Contact the Central American Group to establish nearshore manufacturing operations in the Green Park Free Zone.
Concerted and complementary efforts between government authorities, legislators, and the private sector will ensure Costa Rica will move forward to take advantage of international trends in Nearshoring and Friendshoring.
Nearshoring has gained in popularity
Nearshoring is a contemporary international trend in the business world that consists of moving production processes to a country closer to its end-user market. Companies alter their manufacturing supply chains to reduce transportation times and costs. In addition to these benefits, nearshoring operations are an attractive option due to regulatory alignment. Nearshore countries may have similar or compatible legal frameworks, intellectual property protections, and regulatory standards. This alignment can simplify compliance requirements and reduce potential risks associated with offshore outsourcing.
The objective of trends in nearshoring and friendshoring is to bring the production centers closer to home and solve the problems of long distances and the considerable time differences between continents.
Factors that have fueled these trends in nearshoring and friendshoring include the trade war, tensions between the United States and China, and the supply and container crisis during the COVID-19 pandemic.
Due to its proximity to the US market, Mexico is the country that is situated to benefit the most from nearshoring. Costa Rica is also beginning to join this trend as a recipient country of new foreign direct investment. In addition to being close to the United States, other features that make Costa Rica an attractive nearshore option for US businesses include:
- A highly skilled workforce: Costa Rica has a well-educated workforce with a high English proficiency.
- Political and economic stability: Costa Rica has a long-standing tradition of peace and democracy. It has a robust legal framework that has created a favorable business environment.
- Cultural Affinity: Costa Rica shares many cultural similarities with the United States. This circumstance helps US and Costa Rican businessmen and women understand each other.
Trends in nearshoring encompass friendshoring
On the other hand, friendshoring is the international trend in the business world that consists of doing business with countries and companies from nations with similar values and principles. In addition to being friends, they are often geopolitical allies with common strategic interests.
The factors that have most fueled this trend in nearshoring and friendshoring were Russia’s invasion of Ukraine over a year ago and the political and trade frictions between the United States and China.
Friendshoring combines friendship and outsourcing, “which involves an organization hiring a specialized external firm to take care of one or more activities within its own business process.”
The term was popularized by Mrs. Janet Yellen, Secretary of the Treasury of the United States, and “It refers to the grouping of countries with shared values and principles, favoring supply chains among them.” In Yellen’s words: “relocate factories to nations that consider themselves allies.”
Or, in other words, move the production process and supply chains to countries that are not systemic rivals. From the Treasury secretary’s perspective, those rival countries include China and Russia.
Due to the Friendshoring trend, companies are already relocating operations from China to countries such as India, Thailand, Vietnam, and others in Southeast Asia.
Costa Rican proximity to the US has created benefits
Costa Rica has benefited from trends in nearshoring due to its geographic proximity and time proximity to the United States. The US is Costa Rica’s leading trade, investment, and tourism partner.
Likewise, Costa Rica has benefited from friendshoring due to its affinity in values and principles with the United States and with democracies in general. It is a preferential strategic location due to its relationship with democracies in Europe, North America, Oceania, and Asia.
In addition to its well-known credentials as a democratic, stable, and peaceful country with the rule of law and legal security, it offers foreign investors an excellent strategic location, tax incentives under its Free Zone Regime, and highly qualified human talent, among other attractions.
Although most foreign direct investment in Costa Rica comes from the United States, it remains open to attracting investors from Europe and other countries such as Saudi Arabia, the United Arab Emirates, and China, among others.
There is currently great competition between countries to benefit the most from the contemporary trends in nearshoring and friendshoring. Costa Rica competes with distant nations such as Vietnam, India, Malaysia, and countries that are closer to home, such as Mexico, Colombia, and the Dominican Republic.
To maintain its competitive position, Costa Rica must continue legislating, executing public policies, and improving the business climate to continue to benefit from nearshoring and friendshoring.
Please use this form to contact us and we will respond as soon as possible: