Caribbean & Central America - June 2026

On 20 May Costa Rica’s new president, Laura Fernández, signed a law to finance a new US$800m electric train project, which is part of a wider drive to overhaul the country’s infrastructure and reform the energy system, although structural constraints may limit her ability to deliver on her promises.

The new train will include two lines comprising 51km of double track, one running from Paraíso canton, Cartago province to San José, and another between San José and downtown Alajuela canton, Alajuela province. The train will be operated by the Instituto Costarricense de Ferrocarriles (Incofer), an autonomous state institution, which is planning to operate a fleet of 28 electric tram-train vehicles. Incofer was cited by the media as saying the bidding process for the initiative could be launched this year, with successful applicants selected in 2027.

Fernández announced the funding for the train, which is coming from the Central American Development Bank (BCIE), United Nations green climate fund (GCF), and European Union, less than two weeks after taking over the presidency from her political mentor and former president Rodrigo Chaves (2022-2026), whom she has awarded with the twin posts of minister of the presidency and finance minister. The plan is a redesigned version of a proposal that stalled during Chaves’ time in office, and Fernández has pledged to advance other infrastructure projects which were held up by an uncooperative legislature under her predecessor. 

Fernández has moved quickly, calling for extraordinary legislative sessions to discuss two stalled projects, the Marina de Limón port development in Limón province, and the Ciudad Gobierno government campus in San José. She has also committed to further improvements to the road network to reduce journey times and facilitate the movement of goods and people. Significantly, the new president has a working majority of 31 out of 57 seats in the unicameral legislature, meaning that she should find it easier to advance her agenda than Chaves did, although she is still short of the 38-vote supermajority required to pass constitutional changes.

The lack of a supermajority has already thwarted efforts to pass an electricity market harmonisation bill, which aims to remove restrictions on private generation and encourage investment in the energy system to improve stability and reduce prices. There are also concerns that the forecast arrival of the El Niño weather phenomenon, which is associated with drought conditions that badly affect electricity generation in Costa Rica, which is highly reliant on hydroelectric power plants, will expose the limitations of the current system. Costa Rica’s national emergency commission (CNE) has already placed the Pacific and Central regions of the country on alert for drought conditions, increasing the likelihood of the electricity rationing experienced in 2024 following a period of low rainfall. This could affect operations in key economic sectors such as manufacturing, and the lack of progress in reforming the electricity market could make it more difficult to attract new investment. Drought will also have a negative impact on the agricultural sector, increasing the likelihood of protests from farmers, who have been restive in recent years due to Chaves’ trade liberalisation policies.

Fernández is therefore facing various economic headwinds that are likely to impact growth, with the Organisation for Economic Co-operation and Development (OECD) forecasting a gradual slowdown of GDP growth from 4.2% in 2025 to 3.5% in 2026 and 3.4% in 2027 which could ultimately complicate efforts to advance her agenda.

MoU signed with Panama on railway

On 18 March the Panamanian and Costa Rican authorities announced that a memorandum of understanding (MoU) had been signed by Panama’s national railway secretariat (SNDF) and Costa Rica’s railway institute (Incofer) for a new railway that would link the two countries. The initial phase of the project would run some 475km from Panama City to Paso Canoas, a binational town straddling the Costa Rica-Panama border in Costa Rica’s Puntarenas province and Panama’s Chiriquí province.