Costa Rica is a promising country to do business in with high economic growthbut is not without some challenges.
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Costa Rica is a country with high economic growth and promising opportunities for business, but it does come with some challenges. Despite these challenges, Costa Rica remains one of the most attractive Latin American countries to do business in, with a relatively stable economy and political situation. In fact, it ranks 45th out of 77 jurisdictions assessed in TMF Group’s 2022 ‘Global Business Complexity Index’, making it one of the lower complexity Latin American markets to do business in.
The Coyol Free Zone has been identified as the leading free zone in the region and a pioneer in issues of sustainability, environment, and innovation. It has been recognized by three world rankings, including fDi Intelligence, which has placed it in the ‘Top 10 Free Zones in the World’ for the fifth consecutive year and as the best free zone in the Americas.
Costa Rica also has eight cities that appear in the most recent ranking and in the sixth edition of ‘Cities of the Future of the Americas 2021/22’. According to fDi Intelligence, the country has key geographical areas for foreign direct investment (FDI), human capital, and profitability, among other categories.
Multinational companies are encouraged to start operations under the ‘Free Zone Regime’ (FZR), which is the mainstay of Costa Rica’s export and investment promotion strategy. This regime is a set of incentives and benefits granted by the Costa Rican government to companies making new investments in the country, such as exemption from taxes on exports. These feature under laws and particular regulations coordinated by PROCROMER and other entities.
Costa Rica has been ranked by the World Economic Forum (WEF) as 44th out of the 82 economies assessed in the Social Mobility Index 2020 edition. It is bettered only by Uruguay in Latin America, and it is also recognized by the WEF as having the best educational system in the region.
According to the OECD’s economic forecast for Costa Rica, issued in June 2022, GDP is expected to grow by 3.2% in 2022 and 2.6% in 2023. Domestic demand will strengthen moderately in 2022, and exports will benefit from the reactivation of the tourism sector in the last quarter of 2022 and early 2023.
Despite the generally favorable investment climate in Costa Rica, there are still hurdles to overcome and pitfalls to be aware of when setting up or conducting business. Based on our extensive experience of assisting both local and international clients in this market, we’ve identified ten potential pinch points to be aware of, so that you can expand into Costa Rica with your eyes open. We take a look at each one in more detail here.
For example, starting a business in Costa Rica involves around nine procedures and can take up to 25 days. Although this is favorable compared to elsewhere in the Latin American/Caribbean region, where the average length of time is 31.7 days, it’s important to note. Obtaining a construction permit is also a lengthy, cumbersome process, involving 17 procedures and taking up to 138 days. Registering a property and getting electricity connected also have their own procedures and time frames.
Additionally, the unemployed population rose to 8% in the first quarter of 2021, compared with 9% in the first quarter of 2020, according to World Bank statistics. The employment rate was 60%, with more than 30% of workers holding informal jobs. Despite these challenges, Costa Rica remains a promising country to do business in, with a growing economy and stable political situation.
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