Spanish Colonazation

During most of the colonial period, Costa Rica was the southernmost province of the Captaincy General of Guatemala, which was nominally part of the Viceroyalty of New Spain (i.e., Mexico), but which in practice operated as a largely autonomous entity within the Spanish Empire. Costa Rica's distance from the capital in Guatemala, its legal prohibition under Spanish law to trade with its southern neighbors in Panama, then part of the Viceroyalty of New Granada (i.e.,Colombia), and the lack of resources, such as gold and silver, made Costa Rica into a poor, isolated, and sparsely inhabited region within the Spanish Empire. Costa Rica was described as "the poorest and most miserable Spanish colony in all America" by a Spanish governor in 1719.

Another important factor behind Costa Rica's poverty was the lack of a significant indigenous population available for forced labor, which meant most of the Costa Rican settlers had to work on their own land, preventing the establishment of large haciendas. For all these reasons, Costa Rica was by and large unappreciated and overlooked by the Spanish Crown and left to develop on its own. The circumstances during this period are believed to have led to many of the idiosyncrasies for which Costa Rica has become known, while concomitantly setting the stage for Costa Rica's development as a more egalitarian society than the rest of its neighbors. Costa Rica became a "rural democracy" with no oppressed mestizo or indigenous class. It was not long before Spanish settlers turned to the hills, where they found rich volcanic soil and a milder climate than that of the lowlands.