Transcript INVESTING IN COSTA RICA

Why Costa Rica?
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Strategic Location
Political and Social stability
Economic Stability
Human Resources
Incentives
Infrastructure
Legal Security
Quality of Life
Great Potential
Business Sectors
Professional Assistance from CINDE
Strategic Location
•In the center of the Americas
•Central Standard Time Zone
•2:50 hours flying time to
Miami
•Duty free access to the U.S.
through CBI
Political and social stability
• Tradition of peace and stability
– Army abolished in 1948
• Government
– More than 100 years of democracy
– 3 independent powers
– 4 year term with reelection
– Presidential System
Political and social stability
• No financial crisis for more than 20 years
– Yearly output growth of 4.2%
– $4,361 per capita income in 2004
• As a result, Costa Rica benefits from good access to the
world’s capital markets and moderate risk premium
• Costa Rican Long Term Bond Ratings:
Moody’s
Ba1 (non investment grade)
FITCH Ratings
BB (speculative)
Standard & Poor’s
BB (speculative)
Economic Stability
Macroeconomic Stability in spite of world economic crisis periods
35%
30%
Thailand
I nf l a t i on ( C ost a R i c a )
Mexico,
Malaysia
D e v a l ua t i on ( C ost a R i c a )
Turkey,
Indonesia
Venezuela
Czec Rep.
A
Phillipines
r
Korea
g
Brazil
e
Rusia
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25%
20%
t
15%
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n
10%
a
5%
Source: CINDE
04
03
02
01
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99
98
97
96
95
94
93
92
91
90
0%
Foreign Direct Investment
Annual Growth of FDI
700
US$ Million
600
500
400
300
200
100
0
1989
1991
1993
1995
1997
1999
2001
2003
Open Economy
Openness of the economy
120%
100%
80%
60%
40%
20%
1980
2003
* Goods trade as porcentage of the GDP, 1980-2003; China: 2002.
Source: WTO y IMF, 2004
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Strategic market access
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Tax free access to:
– USA through the CBI
– Mexico
– Canada
– Central America
– Chile
– Dominican Republic
– Panama
– CARICOM
Preferential access through the GPS to:
– Europe and Asia
Free Trade Agreements negotiations:
– USA (signed)
– Investment Promotion and Protection agreements with several countries
Human Resources
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Population to October, 2005:
– 4.3 million
– 34.2% of population is 15 to
35 years old
Labor force 2004: 1.8 million
– Unemployment, July 2005:
6.6%
– Underemployment, July 2005:
8.4%
Universal Health Care and
Education System
– Pillars for the national stability
– 6.5% of the GDP’s destiny is
for education
Age Structure by Gender
80+
Males
Females
60-69
40-49
20-29
0-9
12 10 8
6
4
2
0
2
Percentage
4
6
8 10 12
Literacy Rate
Ireland
Costa Rica
Chile
Hong Kong (SAR)
Phillipines
Singapoure
Mexico
Dominican Rep.
75
80
85
90
95
100
Source: United Nations, Human Development Index, 2004
Education
• Universal, free and compulsory education since
1870 (the first in Latin America)
• Computer labs in 50% of the primary schools and
100% of high schools
• English teaching in 50% of public schools and
100% of private schools
• 92% of high school students will present graduate
English test (*)
*Source: Ministry of Public Education
Education
• Training centers
– Technical High Schools (81)
– University Foundations
– INA: Free on-site technical training
– CEFOF: Center for training trainers
– CENFOTEC: Software training
• Universities, 56 (52 private, 4 state)
– Including HBS/INCAE.
Education
High School Students (1990-2003)
250000
200000
150000
100000
50000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
1°, 2° and 3° grade students
4° and 5° grade students
Source: Estado de la Nación
Labor Force
• Costa Ricans are healthy and motivated
learners
• High observed productivity and learning speed
by Free Zone Companies
• Favorable labor environment:
worker organization (Solidarismo)
• Low Turnover
non-union
Low Turnover
Aggregate Personnel Turn Over Rate
Electronics & Medical Devices Sectors
7.2
Qualified workers
Non - qualified workers
6.1
5.3
Administrative
Technicians
4.1
Engineers
Managers
0
3.6
1.4
2
4
Percentage
6
8
Minimum wages
In US$
Category
Cost
per hour
Non qualified
Semi qualified
Qualified
Specialized
1.81
1.96
2.11
2.43
Total
per year
(thousands)
4.52
4.89
5.26
6.06
NOTES:
All costs include all labor charges paid by the company, Christmas bonus and reserves for
vacations, holidays and severance (47.98% in total). Minimum salaries effective from July
1st to December 31st of 2005. Exchange rate used: 495 colons per US$ (expected and the
year end). Normal week of 48 hours and 8 hours per day
Average Salaries
Occupation
General Manager
Operations Manager &
Customers Service Manager
Production Supervisor
Assistants
Bilingual Secretary
Specialized Worker
Non Specialized Worker
Annual Cost
(Thousands of US$)
122.1 – 210.1
42.0 – 67.6
10.4 – 15.7
9.4 – 12.5
10.5 – 13.
5.9 – 7.5
4.6 – 5.4
NOTES:
The total cost includes all the work charges paid by the company, the Christmas bonus an
reserves for vacations, holidays and severance. Source: Consulting Companies, Survey for the
second semester of 2004.
Investment Incentives
FREE TRADE ZONE REGIME
• 100% exemption on:
– Import rights for raw materials, equipment and
components.
– Export taxes, local sales tax, excise taxes, etc
– Profits repatriation taxes.
– Those incentives dependents on the exporter’s
performance must follow the WTO Guidelines
starting from December 2007.
Investment Incentives
• Minimum Investment:
– US$ 150,000 inside free trade industrial parks
– US$ 2,000,000 outside free trade industrial
parks
– With possibility of sale to other exporters in the
country and up to 25% of the production in the
local market.
Investment Incentives
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ACTIVE FINISHING REGIME
Suspension of 100% of the import taxes over:
Raw materials
Components
Packing
Machinery and equipment
It does not apply a minimum amount of
investment
Proportional payment of sales taxes for the
Central American markets
Infrastructure
• Industrial Parks
– Designated areas for Free Trade Zone companies
– Privately owned and managed
– Variety of services:
• On site expedited customs
• Health
• Security
• Maintenance
• Day care
• Garbage disposal, etc
– Located 7 km away from the Juan Santamaria Intl.
Airport
Industrial Parks
Infrastructure
• Water and Electricity
• Abundant water availability
• Enough and trustable electric
power supply
– Hydroelectric, geothermic
and other sources
– Electric service coverage:
97%
• Installed capacity of 1.962 MW
• Approximated cost of $0,07 $0,12 per KW/Hour, industrial
rate
• Clean energy: 97.5% of the
energy sources are renewable.
Infrastructure
• Transportation
• Ports on both shores
• 24 maritime cargo lines
service
• Main airport located 15 km
away from San Jose
– 2º better airport of LatinAmerican
– 3º better airport of the
world
(5
million
passengers
per
year
category)
• Competitive maritime rates to
the USA, Europe and Asia
Infrastructure
• Telecommunications
• Direct dialing worldwide
• Tone dialing, call waiting,
call forwarding, etc.
• Redundant fiber optics
network
• Point to point connections
• Direct world wide fiber
optic access through Maya
1 & Arcos cables
Submarine Cables
Legal Security
• Foreigners have no limits of property handling
and they can drive business activities freely.
• Foreigners have constitutional equality of
rights and obligations.
• Free capital movement
• Intellectual property laws in accordance with
WTO Guidelines.
Quality of life
• Life expectancy: 78.7
years
• Health-Care Public
Services Coverage:
98.3%
• Infant Mortality very
similar to those of
developed countries:
9.75 death per each
1.000 born alive
Quality of life
• San Jose is among the cities with the best
quality of life in Latin America
– The Economist Intelligence Unit, Liveability
Rankings 2005
• Costa Rica is the 35° country of the world
in Quality of life.
– The World in 2005, The Economist
• The surveys highlight Costa Rica as the country
with the most solid and uninterrupted democracy
Great Potential
• “Central American Country of the Future”
– FDI Magazine, 2005
• 5th High-Tech exporter of the world
– United Nations Human Development Report 2005
• 35th in the Trade and Development Index
– UNCTAD, 2005
• One of the most successful FDI attraction
advantage countries
– UNCTAD: World Investment Report, 2002; and CEPAL
“FDI in Latin America” 2003
Success Story
William Abraham,
General Manager, INTEL Costa Rica
Electronics
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US $1,514 million exported in 2004
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12,000 direct employees
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US$ 172.5 million in FDI (2004)
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Product Lines:
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Intel, Sawtek, Remec, EMC Technology, Bourns, Teradyne, Suttle, Merrimac,
Narda Microwave/ L3, Aetec, Conair/Babyliss, Panasonic, Current Controls, ITT
Industries, Panduit, Pharos, Micro Technologies, Pycon, IDI International,
Cuttler Hammer, Schneider/Square D; Wai Semicon and others...
RF Microwave
Autotronics
Semiconductors
Other subsectors
Medical Devices
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US $521 million exported in 2004
4,800 direct employees through 2004
US $152 million in FDI in 2004
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Product Lines:
Cardiovascular
Orthopedic
Image diagnostics
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It is one of the most dynamic and productive sectors in Costa Rica.
Exports increased by 5% during 2003.
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Baxter Healthcare and Hospira, leaders of the industry, have operations in
Costa Rica.
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Industry growth has created the need to attract new company suppliers to
provide the industry with: molding, filters, packaging, resins and other
supplies.
Services
• US $37.3 million in FDI in 2003
• 6873 direct jobs through 2003
• Costa Rica offers the right conditions to companies for added value to their
production with cost effective infrastructure, its labor force’s characteristics, and
world wide services, such as:
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Shared service Centers
Back Offices
Software Development
Call Centers
Engineering, Architecture & Design
Others Sectors
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Special Projects
– Existing industrial fashion designing capabilities.
– Back office services (offshoring /outsourcing) in marketing, logistics, sourcing,
quality assurance and others.
– Assembly of medical & other specialized products.
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Tourism
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The national tourism market maintains a 7.1% annual growth.
Rooms have been expanding at an annual 4.5%.
More than one million tourists visit Costa Rica every year.
48% of all tourists come from the USA, 16% from Europe and 36% from other
countries.
– Great tourist real estate development presence, golf courses and marinas
Support Industry
• Plastic injection, extrusion, blow molding
– (Electroplast, Plásticos Modernos, Plásticos Star, PPC)
• Sheet metal
– (DIMMSA, Leogar, Perfiles Ranurados)
• Precision Machining
– (R&R,
Prolex,
Oberg
Industeries,
FEMA,
Weststar,
Microtechnologies, Olympic Machining, MOTROSA)
• Tools and Dies, Stamping & Plating
• Quality and manufacturing systems:
– ISO 9000, ISO 14000, QS9000, TL9000, 5S, TQM, Six Sigma.
Techshop,
Assistance from CINDE
• CINDE, the Costa Rican Investment Promotion Agency, is a
private non-profit nonpolitical organization, founded in
1982.
• Providing assistance to investors through the New York
and Costa Rica offices
• Active promotion of foreign investment, local support, and
post establishment services.
• Support for new projects and reinvestment
Solidarista Associations
• Employer-sponsored workers’ associations
• Each company has an organization, in which white and
blue collar workers participate
• The organization operates as a credit union which
provides multiple benefits to workers
• It is funded by employers, with part of the severance
provisions, and by employees
• Solidarista organizations ARE NOT sector-wide
bargaining instances, as American unions