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Costa Rica: Country and Foreign Investment

Free Trade Zone

The Government created Free Export Zones under law no 7210 (known as the "Export Processing Law"). Substantial tax incentives including 100% exemption from virtually all taxes and Government finance for the training of employees have traditionally been available to companies which located within one of the 12 free export zones (6 of which are privately managed).

However, many of these exemptions will have to be phased out by 2015 as a result of Costa Rica's WTO commitments.

The Zones are located next to Calderas and Puntarenas (2 Pacific ports), Limon (an Atlantic port near Panama), Alajuela (the airport serving the capital city of Costa Rica) and Turrialba, as well as some other locations.

All the free trade export zones have an infrastructure which facilitates companies engaged in exports; there are simplified customs and trade procedures.

An application for a licence to operate within a free trade zone takes about 2 months to be processed and must be accompanied by a guarantee deposit for US$5,000 (at the time of writing). There are some requirements as to the minimum amount of capital that must be invested by an incoming company: the minimum investment required is currently US$150,000. The minimum investment required to set up a company anywhere in Costa Rica and receive free zone benefits is US$2m at the time of writing.

The types of entities setting up in the zone include ship builders, businesses involved in the packaging, processing and distribution of goods for export or re-export, management companies and businesses involved in environmental research, the creation of forests and the sale of forestry products. The legislation originally applied only to industrial ventures, but has now been extended to encompass service companies and a wide range of processing activities.

There are several hundred companies within the free export zones and the value of exports emanating from these businesses is well over US$2 billion. About 50% of the companies operating there are from the United States and have included such household names as Intel and Hewlett Packard. Costa Rica's FDI in 2008 is estimated to have been in excess of USD2bn, of which a good proportion is due to the free zones.



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