Country Commercial Guide Summary

Market Overview

Costa Rica’s stable government and democratic traditions have made it historically the leader in the region for international business and tourism. Costa Rica offers ports on both the Pacific and Caribbean coasts and two international airports, one in the Central Valley serving the greater metropolitan area of San Jose and one in Liberia in the northwest province of Guanacaste. In a significant step forward for the development of the country and its port infrastructure, Dutch-based APM Terminals broke ground in early 2015 on its US$1 billion container port on the Caribbean coast. In recent years, Costa Rica’s network of free trade zones have expanded outside of the Central Valley and the number of international companies investing in the country has reached historic numbers.
The U.S. remains Costa Rica’s largest trading partner and Costa Rica’s largest foreign direct investor. In 2015, the U.S. had a US$1.7 billion trade surplus with Costa Rica primarily due to Intel’s relocation of their chip manufacturing plant in 2014. Intel now operates one of two Global Innovation Center in Costa Rica. 40% of the imports in to Costa Rica come from the U.S. Foreign direct investment in Costa Rica continues to increase and reached US$2.85 billion in 2015. Nearly 53% of that investment came from the U.S.
The Central American Free Trade Agreement (CAFTA-DR) with the U.S. was ratified in Costa Rica in 2009. Costa Rica was the last country to ratify the agreement that this year celebrates 10 years from the entry into force for the United States and other countries in the region in 2006. This free trade agreement eliminated most of the tariffs for non-agricultural imports immediately and has made both trade and investment in the region more attractive to U.S. companies.
The Costa Rican labor force is relatively well-educated compared to other countries in Central America. The country claims a literacy rate of 97 percent and English is widely spoken primarily due to Costa Rica’s tourism industry. In recent years due to rising government debt, the major credit rating agencies – Standard & Poor’s, Moody’s and Fitch – have downgraded Costa Rica’s risk ratings. The country is currently debating major fiscal reform legislation to cut the budget deficits and stop the growth in debt.
Costa Rica announced its intention to become an OECD member in 2013 and since then has been actively working with the OECD toward accession. In 2015, Costa Rica announced its roadmap to accession and is currently working with over 20 OECD committees to adopt policy changes that will bring Costa Rica’s practices and laws into compliance with OECD norms and commitments.
There are no controls on capital flows in or out of Costa Rica or on portfolio investment in publicly traded companies but companies are subject to local taxes. Foreigners can own property with no title restrictions.

Market Challenges

Much of Costa Rica’s basic infrastructure – ports, roads, water systems – needs major upgrading. Private-public partnerships as well as concessions continue to face numerous legal and procedural challenges that have delayed, or in some cases, canceled key infrastructure projects. Even China, which has sought to invest in two major infrastructure upgrades, has seen these projects stalled by bureaucratic and legal concerns.
Costa Rica’s often slow and cumbersome bureaucracy poses another challenge to doing business in the country. The World Bank’s Doing Business in 2015 ranked Costa Rica 83 of 189 which was a slight decline from the rating in 2014 of 78 out of 189.
Costa Rica has historically placed a high priority on education and the creation of a skilled work force, but education outcomes fell behind in the past decade. The country needs more English-language and other languages such as Portuguese, Mandarin and French speakers as well as more graduates and programs in Science, Technology, Engineering and Math (STEM), and needs to stem growing high school drop-out rates. Costa Rica is updating and expanding English instruction throughout the country, with a new curriculum that will be introduced in 2017.
Costa Rican laws, regulations and practices are generally transparent and foster competition, except in the sectors controlled by a state monopoly, where competition is explicitly excluded. When applying environmental regulations, the Costa Rican organization that reviews environmental impact statements has been slow in issuing its findings, causing delays for investors in completing projects.
While, Costa Rica’s Digital Government improved product registration times significantly with the digitalization of the process, product registration remains a challenge and companies should expect delays.
In recent years, the government has worked to improve enforcement of intellectual property laws in the country yet Costa Rica remains on the U.S. Trade Representatives Watch List of countries with IPR challenges.

Market Opportunities

Costa Rica’s proximity to the U.S. is a major opportunity for U.S. exporters. With ports of entry on both coasts U.S. exporters from the West, Gulf and East Coasts can have products in Costa Rica in less than a week and can easily travel to meet with sales representatives, distributors or end clients within the same day. There are now direct flights to 15 U.S. cities from Costa Rica and the U.S. carriers United, American, Southwest, Delta, Alaska, Jet Blue and Spirit airlines have direct flights to the U.S. from both international airports in the country.
Costa Rica’s GDP per capita in 2015 was nearly $11,000 which compares to that of Mexico and Panama in terms of economic development. Costa Rica has a strong middle class with purchasing power.
Market prospects are excellent in the following sectors: building products, hotel and restaurant equipment, renewable energy, franchising and cosmetics. Prospects are also good for auto parts and service equipment, drugs and pharmaceuticals, construction equipment, packaging and education and tourism to the U.S.

Market Entry Strategy

Costa Rica has few market entry challenges and U.S. products and services enjoy an excellent reputation making Costa Rica a good market for U.S. companies.
One of the most common market entry options is to appoint an agent or distributor. Another option is to find a local partner who can provide market knowledge and contacts. Other businesses have been successful via licenses or franchises.
The Commercial Service in Costa Rica advises U.S. companies on how best to enter the market and offers a range of services to assist U.S. companies find a local partner or promote through the local partner products already being commercialized or soon to be launched in the market. The Commercial Service can also assist with due diligence on a perspective local company partner.
To learn more about how we can assist you in doing business in Costa Rica and about our local business service providers offering translation, transportation, legal and other services, please visit our website at https://www.trade.gov/costa-rica