Over the last several decades manufacturing in Costa Rica has become the clear choice of many globally recognized firms.
The economy of Costa Rica has been traditionally dominated by its agricultural sector. A list of Costa Rican cash crops that have been and are still sold in export sales to overseas markets includes bananas, pineapples, coffee, sugar, rice, tropical fruits, ornamental plants, and palm oil to name a few. This state of affairs began to change significantly when Intel commenced manufacturing in Costa Rica in 1997. Since that time, the composition of the country’s GDP has changed. Whereas, prior to the arrival of Intel, the vast majority of the country’s workforce was farm labor, today only 12.9% of the Costa Rican workforce is employed in the agricultural sector of the economy. This number is surpassed by industry (18.6%) and services (68.5%). Today Costa Ricans manufacture medical devices, aerospace, and electronic components, computer parts, pharmaceuticals, jewelry, clothing, and food products, as well as perform data processing, software development, and remote customer service activities. There are seven main reasons why international companies are manufacturing in Costa Rica, as well as are conducting other profitable economic activities.
These are the positive points that are related to manufacturing in Costa Rica that have been cited most by foreign investors:
- Human Resources – Costa Rica has one of the highest literacy rates in the Americas. The rate is at 95% for residents of the country that are 15 years of age and older. Over the last three decades, Costa Rica has invested nearly 30% of its national budget in primary and secondary education. Today there are more teachers in Costa Rica than there are policemen.
Costa Rica has both public and private universities. Among the public universities that are in the country are the Instituto Technológico de Costa Rica (the Costa Rican Institute of Technology); the Universidad de Costa Rica, the Universidad Estatal a Distancia (the State Distance Learning University, the Universidad Nacional (the National University), and the National Technical University. Tuition to attend these institutions of higher learning typically costs about 50% less than that charged for in-state students at U.S. public universities. A solid education system provides a very well-educated workforce to those companies that are manufacturing in Costa Rica.
- Trajectory and Experience – For the last thirty years, Costa Rica has been successful in capturing significant foreign direct investment (FDI) that consists of high-tech manufacturing. Since that time, over 20% of Fortune 100 companies and hundreds of high-tech firms have established operations in the country.
The most prominent of industry in Costa Rica in this realm is the medical device sector. Today there are seventy medical device companies manufacturing in Costa Rica. Among them are well-known international firms such as Baxter, Medtronic, Allergan, Boston Scientific, and Hologic. Costa Rican medical device exports have tripled since 2007, and the life sciences industry overtook the agriculture sector in exports for the first time in 2018. Medical device companies manufacturing in Costa Rica sent US $3 billion in product overseas. This comprised 27% of the nation’s total exports.
Additionally, Costa Rica has a nascent aerospace industry cluster which consists of several NADCAP certified companies that are equipped with vertical & horizontal machining center and CNC multifunctional turning center capability. Aerospace companies that are manufacturing in Costa Rica are capable of using exotic alloys and materials to make high tolerance components and finished parts.
- Geographic Location – Companies that are manufacturing in Costa Rica have the advantage of being strategically situated at the midpoint between both the North and South American continents. The country has ports on the Atlantic and Pacific Oceans. This ensures advantageous trade access to markets on both the East and West Coast of both North and South America.
- Commercial Openness – Those companies that are manufacturing in Costa Rica can take advantage of the many free trade agreements that the country has entered into. For the past twenty years, the government of Costa Rica has been pursuing preferential trade accords with its commercial partners. In addition to being a member of the World Trade Organization (WTO) and a party to several Central American Integration Agreements, Costa Rica has entered into many free trade agreements that encompass close to 80% of the country’s foreign trade. Among these agreements are:
- The Colombia-Costa Rica Free Trade Agreement;
- The Central America Free Trade Agreement;
- The Canada Costa-Rica Free Trade Agreement;
- The Caribbean Community Market (CARICOM) Free Trade Agreement;
- The Chile-Costa Rica Free Trade Agreement;
- The China-Costa Rica Free Trade Agreement;
- The Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA);
- The Mexico-Costa Rica Free Trade Agreement;
- The Panama-Costa Rica Free Trade Agreement;
- The Peru-Costa Rica Free Trade Agreement;
- The Singapore-Costa Rica Free Trade Agreement;
- The Association Agreement between Central America and the European Union (AACUE)
- The European Free Trade Association Commercial Accord.
- Political Stability – Companies that are manufacturing in Costa Rica enjoy the benefits of the political stability that the country has promoted and enjoyed for many decades. Costa Rica is considered the most stable country in Central America, and even in Latin America as a whole. The country is a constitutional democratic republic that abolished its army in 1949. After this date, the Costa Rican government allocated budgetary resources that once went to the country’s defense to education and to national healthcare. Several factors have contributed to Costa Rica’s political stability. These include enlightened leadership, comparative prosperity, flexible class lines, and accessible educational opportunities.
- Favorable Business Climate – Costa Rica is very open to foreign direct investment (FDI). Much of the country’s recent economic success can be traced back to foreign investment in Costa Rican Free Trade Zones (FTZs). Free Trade Zones in Costa Rica are areas in the country that are considered to be outside of the nation’s national customs territory. According to government data, one in five jobs created since twenty fifteen have been created by companies that are manufacturing in Costa Rica in country’s FTZs. Free Trade Zones in Costa Rica offer a number of tax incentives to both foreign and domestic investors. Among these are:
- 100% tax exemption on import duties on raw materials, components, and capital goods;
- 100% exemption on taxes on profits for 8 years, and 50% for the following four years;
- 100% exemption on export taxes, local sales taxes, excise taxes, and taxes on profit repatriation;
- 100% exemption on municipal and capital taxes;
- No restrictions on capital repatriation or foreign currency management;
- Fully expedited on-site customs clearance;
- Permission to sell 40% of manufactured product to domestic market customers.
- Quality of Life –This country of 4.5 million inhabitants is popular with expats as well as with the foreign-born employees of companies that are manufacturing in Costa Rica for numerous reasons. In addition to having beautiful beaches on both its Atlantic and Pacific Coasts, much of the country is covered with tropical forests and protected nature preserves. In addition to this, the Costa Rican healthcare system is highly acclaimed. It has universal health insurance and has both public and private hospitals that are world-class.
Companies that are seeking more information about the advantages and benefits of manufacturing in Costa Rica can fill out the request for information page that is below. The Central American Group staff will respond promptly to all inquiries.
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