Doing Business with Costa Rica

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  • By LAC Blog
  • Wednesday 30, May 2018

If your organization is considering doing business in Costa Rica, there are many factors to be aware of.  Here you’ll find an overview of the Costa Rican market and best reasons why North American companies might want to begin exporting there.   It’s also important to formulate custom strategies to penetrate this market, and consider all the obstacles for the typical North American business.

Market Overview

Recent economic indicators and trade stats are very encouraging in Costa Rica, and are important to follow.  You should also be aware of trends specific to the Canadian and US shares of various markets, the political environment (when pertinent to your industry), and current opportunities for American companies to export their goods into Costa Rica.

Foreign direct investment (FDI) in Costa Rica reached $2.85 billion USD in year 2015.  The U.S.A. has long been Costa Rica’s chief trade partner and its biggest foreign investor (a $1.6 billion USD trade surplus with Costa Rica in 2016).  Nearly 53% of the FDI comes from the States.

Political Environment

Costa Rica’s government is known for promoting international commercial projects, and practices democratic processes.  It’s increasing stability and trade programs make it a leader for international business, and even immigration, in this region.  

In 2009, the federal government sanctioned the Central American Free Trade Agreement (CAFTA-DR) with the U.S.A.  This agreement abolished most tariffs for non-agricultural imports right away, and has made fluid trade and foreign investment in the country more attractive to American business.

There are no controls on Capital Flows in or out, nor on portfolio investment in publicly-traded companies, but companies are subject to local taxes in Costa Rica.  Foreign parties can own property with no title limitations, but extra vigilance must be exercised to obey local laws governing coastal zones.

The U.S. Federal Government launched the National Export Initiative (NEI) March 2010, with the goal of supporting U.S. companies to start exporting or growing their exports to Costa Rica.  The second phase of the NEI program (NEI/NEXT) was launched in May 2014.

Logistics

Shipping to Costa Rica is convenient enough, with sea ports on both coasts.  The Port of Limón is the main one in the Caribbean Sea’s shore and the biggest one in the country.  The Port of Caldera is the biggest and most important one in the Pacific coast.  There are also 2 international airports: One serves the metropolitan San Jose area and the other in Liberia along the Guanacaste coast.  Costa Rica has a network of free trade zones spanning most of the country, making transport of goods easier, and which encourages many international companies to invest there.

Changing Business Landscape 

Doing business with this country is easier than ever today, claims a recent study conducted by the World Bank.  Costa Rica’s rating for “ease of doing business” jumped a massive 21 spots on the 2016 report.  Its rank reached #58 of the 189 countries studied in the 2016 report.  2015 brought them in at #79.

This country has been making strides to improve its business climate for several years now. In the last 5 years, Costa Rica has implemented the most regulatory reforms in the region, with 13. The biggest improvements came in access to credit, ease in paying taxes, and access to electricity.

The access to electricity was perhaps the most encouraging change.  Typically, a newly-opened business can now get electricity within 45 days, as opposed to the 55 days it used to take.  A major new hydroelectric project “Reventazon” opened in 2016, to add to the infrastructure.

Among the remaining challenges, you’ll find infrastructure, red tape and utility rates among foreign investors’ top concerns.  And the next major hurdle for Costa Rica is actually an old one: the fiscal deficit.

Before embarking on a business venture here, make sure that it is the right direction for your business. Setting up shop in Costa Rica can be complex, challenging, frustrating, bureaucratic, and let’s not forget the majority of communication will be in Spanish.  You will definitely need the right logistics partner.

This is not to say that all business in Costa Rica is unkind. It offers a friendly business climate with the government promoting foreign investment more than other countries in Latin America. After all, Costa Rica has been nicknamed that region’s new “Silicon Valley.”  Any investment that creates jobs, promotes tourism, and does not negatively impact the environment, is welcome.

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