receiving benefits under the agreement, leading to cheaper food products, raw materials, and industrial equipment for Israeli consumers and industries.

For Costa Rica, the agreement is poised to unlock substantial opportunities for its businesses. The deal specifically targets sectors where both nations possess complementary strengths, including agro-industrial products such as coffee, pineapple, sugar, fruits, and juices, as well as high-value goods like medical devices and technological processors. The agreement also regulates trade in services for the first time, encompassing remote services, digital trade, and the recognition of electronic signatures.

Strengthening Investment and Broader Cooperation

Beyond trade in goods and services, the FTA is expected to be a strategic tool for attracting and growing foreign direct investment (FDI). Israeli investment in Costa Rica has already seen a notable increase, jumping from $1 million in 2023 to $20 million in 2024. Proponents of the FTA are confident that the legal certainty and preferential conditions offered by the treaty will catalyze even greater investment in key sectors such as technology, life sciences, and advanced manufacturing.

The current volume of exports from Israel to Costa Rica averages about $32 million annually, a figure forecast to expand significantly following the agreement's implementation. Costa Rica, an OECD country, views this agreement as aligning with its long-term strategy of diversifying its trade partners and securing new avenues for sustainable economic growth.

Diplomatic Ties and Future Steps

In a related development signaling strengthening bilateral ties, Costa Rica announced its intention to open a trade and innovation office with diplomatic status in Jerusalem in the first quarter of 2026. This announcement followed a meeting between Israeli Foreign Minister Gideon Sa'ar and Costa Rica's Minister of Foreign Trade Manuel Tovar Rivera.

Following the signing of the Free Trade Agreement, a formal ratification process will commence in both countries before the agreement officially enters into force.