Ticos are more satisfied with life than people in any other Latin American country, according to a report released yesterday by the apolitical group State of the Nation.

On average, Costa Ricans are happier overall with their health, work, finances, free time and family and friend relationships than people in other nations. Still, figures released in the same report suggest they may be overly optimistic.

The report, which measures political, economic, social and environmental progress in 2007, identifies key challenges that are setting back Costa Rica's development.

Overall, the economy did well in 2007. Gross domestic product grew at a clip for the third consecutive year, and poverty dropped by 3.5 percentage points. But income inequality was at its second highest in two decades, and 33 percent of the workforce made salaries at or below the state minimum.

Economic growth and improved tax collection have boosted state coffers, but state revenue is still low compared to other Latin American nations. And Costa Rica's regressive tax system weighs on the less wealthy and increases inequality, the report said.

Meanwhile, school retention rates remain low. Some 38 percent of children who entered kindergarten in 1997 will graduate from high school in the expected 11 years. The others have either repeated grades or dropped out all together.

Costa Ricans are also increasingly worried about crime. Just 25 percent think the state guarantees protection against crime. For the first time, in 2007, the homicide rate was greater than one victim a day.