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Central America’s best-seller

Article - September 14, 2011
Costa Rica boasts a tremendously diversified portfolio of exports and markets, thanks to numerous FTAs, incentivizing policies, and overall competitiveness
Costa Rica is renowned for its beautiful beaches, aromatic coffee, and its biodiversity, yet perhaps surprisingly it is also a dynamic export and progressively value-added manufacturing and service-based economy.

The paradisiacal country has diversified both its exports and its markets to the extent that today it exports more than 4,000 products to 140 countries, thanks to numerous FTAs. Over the past 25 years, Costa Rica has signed FTAs with major markets, including the U.S., Mexico, Chile, the Caribbean, and Canada. Recently, it signed an FTA with China, making it the third Latin American country after Peru and Chile to have this kind of arrangement with the Asian giant.

In per capita terms, according to Monica Araya of Cadexco (the Chamber of Exporters), Costa Rica is Latin America’s second largest exporter after Chile. Remove Chile’s copper from the equation, and Costa Rica shoots to the top of the list.

Exports of goods and services totaled over 43% of GDP in 2009, and it was the United States that was on the receiving end of nearly 24% of these exports, making it by far Costa Rica’s most important trading partner. While two-way trade between the two countries exceeded US$9.6 billion in 2009, Costa Rica’s total exports brought in US$8.8 billion. President Laura Chinchilla has set the country the task to reach the target of US$17 billion by 2014, an ambitious goal yet not overly so given the growing list of free trade agreements (FTAs), the rising number of companies who are establishing operations here, and the investment mechanisms in place, such as the free trade zones. Moreover, the government, especially through entities like Cadexco, is working to raise competitiveness through training.

“In order to link FDI with national investment, it’s vital to have in place an attractive foreign investment policy, besides having legal mechanisms. I believe we’ve done an excellent job at, especially regarding our free zone laws,” comments Monica Araya, president of Cadexco.

A large chunk of recent foreign investment has flowed into the free trade zones. Intel set up a microprocessor facility, which alone was responsible for one-fifth of Costa Rica’s exports and nearly 5% of GDP in 2006. Intel’s US$2 billion Costa Rican complex is the company’s third largest, after two other installations in Asia. Intel, along with the many other foreign companies – mostly from the U.S. – who call these free zones home, have turned high-tech manufacturing, especially in electronics and medical equipment, into Costa Rica’s biggest export industry. According to the World Bank, the tiny Central American country is impressively the fourth biggest high-tech exporter in the world.

In line with this trend of knowledge-based industries, Costa Rica’s wealth of biodiversity is an area where Mrs. Araya sees great potential for future investment.

“We’ve got a biodiversity that could contribute value addition, not just to sustainable tourism, but also to research and development,” she says. “We could create products based on this biodiversity in the realm of bio-commerce and nanotechnology, for example.”

Of course, Costa Rica’s nature and beauty also help to inadvertently attract investors, especially from the U.S.

“The tropical heat, the warm welcome, and the people are some of the main reasons why North Americans visit. Some of them come for the tourism, and end up doing business,” says Mrs. Araya.