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Tico (feminine tica, plural ticos, ticas) is a colloquial term for a native of Costa Rica. Costa Ricans are usually called ticos by themselves and persons of other Spanish-speaking countries, in place of the more formal costarricenses.
There are two popular explanations of the origin of the term tico. The first is that it derives from the tendency of Costa Ricans to use -tico as the diminutive suffix in Spanish instead of the more common and widely used -ito. Literally -tico, when used as a suffix, in Costa Rican Spanish denotes something very small, as the suffix -ito would. Use of -tico versus -ito depends on the word, as not all of them would be easily adapted to -tico suffix.
However, this suffix is not unique to Costa Rican Spanish, and is also used in standard Spanish throughout (such as in Cuba, Dominican Republic, and even Spain, with varying degrees of frequency. What is unique to Costa Rica is the use of this suffix to also denote affection. Words ending in -ico, -ica, -tico, -tica do not only mean 'small', but also denote affection and similar feelings as well.
From a linguistic standpoint, the tico namesake is not the same as the actual suffix utilized in everyday Costa Rican language. The diminutive suffix is actually -itico, containing an 'i' that replaces the usual 'o' or 'a' ending a word.
The second explanation of tico is that it's short for Hermanitico ('Little Brother' with the suffix described above), a friendly and respectful way the people of Costa Rica used in the past (during the Central American war against William Walker) to refer to themselves.