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Panama vs. Costa Rica: Which Meets Your Must-Have Criteria?

For would-be expats looking to relocate to Central America, Costa Rica and Panama are natural front runners.

And for good reason.

Located adjacent to one another at the southernmost end of Central America, the two are quite similar in many ways.  Both consistently top the lists of best places to retire in Latin America, and the world for that matter.

They both boast amazing vistas, near-perfect climates, modern amenities with a low cost of living, excellent health care, and some really great options for how you can spend your free time.  However, there are a few areas where one nation has a slight advantage over its neighbor.

While many areas of consideration depend largely on personal preference, we lined up Panama vs. Costa Rica in a head-to-head cage match to see which one comes out on top.


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Round #1: Lifestyle Hacks

Advantage: Costa Rica

Both Panama and Costa Rica offer the opportunity to simplify your life by hiring out a number of services that, quite frankly, you’d just rather not have to do on your own.  You can easily enlist the help of a gardener, a driver, a tutor for your children, or even a full-time maid who cleans your house, buys your groceries, does your laundry, and prepares your meals six days a week (for less than $15 per day).

While the costs are fairly close, domestic help can be a bit more expensive in Costa Rica.  Why’d we pick it as the winner if it’s the more expensive of the two?  Easy.

When comparing Panama vs. Costa Rica, Costa Rica has a much more customer-oriented service culture.  So, while you may pay a few more dollars per day for domestic help in Costa Rica, the extra money is totally worth it in terms of the quality of personal service you’ll receive.

Round #2 – Connectivity

Winner: Panama by a Landslide

Due in part to a long-standing U.S. military presence, Panama is one of the most connected countries in Latin America.  Broadband internet service is available in most cities and is very affordable.  There are also numerous free wi-fi hotspots nationwide.

In fact, Panama was recently named #2 in all of Latin America for technology and internet penetration.  It also earned the #1 spot for wireless availability.  That’s why so many multinational companies like Dell, 3M, and Philips are choosing to establish regional headquarters there.

By contrast, Costa Rica is light years behind its Central American neighbors in terms of internet speed.  Although its average connection speed has increased 43% percent in the past year, it’s still only 2.1 megabytes per second.  (Streaming a movie requires 1.5 Mbps, or 4 Mbps in high definition.)

Panama vs. Costa Rica

Brian Gratwicke

Round #3 – Living Options

Outcome: Varies by Region

This category is a hard one to call.  Both Costa Rica and Panama have such varied topography and eco-climates.  Not to mention all the other factors that can vary greatly from one region to the next, such as climate, infrastructure, and proximity to attractions.

For comparison’s sake, we’ll compare Panama vs. Costa Rica in four subcategories and examine the top cities expats are choosing for each type of area.

  • Mountain towns…Winner: Panama A popular mountain destination for North American expats in Costa Rica is Atenas.  Located in the Central Valley, it enjoys mild weather year-round, great views of the surrounding mountains, proximity to San Jose, and an established expat community.  Boquete, Panama, offers all those things plus cooler temps, better roads and infrastructure, and a million things to do nearby, from ziplining through cloud forests to climbing volcanoes to sport fishing off the coast.

  • City living…Champion: Panama Again  Panama City, the nation’s capital, is a vibrant cosmopolitan city that caters to residents and travelers looking for both business and adventure.  It offers world-class shopping and dining, as well as a 655-acre rain forest that’s within its city limits.  On the other hand, San Jose, Costa Rica, is much smaller, much less attractive, and much more limited in terms of anything interesting to do.

  • Beach communities…Advantage: Costa Rica  Beach living is right in Costa Rica’s wheelhouse.  Towns like Nosara and many, many more have been drawing nomads and expats for decades, and the country caters very well to this genre.  Costa Rica’s beach towns have everything you need, from aquatic adventures to quaint accommodations.  Panama has a few good options, such as Coronado near the capital, but none can hold a candle to the laid-back coastal cities of Costa Rica.

  • Island retreats…No Contest: Panama  Costa Rica was almost a no-show for this match.  There just simply aren’t many island living options available for comparison.  Cano Island offers a serene natural setting among the reefs, but with such slim pickings island ownership is pretty much out of the question. However, in Panama, you can own your own piece of paradise on our own Boca Chica Island, a 400-acre private island offering lots ranging from 5 to 50 acres. It’s just off the coast in an area that’s surrounded by a multitude of land and sea adventures.

Round #4 – Green Living

Winner:  Costa Rica, Hands Down

Both Panama and Costa Rica have great options for living in harmony with nature. However, Costa Rica is committed to protecting its natural environment, due largely to its importance in the country’s eco-tourism industry.  Almost ¼ of its total area is dedicated to parkland.

Over 90% of the country’s electricity comes from renewable energy sources, with a plan to increase this to 95% by 2014.  It’s also on its way to becoming the first carbon-free economy in the world.

Both countries have tons of options for eco-tourism, from jungle tours to mangrove exploration to scuba diving.

Panama vs. Costa Rica


Round #5 – Cost of Living

Slight Edge: Panama

Panama and Costa Rica both boast a cost of living that is a fraction of that of the U.S. or Canada.  However, from the cost of property to the cost of a bunch of bananas, prices are a bit lower in Panama on average.

It’s true that in both countries there are certain regions or cities (typically the most developed or heavily-touristed areas) where everything from rent to a three-course meal runs close to North American prices, but in general you can find more places in Panama where those expenses are considerably less.

One of the largest contributing factors to Panama’s affordability for many expats is its Pensionado Program.  Available to “retirees” of any age, those who meet the income requirements can qualify for discounts ranging from 15-50% on everything from health care to entertainment.

Round #6 – Ease of Access

Verdict: It’s a Tie

Panama and Costa Rica are fairly neck and neck in this category, each for their own reason. Panama takes the prize for international arrivals and departures. Its Tocumen International Airport has flights to several North American cities, as well as various points in South America, making Panama a great destination for those who want easy access to faraway places.

Costa Rica wins for being a great jumping-off point for other adventures throughout Central America, due to its more central location and affordable travel options.

Round #7 – Business Climate

Advantage: Panama

The International Finance Corporation ranked Panama 55th in the world for ease of doing business, compared to a rank of 102 for Costa Rica.  Their findings are based on an examination of 10 factors to determine which countries are most conducive to the startup and operation of a local business.

And the difference is obvious if you’ve experienced the business climate of the two nations. Panama’s government is extremely pro-business and pro-investor. It’s also something of a tax haven. Costa Rica on the other hand is much more bureaucratic, with slower processes and higher taxes and fees.

Panama vs. Costa Rica

Arturo Sotillo

Round #8 – Banking

Winner: Costa Rica (For Now)

With changing regulations, in both the U.S. as well as Costa Rica and Panama, this category tends to fluctuate greatly over time.  However, for the past few years at least, banking for North Americans has typically been easier in Costa Rica.

This is mainly in terms of opening and holding a bank account.  Both countries share many of the same requirements (identification, proof of residence and income, etc.). However, Costa Rica only requires a $25 minimum deposit (vs. Panama’s $1,000). Panamanian banks may also ask for additional documents such as proof of employment or reference letters from one or more North American banks.

One difference worth noting is that Panama’s official currency is the dollar, while Costa Rica uses the colon.  Because it’s so thinly traded, the colon generally follows the dollar.  However, in the event of a financial crisis, this could mean problems for Costa Rica.

Round #9 – Investment Opportunities

Our Pick: Panama

To put this showdown into perspective, let’s use the analogy that Panama is basically the Costa Rica of twenty years ago.  When North American retirees began to get tired of the overcrowded expat communities and rising costs of Mexico, they turned to Costa Rica.  Now that Costa Rica has reached mega-expat status, people are looking to Panama.

Costs are still lower and, as a result, there is much more capacity for growth.  In addition to those factors, the Panamanian government is and has been placing heavy emphasis on tourism investment, largely in the form of tax incentives.  It’s also possible for foreign residents to obtain financing in Panama, something they can’t get in Costa Rica.

Round #10 – Healthcare

Outcome: Too Close to Call

Healthcare is excellent in both Costa Rica and Panama.  The two countries both have inexpensive public health care, with Costa Rica’s being touted as one of the world’s best low-cost medical programs.  In fact, the quality of its health care system is ranked 36th in the world by the WHO, with the U.S. in 37th place.

Both countries also have private hospitals available, where many of the doctors speak English and trained in the U.S.  Panama has several state-of-the-art hospitals that are affiliated with world-renowned facilities in the U.S., such as Johns Hopkins.

Panama’s only drawback is the accessibility of its modern private medical facilities. They’re often found only in the largest cities, specifically Panama City and David. Those in rural areas may have trouble finding the care they need, as often only first aid is available in the most remote areas.

Punta Pacifica Hospital

World Bank

Round #11 – Consumer Goods

Winner: Panama

We mentioned that the cost of living is slightly higher in Costa Rica.  This is especially true when it comes to consumer goods, like groceries–for instance–which generally run about 15-20% higher than in Panama.  Exports are also taxed more heavily in Costa Rica, so as a result a lot of products are much harder to find.

Costa Rica also has a higher value added tax (VAT), 14% vs. 7% in Panama.  It also has a lot more taxes on luxury items like cars, electronics, and appliances.  Compare this with Panama which has lower taxes and even a number of duty-free zones.

These factors have made Panama quite the shopping hub for folks in Latin America.  In fact, on one of our last trips to Ecuador we met some people who were on their way back from Panama City where they’d gone specifically to buy several flat screen TVs, due to the country’s lower prices and better selection.

Round #12 – Foreign Land Ownership

Undisputed Champ: Panama

Panama has virtually no restrictions on the ownership of property by foreigners.  In fact, there’s only one, and here it is.  Foreigners, or foreign owners of Panamanian corporations, can’t own property within 10 kilometers of the country’s borders.  That’s it.  Also, under Panamanian law, foreigners have all the same protections as citizens.

By contrast, Costa Rica’s land ownership laws are not as liberally applied to foreigners. Land considered restricted or concession areas, including 95% of all beachfront property, is not eligible to be owned by foreign residents (unless they’ve lived in Costa Rica for at least 5 years).  The only option for use of this kind of property is through 49% ownership in a corporation with a native Costa Rican.

The buying process is also much easier in Panama, where a good attorney can help to simplify things like title searches, purchase agreements, and the registering of the deed.

Bocas del Toro Panama

Coco Lime Monkey

Panama vs. Costa Rica…Which is the Grand Champion?

Were you keeping score during that match-up of Panama vs. Costa Rica?  If so, we would advise you to take our recommendations with a grain of salt.  Panama and Costa Rica both offer a host of great places to live as an expat.  And determining which one is right for you depends 100% on your values and what you want out of your life in a new location.

Want to Learn about Residency Options?

Each one of these countries has different strengths, but you can listen to our interviews with the experts and find out what it takes to become a resident or if you need to do it at all. The Costa Rica residency interview is here and the Panama residency discussion can be found here.

Our best advice? Plan a trip down to Central America. Check out both of these amazing expat destinations and choose for yourself which one is right for your family.

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4 thoughts on “Panama vs. Costa Rica: Which Meets Your Must-Have Criteria?

  1. 1

    Panama City looks like Miami. Very impressive city. Overall though, I prefer Costa Rica. They are poor, but they have dignity, and they build beautiful buildings that are made to last. Also, the United States attacked Panama in 1989, and while I was there in 2007 it came up pretty often as a topic of conversation. I like Costa Rica better. Seems safer to me. Slower-pace.

  2. 2

    We are looking at both countries for possible retirement. I am an antique collector and would like to know which areas of either country are best for antique shops, flea markets and any other spots to purchase older collectibles and art.

  3. A2Z'WorldTravLR

    We have just returned from an exploratory pre-retirement trip to Panama. While a week is not long enough to see everything, we found Coronado ok but with a sense of decay of infrastructue. The beach is nothing special and parts are not good for swimming. Beautiful Boquete in the mountains is quiet, perhaps too quiet. Las Lajas beach is 2 hours away. Very long and very wide beeach. and not very crowded. Spent 2 weeks in Costa Rica years ago and read up on it recently. At this point, Panama has the edge.

  4. Pegi Beecroft

    I’m a single woman looking to retire in either Costa Rica or Panama. (or Jacksonville Florida) I am living off of social security only. Any suggestions for which country might be the better fit for me?

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