Foreign investment in Costa Rica is Robust

Last year, in 2021, Costa Rica reached a record number in attracting Foreign Direct Investment (FDI) projects. One hundred and three were initiated. This figure represents an increase of 30% over the previous year. This result is according to the leaders and specialists from the Chamber of Exporters of Costa Rica (CADEXCO), a non-profit business organization founded in 1981.

Foreign investment in Costa Rica reached one hundred and three projects in 2021

Of the one hundred and three investment projects in Costa Rica last year, seventy-one correspond to reinvestments for facilities expansion and diversification of companies. The remaining thirty-two investments were made by companies that are new to the country.

“The current situation creates new challenges that we must face. The export sector has been a motor of post-pandemic economic reactivation by maintaining and creating jobs. It is imperative that Costa Rica continue promoting mechanisms that allow the sector to be competitive,” said Laura Bonilla, President of CADEXCO.

For their part, specialists Pilar Camacho and Adrián Rodríguez from CADEXCO indicated that nearshoring is an opportunity that Costa Rica has been able to take advantage of. The two add that there is still much for the country to explore since the Covid-19 health crisis led many companies to move operations, manufacturing, and/or distribution closer to their customers to offset high transportation costs and logistical uncertainty.

Costa Rica is a prime site for nearshoring

Nearshoring is the strategy of relocating value and supply chains from distant points, such as the Asia Pacific region, to the Western Hemisphere. This action is taken to reduce costs and to avoid interruptions in supply chains in the event of a possible health crisis or shortage of containers, among others. It is a mechanism representing a significant opportunity to augment foreign investment in Costa Rica.

They added that this strategy brings great challenges with it for the countries of the Central American isthmus, which seek to attract investment. Taking advantage of the nearshoring trend is not only a question of geographic location but also the availability of a specialized labor force, bilingual talent, logistical and technological infrastructure, political stability, and legal certainty, among other factors that create a positive business climate.

“The governments that point to this strategy must ensure that they guarantee a favorable environment and a stable legal framework as an alternative for companies that are looking to relocate their manufacturing or service operations,” added Camacho and Rodríguez.

In this regard, they reiterated that the country has had a successful strategy for attracting foreign direct investment in Costa Rica. Much recent success is based on the fact that the nation is one of the allies of the United States in the region and that it has a successful free trade agreement in the DR-CAFTA. In addition to these factors, it has a robust and attractive free trade zone program that is based on a stable legal framework.

Another factor positively affecting the flow of foreign investment in Costa Rica is the availability of talented human resources. A supply of skilled workers has allowed the country to stand out in high-value-added sectors, such as life sciences, related to manufacturing advanced medical devices.

High-value exports result from foreign investment in Costa Rica

According to official data from the Ministry of Foreign Trade of Costa Rica, in 2007, foreign investment in Cost Rica totaled approximately US $2 billion. Of this amount, the manufacturing industry recorded an influx of US $865,000.

In 2018, the total foreign direct investment (FDI) flow corresponded to a capital capture of  US $2.1 billion. Of this figure, just over one million dollars went to the manufacturing industry.

Camacho and Rodríguez indicated that the value that the country offers to the world in terms of foreign investment in Costa Rica is based on four fundamental axes. They are political stability resulting from a long democratic tradition, geographical location, the development of skilled human talent, and, finally, the policies of openness to trade and investment promoted by different successive governments.

As an effect and result of these policies, they pointed out that today more than 876,000 people work directly and indirectly in the export sector.

“Costa Rica is making efforts to attract foreign direct investment in sectors such as information technology services and life sciences. Additionally, efforts have recently been strengthened to obtain further investment in tourism,” they pointed out.

Precisely, between November 2021 and January 2022, the then President of the Republic of Costa Rica, Carlos Alvarado, participated in these official efforts to attract new foreign investment or to expand others already underway.

As an example of success in attracting foreign investment in Costa Rica, on November 11, 2021, the first investment of the firm Nevro was inaugurated. The company is listed on the New York Stock Exchange and is engaged in the vertical manufacturing of medical devices to treat chronic pain. The approximate investment of US $21 million over the course of 2022 will provide around one hundred jobs.

Subsequently, on January 24, President Alvarado inaugurated a second plant for Biomerics. The company is a leading contract manufacturer for the medical intervention device market. Biomerics will eventually generate 250 new jobs. In May of this year, Coloplast, a Danish company, announced that it would expand its ostomy and incontinence care device manufacturing facility. This foreign investment in Costa Rica is valued at US $80 million and will bring the company’s total employment to 450 individuals by the end of 2022.