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1. General Overview
Costa Rica’s investment climate has been favourable for many years. Foreign
direct investment is high and has been a significant contributor to Costa Rica’s
economic growth. Despite challenges to the country's competitiveness, including
rising operating costs, a complicated legal environment, bureaucratic red tape, and
infrastructure deficiencies, Costa Rican government actions to address this issue
have moved Costa Rica up in the ease of doing business ranking considerably.
Prior to the global economic crisis, Costa Rica enjoyed stable economic growth.
The economy contracted 1.3% in 2009 but resumed growth at about 4% per year
in 2010-14. While the traditional agricultural exports of bananas, coffee, sugar, and
beef are still the backbone of commodity based export trade, a variety of industrial
and specialized agricultural products have broadened export trade in recent years.
High value-added goods and services, including medical devices, have further
bolstered exports.
Tourism continues to bring in foreign exchange, as Costa Rica's impressive
biodiversity makes it a key destination for ecotourism. Foreign investors remain
attracted by the country's political stability and high education levels, as well as the
incentives offered in the free-trade zones; Costa Rica has one of the highest levels
of foreign direct investment per capita in Latin America.
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Costa Rica has an open economy focused on industrial production, services,
tourism and agriculture. Its main industrial products are: microprocessors, medical
equipment, electronic components and food processing. These goods, along with
pineapple, banana, dairy products and coffee, are the country’s main export
products. The currency is Colón (¢) and the exchange rate is £1 = ¢838.1
As one of the most stable countries in Latin America, Costa Rica stands out in a
number of ways:
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Population is 4.872 million.
The country is in 3rd place in competitiveness in Latin America.2
The absolute GDP is £32.2 billion and GDP per capita is approximately
£6,6123with a growth rate of 3.5%.
Inflation is situated at 5.13%4, interest rates in US dollars are 11% and in
Costa Rican colones 7.25%, which demonstrates that the country is one of
the most developed in Latin America and the most stable economy in
Central America.
Foreign Direct Investment is an important part of the market’s economy. In 2014, it
received around GBP £1.4 billion and several multinational companies set up their
hubs in the country. Investors are interested in Costa Rica because of its high
standards of living, its political and economic stability and its excellent educational
system.
The country has free trade agreements with the European Union, United States,
Canada, Mexico, China, Singapore, the rest of Central America and Caribbean
countries among others. The US-Central American-Dominican Republic Free
Trade Agreement (CAFTA-DR) entered into force on 1 January 2009 after
significant delays within the Costa Rican legislature. CAFTA-DR has increased
foreign direct investment in key sectors of the economy, including the insurance
and telecommunications sectors which were recently opened to private investors.
Although the business climate in Costa Rica is favourabl obstacles remain.
Difficulties which foreign companies can encounter include bureaucracy, slow
decision-making processes, and lack of clarity and transparency in tax
administration, and the slowness of the Costa Rican judicial system. Companies
can also experience delays in customs, extra paperwork requirements and delays
in processing payment.
1
July 2015 exchange rate used
Global Competitiveness Index 2014-2015
3 World Bank, 2013
4 Trading economics, 2015
2
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2. Politics
Some political challenges should be considered when doing business in Costa
Rica. As previously mentioned this could include bureaucracy and lack of
transparency, slowness in the judiciary system and in decision-making processes,
and delays in customs. The country has also faced a fiscal deficit for some time.
Although unemployment is one of the highest in the region (7.9%) and poor
infrastructure causes problems; trade liberalisation has boosted productivity
growth, economic diversification and investment.
High energy costs, bureaucracy, weak investor protection, and legal uncertainty,
conflicting responsibilities between agencies, remain impediments to greater
international company’s competitiveness. The legal system, whilst solid, can be
very slow and often disappointing.
President Luis Guillermo Solís is keen to promote foreign direct investment. In the
past year, he connected with several political leaders worldwide. This includes
visiting and lobbying with Asian countries, North and South America and some
European countries. The President is looking for international private investment in
the country, offering Costa Rica’s main opportunity with the Free Trade Zones
(FTZs).
Costa Rica’s continued popularity as an investment destination is well illustrated by
historic FDI which climbed steadily from the year 2000 (GBP 263.82 million) to
2008 (over GBP 1.29 billion), and reaching a peak of over GBP 1.68 billion (5.4
percent of GDP) in 2013 before dropping back to GBP 1.35 billion in 2014.
President Solís is improving countryside access with road maintenance, a megaport construction and airports. In terms of infrastructure, Costa Rica has a powerful
energy supply network (98.55% from renewable sources). With the liberalisation of
the telecommunications sector, mobile phone coverage is wider and internet
connection is commonplace. The country is carrying otu major improvements in the
main seaports, airports and highways with new port terminals on both coasts
scheduled to open in the next 3 years (an investment worth over GBP 650 million).
Costa Rica has one of the highest innovation potentials in the region thanks to a
high-quality educational system, good use of ICT and an above-average capacity
to innovate and use available technology. Despite these strengths, the country
still faces significant challenges that it must address to improve its competitive
edge. The quality of transport infrastructure is poor, procedures to start a business
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are lengthy, and available financing for businesses— especially through local
equity markets—is scarce, affecting the conditions for entrepreneurship.5
3. Economics
Costa Rica offers investors excellent conditions and incentives given by the
government as part of the export and investment promotion strategy. The country
provides the most attractive and cost-effective tax incentives in the region. It is an
excellent location for business and trade because it is at the heart of the Americas,
with ports in both the Pacific and Atlantic coasts.
Free Trade Agreements provide preferential access to over 57 trade partners,
including the UK. Moreover, Costa Rica is in the process of becoming a member of
the Organisation for Economic Co-Operation and Development (OECD) by 2015
and the Pacific Alliance (one of the most important trade organisations in the
Americas).
Trade between UK and Costa Rica
Trade between the UK and Costa Rica has increased in the last few years. Exports
of goods to the UK were £151 million in 2014. Those exports are made up of
electronic chips, fresh fruit and vegetables. In the same period, imports of UK
products reached £63 million in pharmaceuticals, chemicals, vehicles and spare
parts, whisky, machinery and petroleum products.
UK businesses established in Costa Rica are: AstraZeneca, Land Rover, VITEC
Group, BAT and Glaxosmithkline.
Strengths of the market
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Open and well-diversified economy.
English is generally spoken.
High literacy rate (96.2%).6
GDP constantly growing since 1991.
Highly educated and efficient workforce -best educational system in Latin
America.7
Ranked first in political stability in Latin America, with more than 120 years of
solid democracy.
Safest country in Latin America.8
5
The Global Competitiveness Index 2012–2013: World Economic Forum
6
United Nations Human Development Report
World Economic Forum
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Top recipient of foreign direct investment per capita in Central America and
second in Latin America.
International standards for Intellectual Property protection.
Tax and customs considerations
Four investment incentive programs operate in Costa Rica: the free trade zone
system, an inward-processing regime, a duty drawback procedure, and the tourism
development incentives regime. These incentives are available equally to foreign
and domestic investors.
The Free Trade Zone Regime provides 100% tax exemption to all sectors with an
option for either 10-year period or no expiration period. For manufacturing projects
with an investment of USD $10 million (approximately £6.5 million) or more they
can receive 100% income tax exemption for an 8-year period and the following 4
years a 50% income tax exemption (additional 8-year renewal periods are possible
if significant reinvestment is made). Companies that apply can set up their
operations inside one of the privately-owned Free Trade Zone Industrial Parks.
Most of these industrial parks are located within 20 miles from the main
international airport.
Other taxes include:
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Sales tax: 13%
Selective consumption tax: between 5% and 75% depending on the product.
Customs procedures in Costa Rica are carried out through an agent responsible
for presenting declaration forms to the Customs Office. The importer must provide
all required documentation, such as commercial invoices, bills of lading, insurance
agreements (if any),and technical specifications of the product. This is done mainly
to designate the correct coding of the merchandise within the Central American
Customs System.
The following sectors offer the greatest opportunities to UK companies:
Services
Costa Rica works with multifunctional modern processes like financial analysis,
regional centres, software development and information technologies, engineering
and design. The country stands as the first exporter of high value added services in
Latin America, over Chile and Brazil. The amount of companies in the sector grew
8
2014 Latin America Security Index
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from 6 to 120 in the last 15 years. There are many opportunities for UK companies
in the services sector, including:
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Contact centres
Shared and back office services
Digital technologies
Design and engineering
Regional hubs
Advanced manufacturing
Costa Rica is #1 Latin America for production process sophistication. It has a
consolidated industry that operates with a high level of complexity, diversity of
manufactured products and great dynamism. This is due to a strong educational
system that leads to a highly skilled workforce. In the last 15 years the amount of
companies in this sector has doubled which introduced the country as a relevant
part of Global Value Chains. There are many opportunities for UK companies,
including provision of:
1. Electronics
2. Automotive and aerospace components
Life sciences
Costa Rica is leader in MedTech investment in the region. According to the
MEDTECH report 2014 the country has attracted 47 MedTech projects over a fiveyear period including 18 in 2012, and ranking 7th globally in terms of the number of
manufacturing projects ahead of the Netherlands, Brazil and Mexico. The sector
has grown over 190% in the last decade.
Opportunities for UK companies include:
1. Medical devices
2. Biotechnology development
Clean technologies
Costa Rica aims to be carbon neutral by 2021, which brings opportunities for green
technologies. UK companies can help with development and production of
components within the supply chain.
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4. Business and Human Rights
In Costa Rica, foreigners have equal rights and obligations; they have no limits to
property handling and they can conduct business activities freely, since there is
free capital movement without foreign exchange controls. Multinational companies
must comply with the same procedures and regulations as local companies do to
start operations in the country.
Costa Rica still has some limitations and regulatory procedures, especially
regarding the protection of public health, (human, animal or plant), security, the
environment, and the compliance with the adequate quality standards. There are
also laws and regulations in the following areas: Anti-discrimination and
Harassment; Child and Youth Labour; Statutory Cash Bonus; Workplace Safety;
Social Security and Insurance; Taxes; Pensions; Immigration; Association and
Union; Confidentiality/Non-Disclosure of Information. 5. Bribery and Corruption
Costa Rica has ratified the UN Anticorruption Convention, the OECD Convention
on Combating Bribery and the Inter-American Convention against Corruption in
1997. This initiative of the Organization for Economic Cooperation and
Development (OECD) and the Organization of American States (OAS) obligates
subscribing nations to implement criminal sanctions for corruption. Costa Rica also
ratified the UN Anti-Corruption Convention in March 2007 and has laws,
regulations and penalties to combat corruption, though the resources available to
enforce those laws have been limited.
A series of high-profile corruption cases in recent years involving directors of stateowned enterprises as well as two ex-presidents have helped emphasise that even
senior officials may be prosecuted on corruption charges. Acts of bribery, including
those directed against government officials, are criminal acts punishable by
imprisonment. Public officials convicted of receiving bribes are subject to prison
sentences of up to ten years, according to the Costa Rican Criminal Code (Articles
340-347). Entrepreneurs may not deduct the costs of bribes or any other criminal
activity as business expenses.
6. Terrorism and Security
Read the latest on terrorism and protective security in Costa Rica on the FCO’s
travel advice page
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7. Intellectual Property
While the legal framework governing intellectual property exists, Costa Rica does
not adequately enforce those rights. Significant delays in judicial proceedings and
a lack of official investigators, public prosecutors, and criminal and civil judges
specializing in intellectual property continue to hamper effective enforcement.
Costa Rica is a signatory to the main International agreements on Intellectual
property and is a member of the World Intellectual Property Organisation
(WIPO). The Costa Rican Legislative Assembly has also ratified the General
Agreement on Tariffs and Trade (GATT) agreement on Trade Related Aspects of
Intellectual Property (TRIPS) and the Paris Convention for the Protection of
Industrial Property. In September 2000, Congress passed a law which brings into
force international treaty obligations with the WTO and TRIPS.
In order to obtain a patent in Costa Rica, an applicant must apply to the Registry
Office. This process usually takes two years. To register a trademark, the applicant
must submit a power of attorney requiring only notarization, a certified copy of the
original registration or a legalised Declaration of Adoption of the Trademark. In
addition, the applicant or local representative must supply one printing block and
twenty prints of the trademark. The registration processes take approximately
seven to eight months.
8. UK Trade & Investment Contact
If you require more information about Costa Rica, should contact:
UK Trade & Investment Enquiry Service
Tel: +44 (0)20 7215 8000
Fax: +44 (0)141 228 3693
Email: enquiries@ukti.gsi.gov.uk
If you prefer to contact the team in Costa Rica directly, contact:
UK Trade and Investment Costa Rica British Embassy San José
Centro Colón,Piso 11, Calles 38 y 40, Paseo Colón
San José, Costa Rica
Telephone: + (506) 2258-2025 Fax: + (506) 2233-9938
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Luisa C. Pastor
Trade and Investment Director
Email: ukin.costarica@fco.gov.uk
9. Useful Links
British Embassy San José www.ukincostarica.fco.gov.uk
CINDE –Costa Rican Investment Promotion Agency www.cinde.org
Costa Rican Ministry of Economy and Industry www.meic.go.cr
Costa Rican Ministry of Foreign Trade www.comex.go.cr
Costa Rican Central Bank (Main Economic Statistics) www.bccr.fi.cr
PROCOMER -Costa Rica’s Trade Promotion Authority
http://www.procomer.com/Ingles/index.html
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