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Country Commercial Guide Summary

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2013 ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

Market Overview

  • The United States is Costa Rica’s main trading partner, accounting for about 47% of Costa Rica’s total imports. According to U.S. Census Bureau trade data, the U.S. had a US$4.8 billion trade deficit with Costa Rica in 2012, as compared with a deficit of US$4.0 billion in 2011, US$3.5 billion in 2010, a deficit of US$897 million in 2009, and surpluses of US$1.7 billion in 2008, US$639 million in 2007, US$288 million in 2006, and US$183 million in 2005.
  • Foreign direct investment in Costa Rica climbed steadily from the year 2000 ($408 million) to 2008 (over $2 billion), falling back over the last three years to 2006 levels of roughly $1.5 billion. New foreign direct investment in Costa Rica from all countries was US$1.6 billion in 2012, US$1.56 billion in 2011, US$1.46 billion in 2010, US$ 1.35 billion in 2009, US$2.08 billion in 2008, US$1.9 billion in 2007, US$1.5 billion in 2006, and US$861 million in 2005. About 70 percent of that investment has come from the United States. Del Monte, Dole, and Chiquita have a large presence in the banana and pineapple industries.
  • In recent years, Costa Rica has successfully attracted important investments by such companies as Intel Corporation, which employs 3,200 people at its major fabrication plant; Procter & Gamble, which employs about 1,200 in its administrative center for the Western Hemisphere and has plans to increase its number of employees in 600 more by the end of this year; Hewlett-Packard (6,500), Boston Scientific, Allergan, Hospira, Baxter Healthcare and others from the healthcare products industry. According to the US Census Bureau, 2011 data show that two-way trade between the U.S. and Costa Rica exceeded $16.2 billion during that timeframe. Other U.S. companies with a great number of employees in Costa Rica include Dell, Amazon, IBM and Western Union.
  • After experiencing positive growth for several years, the Costa Rican economy shrank slightly in 2009 (-2.5%) due to the global economic crisis. The services sector (around 68% of GDP) was the most affected, with tourism falling by 8%. The economy experienced a rebound in 2010 with a 3.6% GDP growth rate, a growth rate in 2011 of 3.8%, and a growth rate in 2012 of 5.1%. Costa Rica enjoys the region’s highest standard of living, with a per capita income of about US$7,843, and an unemployment rate of 7.37%. Consumer price inflation is high but relatively constant at about a 10% annual rate over the last decade.
  • According to the latest National Population Census of 2010, the percentage of population living in poverty in 2012 was estimated at 17.6 percent in the urban areas and 25.8 percent in the rural areas, with 4.8 percent in extreme poverty in the urban areas and 8.9 percent in extreme poverty in the rural areas. Inflation reached 13.9% at the end of 2008, dropped during 2009 to 4.0% by year’s end, and reached 5.8 percent by the end of 2010 and decrease to 4.74% during 2011. Inflation rate was 4.55% during 2012. The unemployment rate for 2012 was 7.8%. During 2010, the unemployment rate reached 7.3%, an increase from the 2009 year-end figure of 7.0%. The Government of Costa Rica has been running budget deficits in 2009-2011 but is currently capable of borrowing the necessary funds to do so.

Market Opportunities

  • The National Export Initiative (NEI) introduced by President Obama in January 2010 in his State of the Union message, provided a goal around which the US Embassy in Costa Rica and its various sections have come together to support American business and to achieve a doubling of US exports by 2015.
  • CAFTA-DR’s entry into force on January 1, 2009, represented a major step forward in the trade and investment relationship between Costa Rica and the United States, opening opportunities in the wireless telecommunications, Internet, and insurance markets that previously had not existed.
  • Costa Rica’s accession to the agreement has meant that more than 80 percent of all non-agricultural goods and more than 50 percent of agricultural products became duty-free immediately, on January 1, 2009, and the remaining duties are being eliminated on an agreed-upon schedule that is underway.
  • Furthermore, CAFTA-DR’s entry into force eliminated Costa Rica’s dealer protection regimes, allowed non-discriminatory treatment for U.S. firms in government procurement bids, and provided stronger protection for investors.
  • Market prospects are excellent in the following sectors: building products, hotel and restaurant equipment, and medical and dental equipment. Prospects are also good in auto parts and service equipment, drugs and pharmaceuticals, construction equipment and travel and tourism, as well as in the food processing and packaging sector.

Market Entry Strategy

  • U.S. products enjoy an excellent reputation for quality and price-competitiveness. This inherent value will only be improved as CAFTA-DR continues its implementation and landed prices of U.S. exported goods drop. If and as this lower cost of goods is passed along through the distribution chain, it should drive an acceleration of trade and greater market share for U.S. products.
  • Proximity to the Costa Rican market is also a major advantage for U.S. exporters who wish to visit or communicate with potential customers. The proximity facilitates close contacts and strong relationships with clients, both before and after the sale. The same holds true for agents and distributors, who typically represent U.S. exporters in the national market.
  • With Costa Rica’s accession to the CAFTA-DR Free Trade Agreement, it is important to remember that the free trade regime is region-wide, i.e., for the countries of Honduras, Guatemala, Nicaragua, El Salvador, and the Dominican Republic, as well as for the United States and Costa Rica. This presents the opportunity to consider these markets from a regional perspective and to design a regional marketing approach, given the lowered barriers and relative proximity, particularly for those signatories in Central America. U.S exports to the CAFTA-DR countries in 2012 were $30.2 billion, unchanged over 2011, but 79% higher than the level in 2005, the year before the Agreement first entered into force. In 2012, the CAFTA-DR region represented the 14th largest U.S. export market worldwide and the 3rd largest in Latin America behind Mexico and Brazil.
  • The U.S. Commercial Service Costa Rica advises U.S. companies to consult with local market research companies and law firms to conduct the necessary due diligence before entering into contracts with local firms. These partners can be instrumental in helping to penetrate and expand the market for a company’s exports.
  • With CAFTA-DR now in force in Costa Rica, trade should be further facilitated with the market access improvements and tariff reductions listed above.

U.S. exporters seeking general export information/assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's Trade Information Center at (800) USA-TRADE, or go click HERE.

For a complete copy of the Country Commercial guide (2013) please go to:

http://www.buyusainfo.net/docs/x_9598169.pdf

To the best of our knowledge, the information contained in this report is accurate as of the date published. However, The Department of Commerce does not take responsibility for actions readers may take based on the information contained herein. Readers should always conduct their own due diligence before entering into business ventures or other commercial arrangements. The Department of Commerce can assist companies in these endeavors.