Spurred by government encouragement and generous investment incentives, direct foreign investment was 6% of the Gross Domestic Product  in 1997.¹⁰  The economy is growing faster than its counterparts in South and Central America, yet with lower inflation and labor costs.  Evidence of this dynamic environment lies in the fact that 85 of the Fortune 500 companies have chosen Costa Rica to establish business operations in Latin America (Intel, Microsoft, Hewlett Packard, etc.).  Points of consideration for the non-IT firm are presented below in order to provide a basis for making a decision of whether one should chose to set-up a sales office, expand operations, or open a distribution center, etc.  In this section, it is worthy to explore other inter-related areas of the economy in order to provide a complete picture of how telecommunications fits as part of an investment decision.

• Telecommunications Infrastructure (link to more info)
• The telecommunications infrastructure is still below North American and European standards, yet is increasing at an impressive rate.  In addition, the government is supportive in approving spending in telecommunications infrastructure investments.
• While telephone penetration is relatively low for a developed country, it is quite high as compared to other countries in the "meanderer"^* category.  It is considered to be quite adequate to support expansion of facilities and offices, if required.
• Internet connectivity has been available since 1993 with an abundance of service providers available and growing.

• Infrastructure Projects
• Generally, an abundance of other infrastructure opportunities exist for foreign investors.  Each of these opportunities including highway improvements, addition of piers and seaports, and the expansion of Costa Rica's principal airport, represent not only opportunities for non-IT firms to participate in the country's expansion, but also to assist in the attractiveness of the country and increased demand for an appropriate telecommunications infrastructure.  Any increase in the number of foreign investors and non-IT firms helps to pressure the government to solicit bids from international companies to utilize their resources and expertise to develop fundamental projects.
• The number of joint venture/strategic alliance opportunities will significantly increase if Costa Rica's new president, Miguel Angel Rodriguez, is successful in implementing proposed privatization plans for certain State controlled monopolies including national insurance companies and of course, telecommunications.

• Economic Infrastructure
• Costa Rica is strategically located in Central America between Panama and Nicaragua allowing for super efficient air and sea access to North and South American markets.
• Several major airlines provide service from the main airport, Juan Santamaría International.
• Key economic indicators are favorable compared to other countries in the region.

• Well educated, Highly Productive Population (link to more info)
• One of the highest literacy rates in the world of 94% is enjoyed by the population.
• One of the highest life expectancy rates of 75.7 years is maintained.
• Highest United Nations Human Development Index among all developing countries.
• Excellent standard of living.
• Strong focus on technical and educational development projects in order to attract high technology companies.
• Competitive, regional salaries.

• Investment Incentives and Foreign Trade

The eight Free Zones  are designed to promote the import, manufacture and export processes supported by a highly productive workforce.  The following tax incentives provide additional benefits⁹:
• 100% exemption from import taxes on raw materials, goods, and other items necessary for a company's operation
• 100% exemption on income tax during an 8 year period and 50% for the next 4 years
• 100% exemption on income tax during a 12 year period and 50% for the next 6 years (in special area only)
• Full exemption on withholding taxes over remittances abroad
• Efficient processes for the establishment of operations
• Foreign entities and individuals are allowed to negotiate commercial transactions and actively participate as owners, partners and trustees.
• Greater trade liberalization and lower tariffs are continuously being encouraged through several trade agreements and organizations.  These include the World Trade Organization, GATT and the Central American Common Market.
• The Generalized System of Preferences (GSP) grants Costa Rica preferential tariff rates for the Canadian, Japanese, and European markets.  In addition, Costa Rican products can enter duty free to the United States through the Caribbean Basin Initiative (CBI).
• The Free Trade Area of the Americas (FTAA) implementation by 2005 remains to be a key goal.
See Government Policies for more information.

• Natural Resources

The country's remarkable environment wealth also provides ample opportunities for the non-IT firm.
• 5% of the Earth's bio-diversity is contained in Costa Rica
• Carbon Dioxide Reduction Certificates allow the country to sell its forests' ability to absorb carbon dioxide to the world's 32 most developed nations.
 
• PROCOMER

PROCOMER, Costa Rica's Foreign Trade Corporation established in 1996, offers services to increase exporters' competitiveness in foreign markets.

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Last updated December 18, 1998