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- Picture via U.S. Department of State

U.S. highlights Costa Rica as an ideal destination for foreign investment

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Published on Monday, August 7, 2023
By the A.M. Costa Rica staff and wire services

According to a recent report by the U.S. Department of State, Costa Rica is considered to be an excellent choice for foreign investors.

The report, "2023 Investment Climate Statements in Costa Rica," named the country as one of the oldest continuous democracies in Latin America and the newest member of the Organization for Economic Cooperation and Development (OECD), with an established government institutional framework, and a diversified upper-middle-income economy. 

"The country’s well-educated labor force, relatively low levels of corruption, geographic location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives all appeal to investors," said the U.S. Department of State in its statement. 

Foreign direct investment inflow in 2022 as estimated by the Costa Rican Central Bank was $3 billion, or 4.45 percent of GDP, with the United States accounting for $2.2 billion (73 percent of total FDI). Costa Rica recorded 4.3 percent GDP growth in 2022 as it recovered from the effects of the covid-19 pandemic.

Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. 

A similar transformation took place in the tourism sector. A plethora of smaller enterprises were handling an increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. 

Ticolandia is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness. 

The Free-Trade Zone economy (FTZ) continued to expand during the pandemic, while the tourism sector had to reset and is now rebounding. The 2022 number of total arrivals was 2.3 million. That's more than double the 2020 pandemic low of one million. But are still only 75% of the 2019 pre-pandemic high.

The Costa Rican investment climate is threatened by a persistent, although currently shrinking government fiscal deficit, high unemployment (Q422, 11.7%) and underemployment (9.7%), high energy costs, deterioration of basic infrastructure, and underperformance in some key areas of government service provision, notably security, health care, and education.

The country is operating under a stabilizing agreement with the International Monetary Fund (IMF) and generally managed the Covid-19 crisis well. Moreover, its accession in 2021 to the Organization for Cooperation and Development (OECD) has exerted a positive influence by pushing the country to address its economic weaknesses through executive decrees and legislative reforms in a process that began in 2015.

The Ministry of Foreign Trade (COMEX) has protected the Free Trade Zones (FTZs) from new taxes by highlighting the benefits of the regime, promoting local supply chains, and using the FTZs as examples for other sectors of the economy. 

The administration of President Rodrigo Chaves has continued to prioritize the attraction of foreign direct investment and pursued a free trade posture, signing a new trade agreement with Ecuador and launching other negotiations.

Nevertheless, Costa Rica’s political and economic leadership faces a difficult balancing act over the coming years. The country must simultaneously exercise budget discipline and respond to demands for improved government-provided infrastructure and services, reads the report.

Related to policies towards foreign direct investment (FDI), Costa Rica actively courts placing a high priority on attracting and retaining high-quality foreign investment. 

Costa Rica has had great success over the last several decades in attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing, and the food industry. 

Costa Rican institutions are strong and effective guides and advocates for their client companies, prioritizing investment retention and maintaining an ongoing dialogue with investors, they said.

The U.S. authorities report also covers important issues such as limits on foreign control and the right to private ownership and establishment, business facilitation, bilateral investment and taxation treaties, transparency of the regulatory system, and foreign investment incentives, among many others.

Costa Rica is attracting a lot of investment from international companies. One such example is Sysco, a global food service distribution company headquartered in Houston, Texas. They recently announced the expansion of their Global Support Center (GSC) in Heredia Province.

What should Costa Rican authorities do to boost foreign investment? 
We would like to know your thoughts on this story. Send your comments to news@amcostarica.com

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