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Local suppliers sell products worth more than $ 2.3 billion a year to companies housed in Costa Rican Free Zones. Items sold are in areas such as product sterilization, metalworking, packaging, plastic injection molding, and storage and labeling
At least 11,000 domestic companies are doing business, with almost 400 multinationals operating in Costa Rican free zones. In addition to a wide array of intermediate products, these companies are also providers of services that international companies require to maintain their operations.
Costa Rican Free Zone companies consume a diversity of goods and services.
The services range from the most common, such as surveillance or cleaning, to the more specialized, such as sterilizing products from the life sciences industry. They also supply free zone tenants with intermediate goods for metalworking, packaging, plastic injection molding, logistics, storage, product parts, and labeling, among others.
At least 11,000 companies in Costa Rica are economically linked to the almost 400 multinationals that operate in the country’s free zone regime. This is the case to such an extent that they provide services and intermediate products that are valued at US $ 2.3 billion in one year.
The growth of these supplier companies is closely linked to the advancement of Costa Rican Free Zones. This regime presented an increase in the value of its exports of 7% when comparing the calendar year 2020 with 2019. This result occurred despite the challenges presented by the coronavirus pandemic. This is according to the statistical portal of Procomer, the country’s export promotion agency. In the first eight months of 2021, that figure increased by 37%, compared to the same period in 2020.
This increase in the activity of the companies housed in Costa Rican Free Zones has impacted the growing volume of their local purchases. This information is according to Costa Rica’s Association of Free Zones (Azofras).
Between 2016 and 2020, for example, 191 new companies entered the free zone regime, which, as of 2019, was made up of 394 companies. The breakdown of the types of companies in Costa Rican Free Zones is as follows: 53% from the service sector, 42% from manufacturing, and 5% from park administrators and trading companies.
According to the Association’s leadership, the life sciences industries are a great example of fostering supplier relationships. Things such as sterilization services, metal treatment, and coating companies, machinery and equipment, plastic parts, containers and packaging, semiconductors, business and administrative support are all sourced locally.
Procomer’s records also maintain that the agri-food and service sectors are also among those that make the highest volume of local purchases. They procure packaging, operational support services, engineering services, and food.
In many cases, tenants in Costa Rican Free Zones make purchases between themselves. Among these products are sterilization services, equipment, and construction of clean rooms, tools for manufacturing, molding, extrusions, and plastic injection parts.
More specialization in Costa Rican Free Zones
Carlos Wong, president of Azofras, highlighted specific specialized cases such as the installation of two companies with sterilization services. Having this service available locally eliminates the need to send the product abroad to undergo this process. This reduces costs and allows multinationals to export directly to hospitals from their production facilities in Costa Rica.
Another company installed warehouse systems with specialized storage. These products are very different from conventional ones and are made specifically for the life sciences sector. Other warehouses contain a supply of practically everything that large companies require within easy reach.
The supplier situation in Costa Rican Free Zones has been strengthening and becoming more specialized with the development of industry clusters and global value chains.
“The capabilities of the ecosystem (as a whole) that a country offers are key to the decision-making of multinational companies when investing,” said Jorge Sequeira, general director of the Costa Rican Coalition of Development Initiatives (Cinde).
“Having suppliers in the same free zone, whether local or international, generates efficiencies. This circumstance also presents competitive advantages in costs, and convenience, among others,” added Sequeira.
“If I have the suppliers close by, there is a greater guarantee of delivering products to the tenants of Costa Rican Free Zones on time. It is important that companies have efficient logistics chains, which is why they are looking for supplier proximity”, Wong explained.
To achieve this end, volume is also required. Wong recalled that some years ago when they began to arrange for firms with sterilization services to set up in the country, industry “experts” told them that it would be impossible.
But life sciences activities grew. As a result, two such companies already perform the service mentioned above, while exports continue to increase.
In addition to the life sciences sector, those of advanced manufacturing (especially electronics, such as Intel) and agribusiness will continue to grow with increasingly specialized services in the country, Sequeira and Wong agreed.
Four to 80 employees in six years
In 2014, Silvio Segnini Acosta began offering services to multinationals from his company Segex. He did not foresee that a business that started with four employees would have a payroll of eighty workers today.
After only six years of existence, Segex operates in a modern $ 10 million facility which provides it with all the conditions required to meet the demands of drug and life sciences companies.
The Costa Rican firm provides import services, inventory management, quality assurance, order traceability, laboratory packaging of drugs, and the export of the final product.
“We do much more than just store the product. If we only offered such a service, we would not add value for the customer,” says Segnini when explaining how his company has progressed.
In such a specialized world full of demands and high standards, the businessman explained that even the type of doors found in the facility needs to be of particular specifications.
For this reason, the firm invested US $10 million in new facilities. Segex will pay attention to the most minuscule details, such as the storage temperature. It will also address the most minor, such as types of doors.
When looking back, the businessman recalls that in 2013 he started the adventure of establishing the company in a home office. At that time, Segex’s services were limited to transport and logistics solutions on a regional scale.
At the beginning of 2014, Segnini established relationships with Costa Rican Free Zones multinational companies by offering comprehensive value-added services. The business continues to thrive to this day.
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