Costa Rica Businesses

Provides the reader with an overview of doing business in Costa Rica.

Costa Rica MARKET OVERVIEW

The United States is Costa Rica’s main trading partner, accounting for 46 percent of Costa Rica’s total imports in 2004. According to U.S. Census Bureau data, the U.S. had a trade deficit of US$29.2 million with Costa Rica in 2004. This compares to a US$49.3 million surplus in 2003. U.S. exports declined slightly from $3.4 billion in 2003 to $3.3 billion in 2004.

The United States is also the leading investor in Costa Rica with $358 million in 2003, the last year for which data is available. Total investment into the country for that year amounted to $587 million. U.S. companies like Intel, Procter & Gamble and a number of franchising and service companies have facilities here.

Economic growth continues at a steady pace, with GDP rising 4.2 percent in 2004 but down from 5.6 percent in 2003. Inflation, however, rose to 13 percent last year, exceeding the Government’s goal of 10 percent.

Costa Rica MARKET CHALLENGES
The Costa Rican market is generally open. Tariffs, with certain exceptions, range from 0 to 15 percent. There have been sporadic reports of problems with Customs clearance of incoming goods.

The Costa Rican Government has not enjoyed success with certain of its concession scheme to manage many of its public works projects, including the Juan Santamaria Airport, the Pococi prison facility, and various road improvement programs.
Although Costa Rica’s IPR laws are considered to be adequate, enforcement of intellectual property laws has been lacking in many cases, due to insufficient resources and training, weaknesses in the country’s criminal code, and lack of political will to pursue such cases.

While having signed the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) in August 2004, the GOCR has still not ratified the agreement nor started discussions of the all-important implementing legislation which, among other things will ensure a phased opening of the telecommunications and insurance markets and more stringent intellectual property rights protection provisions.

Costa Rica MARKET OPPORTUNITIES
Market prospects are excellent in the following sectors: kraftpaper, paperboard, and other paper products; information and communication technology; auto parts; medical equipment; construction equipment
Future prospects in these and other sectors are likely to improve if CAFTA-DR is ratified by the Costa Rican congress and implemented properly. More than 80 percent of all non-agricultural goods, and more than 50 percent of agricultural products, will be duty-free immediately upon signing.
Over time, the agreement will open the cellular and internet service markets as well as insurance. In addition, CAFTA-DR will strengthen Costa Rica’s IPR protection regime, eliminate the dealer protection regimes, allow non-discriminatory treatment for U.S. firms in government procurement bids, and provide stronger protection for investors.

Costa Rica MARKET ENTRY STRATEGY
U.S. products enjoy an excellent reputation for their quality and price competitiveness. Proximity to the Costa Rican market is also a major advantage for U.S. exporters who wish to visit or communicate with potential customers. This facilitates close contacts and strong relationships with clients, both before and after the sale.

The U.S. Commercial Service Costa Rica advises that U.S. companies consult with local research companies and legal firms to conduct the necessary due diligence before entering into contracts with local firms. These partners will be instrumental in penetrating and expanding the market for a company’s exports.

If CAFTA-DR is approved and implemented properly, trade should be further facilitated with the market access improvements listed above.