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  1. 2. Why Costa Rica? <ul><li>Strategic Location </li></ul><ul><li>Political and Social stability </li></ul><ul><li>Economic Stability </li></ul><ul><li>Human Resources </li></ul><ul><li>Incentives </li></ul><ul><li>Infrastructure </li></ul><ul><li>Legal Security </li></ul><ul><li>Quality of Life </li></ul><ul><li>Great Potential </li></ul><ul><li>Business Sectors </li></ul><ul><li>Professional Assistance from CINDE </li></ul>
  2. 3. Strategic Location <ul><li>In the center of the Americas </li></ul><ul><li>Central Standard Time Zone </li></ul><ul><li>2:50 hours flying time to </li></ul><ul><li>Miami </li></ul><ul><li>Duty free access to the U.S. </li></ul><ul><li>through CBI </li></ul>
  3. 4. Political and social stability <ul><li>Tradition of peace and stability </li></ul><ul><ul><li>Army abolished in 1948 </li></ul></ul><ul><li>Government </li></ul><ul><ul><li>More than 100 years of democracy </li></ul></ul><ul><ul><li>3 independent powers </li></ul></ul><ul><ul><li>4 year term with reelection </li></ul></ul><ul><ul><li>Presidential System </li></ul></ul>
  4. 5. <ul><li>No financial crisis for more than 20 years </li></ul><ul><ul><li>Yearly output growth of 4.2% </li></ul></ul><ul><ul><li>$4,361 per capita income in 2004 </li></ul></ul><ul><li>As a result, Costa Rica benefits from good access to the world’s capital markets and moderate risk premium </li></ul><ul><li>Costa Rican Long Term Bond Ratings: </li></ul><ul><li>Moody’s Ba1 (non investment grade) </li></ul><ul><li>FITCH Ratings BB (speculative) </li></ul><ul><li>Standard & Poor’s BB (speculative) </li></ul>Political and social stability
  5. 6. Economic Stability Macroeconomic Stability in spite of world economic crisis periods Source: CINDE
  6. 7. Foreign Direct Investment Annual Growth of FDI
  7. 8. Open Economy * Goods trade as porcentage of the GDP, 1980-2003; China: 2002. Source: WTO y IMF, 2004
  8. 9. <ul><li>Tax free access to: </li></ul><ul><ul><li>USA through the CBI </li></ul></ul><ul><ul><li>Mexico </li></ul></ul><ul><ul><li>Canada </li></ul></ul><ul><ul><li>Central America </li></ul></ul><ul><ul><li>Chile </li></ul></ul><ul><ul><li>Dominican Republic </li></ul></ul><ul><ul><li>Panama </li></ul></ul><ul><ul><li>CARICOM </li></ul></ul><ul><li>Preferential access through the GPS to: </li></ul><ul><ul><li>Europe and Asia </li></ul></ul><ul><li>Free Trade Agreements negotiations: </li></ul><ul><ul><li>USA (signed) </li></ul></ul><ul><ul><li>Investment Promotion and Protection agreements with several countries </li></ul></ul>Strategic market access
  9. 10. Human Resources <ul><li>Population to October, 2005: </li></ul><ul><ul><li>4.3 million </li></ul></ul><ul><ul><li>34.2% of population is 15 to 35 years old </li></ul></ul><ul><li>Labor force 2004: 1.8 million </li></ul><ul><ul><li>Unemployment, July 2005: 6.6% </li></ul></ul><ul><ul><li>Underemployment, July 2005: 8.4% </li></ul></ul><ul><li>Universal Health Care and Education System </li></ul><ul><ul><li>Pillars for the national stability </li></ul></ul><ul><ul><li>6.5% of the GDP’s destiny is for education </li></ul></ul>Age Structure by Gender
  10. 11. Literacy Rate Source: United Nations, Human Development Index, 2004
  11. 12. <ul><li>Universal, free and compulsory education since 1870 (the first in Latin America) </li></ul><ul><li>Computer labs in 50% of the primary schools and 100% of high schools </li></ul><ul><li>English teaching in 50% of public schools and 100% of private schools </li></ul><ul><li>92% of high school students will present graduate English test (*) </li></ul>Education *Source: Ministry of Public Education
  12. 13. Education <ul><li>Training centers </li></ul><ul><ul><li>Technical High Schools (81) </li></ul></ul><ul><ul><li>University Foundations </li></ul></ul><ul><ul><li>INA: Free on-site technical training </li></ul></ul><ul><ul><li>CEFOF: Center for training trainers </li></ul></ul><ul><ul><li>CENFOTEC: Software training </li></ul></ul><ul><li>Universities, 56 (52 private, 4 state) </li></ul><ul><ul><li>Including HBS/INCAE. </li></ul></ul>
  13. 14. Education Source: Estado de la Nación
  14. 15. Labor Force <ul><li>Costa Ricans are healthy and motivated learners </li></ul><ul><li>High observed productivity and learning speed by Free Zone Companies </li></ul><ul><li>Favorable labor environment: non-union worker organization ( Solidarismo ) </li></ul><ul><li>Low Turnover </li></ul>
  15. 16. Low Turnover
  16. 17. Minimum wages <ul><li>Category C o s t T o t a l </li></ul><ul><li>per hour per year (thousands) </li></ul><ul><li>Non qualified 1.81 4.52 </li></ul><ul><li>Semi qualified 1.96 4.89 </li></ul><ul><li>Qualified 2.11 5.26 </li></ul><ul><li>Specialized 2.43 6.06 </li></ul><ul><li>NOTES: </li></ul><ul><ul><li>All costs include all labor charges paid by the company, Christmas bonus and reserves for vacations, holidays and severance (47.98% in total). Minimum salaries effective from July 1st to December 31st of 2005. Exchange rate used: 495 colons per US$ (expected and the year end). Normal week of 48 hours and 8 hours per day </li></ul></ul>In US$
  17. 18. Average Salaries Occupation Annual Cost (Thousands of US$) General Manager 122.1 – 210.1 Operations Manager & 42.0 – 67.6 Customers Service Manager Production Supervisor 10.4 – 15.7 Assistants 9.4 – 12.5 Bilingual Secretary 10.5 – 13. Specialized Worker 5.9 – 7.5 Non Specialized Worker 4.6 – 5.4 NOTES: The total cost includes all the work charges paid by the company, the Christmas bonus an reserves for vacations, holidays and severance. Source: Consulting Companies, Survey for the second semester of 2004.
  18. 19. Investment Incentives <ul><li>FREE TRADE ZONE REGIME </li></ul><ul><li>100% exemption on: </li></ul><ul><ul><li>Import rights for raw materials, equipment and components. </li></ul></ul><ul><ul><li>Export taxes, local sales tax, excise taxes, etc </li></ul></ul><ul><ul><li>Profits repatriation taxes. </li></ul></ul><ul><ul><li>Those incentives dependents on the exporter’s performance must follow the WTO Guidelines starting from December 2007. </li></ul></ul>
  19. 20. <ul><li>Minimum Investment: </li></ul><ul><ul><li>US$ 150,000 inside free trade industrial parks </li></ul></ul><ul><ul><li>US$ 2,000,000 outside free trade industrial parks </li></ul></ul><ul><ul><li>With possibility of sale to other exporters in the country and up to 25% of the production in the local market. </li></ul></ul>Investment Incentives
  20. 21. Investment Incentives <ul><li>ACTIVE FINISHING REGIME </li></ul><ul><li>Suspension of 100% of the import taxes over: </li></ul><ul><li>Raw materials </li></ul><ul><li>Components </li></ul><ul><li>Packing </li></ul><ul><li>Machinery and equipment </li></ul><ul><li>It does not apply a minimum amount of investment </li></ul><ul><li>Proportional payment of sales taxes for the Central American markets </li></ul>
  21. 22. Infrastructure <ul><li>Industrial Parks </li></ul><ul><ul><li>Designated areas for Free Trade Zone companies </li></ul></ul><ul><ul><li>Privately owned and managed </li></ul></ul><ul><ul><li>Variety of services: </li></ul></ul><ul><ul><ul><li>On site expedited customs </li></ul></ul></ul><ul><ul><ul><li>Health </li></ul></ul></ul><ul><ul><ul><li>Security </li></ul></ul></ul><ul><ul><ul><li>Maintenance </li></ul></ul></ul><ul><ul><ul><li>Day care </li></ul></ul></ul><ul><ul><ul><li>Garbage disposal, etc </li></ul></ul></ul><ul><ul><li>Located 7 km away from the Juan Santamaria Intl. Airport </li></ul></ul>
  22. 23. Industrial Parks
  23. 24. Infrastructure <ul><li>Water and Electricity </li></ul><ul><li>Abundant water availability </li></ul><ul><li>Enough and trustable electric power supply </li></ul><ul><ul><li>Hydroelectric, geothermic and other sources </li></ul></ul><ul><ul><li>Electric service coverage: 97% </li></ul></ul><ul><li>Installed capacity of 1.962 MW </li></ul><ul><li>Approximated cost of $0,07 - $0,12 per KW/Hour, industrial rate </li></ul><ul><li>Clean energy: 97.5% of the energy sources are renewable. </li></ul>
  24. 25. Infrastructure <ul><li>Transportation </li></ul><ul><li>Ports on both shores </li></ul><ul><li>24 maritime cargo lines service </li></ul><ul><li>Main airport located 15 km away from San Jose </li></ul><ul><ul><li>2º better airport of Latin-American </li></ul></ul><ul><ul><li>3º better airport of the world (5 million passengers per year category) </li></ul></ul><ul><li>Competitive maritime rates to the USA, Europe and Asia </li></ul>
  25. 26. Infrastructure <ul><li>Telecommunications </li></ul><ul><li>Direct dialing worldwide </li></ul><ul><li>Tone dialing, call waiting, call forwarding, etc. </li></ul><ul><li>Redundant fiber optics network </li></ul><ul><li>Point to point connections </li></ul><ul><li>Direct world wide fiber optic access through Maya 1 & Arcos cables </li></ul>
  26. 27. Submarine Cables
  27. 28. <ul><li>Foreigners have no limits of property handling and they can drive business activities freely. </li></ul><ul><li>Foreigners have constitutional equality of rights and obligations. </li></ul><ul><li>Free capital movement </li></ul><ul><li>Intellectual property laws in accordance with WTO Guidelines. </li></ul>Legal Security
  28. 29. Quality of life <ul><li>Life expectancy: 78.7 years </li></ul><ul><li>Health-Care Public Services Coverage: 98.3% </li></ul><ul><li>Infant Mortality very similar to those of developed countries: 9.75 death per each 1.000 born alive </li></ul>
  29. 30. <ul><li>San Jose is among the cities with the best quality of life in Latin America </li></ul><ul><ul><li>The Economist Intelligence Unit, Liveability Rankings 2005 </li></ul></ul><ul><li>Costa Rica is the 35° country of the world in Quality of life. </li></ul><ul><ul><li>The World in 2005, The Economist </li></ul></ul><ul><li>The surveys highlight Costa Rica as the country with the most solid and uninterrupted democracy </li></ul>Quality of life
  30. 31. Great Potential <ul><li>“ Central American Country of the Future” </li></ul><ul><ul><li>FDI Magazine, 2005 </li></ul></ul><ul><li>5 th High-Tech exporter of the world </li></ul><ul><ul><li>United Nations Human Development Report 2005 </li></ul></ul><ul><li>35 th in the Trade and Development Index </li></ul><ul><ul><li>UNCTAD, 2005 </li></ul></ul><ul><li>One of the most successful FDI attraction advantage countries </li></ul><ul><ul><li>UNCTAD: World Investment Report, 2002; and CEPAL “FDI in Latin America” 2003 </li></ul></ul>
  31. 32. Success Story William Abraham, General Manager, INTEL Costa Rica
  32. 33. Electronics <ul><li>US $1,514 million exported in 2004 </li></ul><ul><li>12,000 direct employees </li></ul><ul><li>US$ 172.5 million in FDI (2004) </li></ul><ul><li>Product Lines: </li></ul><ul><ul><li>RF Microwave </li></ul></ul><ul><ul><li>Autotronics </li></ul></ul><ul><ul><li>Semiconductors </li></ul></ul><ul><ul><li>Other subsectors </li></ul></ul><ul><li>Intel, Sawtek, Remec, EMC Technology, Bourns, Teradyne, Suttle, Merrimac, Narda Microwave/ L3, Aetec, Conair/Babyliss, Panasonic, Current Controls, ITT Industries, Panduit, Pharos, Micro Technologies, Pycon, IDI International, Cuttler Hammer, Schneider/Square D; Wai Semicon and others... </li></ul>
  33. 34. Medical Devices <ul><ul><li>US $521 million exported in 2004 </li></ul></ul><ul><ul><li>4,800 direct employees through 2004 </li></ul></ul><ul><ul><li>US $152 million in FDI in 2004 </li></ul></ul><ul><ul><li>Product Lines: </li></ul></ul><ul><ul><li>Cardiovascular </li></ul></ul><ul><ul><li>Orthopedic </li></ul></ul><ul><ul><li>Image diagnostics </li></ul></ul><ul><ul><li>It is one of the most dynamic and productive sectors in Costa Rica. </li></ul></ul><ul><ul><li>Exports increased by 5% during 2003. </li></ul></ul><ul><ul><li>Baxter Healthcare and Hospira, leaders of the industry, have operations in Costa Rica. </li></ul></ul><ul><ul><li>Industry growth has created the need to attract new company suppliers to provide the industry with: molding, filters, packaging, resins and other supplies. </li></ul></ul>
  34. 35. Services <ul><ul><li>US $37.3 million in FDI in 2003 </li></ul></ul><ul><ul><li>6873 direct jobs through 2003 </li></ul></ul><ul><ul><li>Costa Rica offers the right conditions to companies for added value to their production with cost effective infrastructure, its labor force’s characteristics, and world wide services, such as: </li></ul></ul><ul><ul><ul><li>Shared service Centers </li></ul></ul></ul><ul><ul><ul><li>Back Offices </li></ul></ul></ul><ul><ul><ul><li>Software Development </li></ul></ul></ul><ul><ul><ul><li>Call Centers </li></ul></ul></ul><ul><ul><ul><li>Engineering, Architecture & Design </li></ul></ul></ul>
  35. 36. <ul><li>Special Projects </li></ul><ul><ul><li>Existing industrial fashion designing capabilities. </li></ul></ul><ul><ul><li>Back office services (offshoring /outsourcing) in marketing, logistics, sourcing, quality assurance and others. </li></ul></ul><ul><ul><li>Assembly of medical & other specialized products. </li></ul></ul><ul><li>Tourism </li></ul><ul><ul><li>The national tourism market maintains a 7.1% annual growth. </li></ul></ul><ul><ul><li>Rooms have been expanding at an annual 4.5%. </li></ul></ul><ul><ul><li>More than one million tourists visit Costa Rica every year. </li></ul></ul><ul><ul><li>48% of all tourists come from the USA, 16% from Europe and 36% from other countries. </li></ul></ul><ul><ul><li>Great tourist real estate development presence, golf courses and marinas </li></ul></ul>Others Sectors
  36. 37. Support Industry <ul><li>Plastic injection, extrusion, blow molding </li></ul><ul><ul><li>(Electroplast, Plásticos Modernos, Plásticos Star, PPC) </li></ul></ul><ul><li>Sheet metal </li></ul><ul><ul><li>(DIMMSA, Leogar, Perfiles Ranurados) </li></ul></ul><ul><li>Precision Machining </li></ul><ul><ul><li>(R&R, Prolex, Oberg Industeries, FEMA, Weststar, Techshop, Microtechnologies, Olympic Machining, MOTROSA) </li></ul></ul><ul><li>Tools and Dies, Stamping & Plating </li></ul><ul><li>Quality and manufacturing systems: </li></ul><ul><ul><li>ISO 9000, ISO 14000, QS9000, TL9000, 5S, TQM, Six Sigma. </li></ul></ul>
  37. 38. Assistance from CINDE <ul><li>CINDE, the Costa Rican Investment Promotion Agency, is a private non-profit nonpolitical organization, founded in 1982. </li></ul><ul><li>Providing assistance to investors through the New York and Costa Rica offices </li></ul><ul><li>Active promotion of foreign investment, local support, and post establishment services. </li></ul><ul><li>Support for new projects and reinvestment </li></ul>
  38. 39. Solidarista Associations <ul><li>Employer-sponsored workers’ associations </li></ul><ul><li>Each company has an organization, in which white and blue collar workers participate </li></ul><ul><li>The organization operates as a credit union which provides multiple benefits to workers </li></ul><ul><li>It is funded by employers, with part of the severance provisions, and by employees </li></ul><ul><li>Solidarista organizations ARE NOT sector-wide bargaining instances, as American unions </li></ul>