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Multinational companies developing successfully under Free Trade Zone Regime in Costa Rica

Multinational companies developing successfully under Free Trade Zone Regime in Costa Rica

SAN JOSE, Costa Rica, Aug. 18, 2016. More than 82 thousand direct jobs and 43 thousand indirect jobs generated, a return of $3.179 billion on incentives received (Net Country Benefit), added to a major technology transfer, incorporation of key business innovations, dynamic productive linkages that galvanize the entry of small- and medium-sized businesses to the global economy, as well as the implementation of novel and modern business practices and the assimilation of high international quality standards in Costa Rican companies -- these are some of the benefits that the Free Trade Zone Regime in Costa Rica has contributed in 2015, a year in which both Net Country Benefit and direct employment grew 5% over 2014, as confirmed by the study "Free Trade Zone Balance Sheet: net benefit of the free trade zone regime for Costa Rica 2011-2015 (Balance de las Zonas Francas, beneficio neto del régimen para Costa Rica 2011-2015).

The analysis conducted by the Foreign Trade Promoter of Costa Rica (PROCOMER - Promotora de Comercio Exterior de Costa Rica ), the Ministry of Foreign Trade of Costa Rica (COMEX - Ministerio de Comercio Exterior de Costa Rica) and the Costa Rican Investment Promotion Agency (CINDE - Coalición Costarricense de Iniciativas de Desarrollo ), confirm that the Free Trade Zone (FTZ) Regime of Costa Rica is socially profitable: each dollar of incentives granted to companies last year generated $6.2 for the country.

Average wages in the FTZ grew at rates of 7% in the past year, reaching $1,551 per month in 2015, a figure that is 1.8 times greater than the average paid for private activities in the rest of the country.

The presentation of the study was attended by the President of Costa Rica, Luis Guillermo Solís. "The study presented this morning confirms for us once again the fundamental role played by Free Trade Zones in the development of the country, as generators of quality employment for Costa Ricans and dynamizing platforms for national productive activity. Our government maintains a strong commitment to guarantee the juridical security of the Regime of Free Trade Zones (FTZ) and its stability. Today more than 125 thousand Costa Ricans work in the regime, giving rise to greater well-being for them, their families and our country. We reiterate our support for, and commitment to the regime" said the President.

For his part, the Minister of Foreign Trade of Costa Rica, Alexander Mora, noted that the study released this morning by PROCOMER comprises par of the strategy that the foreign trade sector is pursuing to sustain its public policies and actions, as well as the initiatives deriving from them, with evidence and solid data. "The study uses a widely recognized international methodology, whose method is to model costs and benefits, presenting a net result, that is to say, it deducts costs from benefits therefore making it possible to approach more precise and rigorous results than other alternative methods. This confirms for us that the free trade zone regime is increasing its social profitability for the country at a greater speed than before, consolidating itself as a powerful tool for promoting and providing incentives for production," the Minister observed. "We are committed to keep generating and strengthening the conditions necessary so that more companies can put down deeper and deeper roots by establishing linkages with local businesses, and hire Costa Rican personnel for a higher addition of national value, one of the variables that, along with productivity, we are also studying in greater depth, and about which we will soon be sharing information with the country," Minister Mora concludes.

For the first time, the study analyzed the productivity level of the regime's workers, concluding that, for manufacturing industry, real added value per worker within the FTZ showed annual growth of 8.1% in the 2000-2015 period, a much higher figure than that registered outside the regime, which was 1% during the same period.

Pedro Beirute Prada, General Manager of PROCOMER, said that the free trade zone regime is vital for the country's competitiveness, since it creates nearly half of its exports.

"The FTZ has contributed to the diversity of exportable supply, we have companies in all sectors and in all provinces, generating employment, linkages and knowledge transfer," said Beirute.
Jorge Sequeira, Managing Director of CINDE, added that the FTZ is one of the main tools Costa Rica has to attract companies for direct foreign investment.

"The competition to attract companies to invest is getting stiffer and stiffer. Our country is competing with countries that are very aggressive in terms of the benefits and incentives offered to companies. The FTZ is one of the elements that has enabled Costa Rica to be considered within the list of competitive options for companies. Continuing to ensure its stability and juridical security is of the greatest importance to attract new companies to invest, while this also helps established companies to keep growing and generating quality employment for more and more Costa Ricans," Sequeira said.

Finally, Beirute noted that it is important to emphasize that national expenditure on purchasing of goods and services (linkages) came to $1.516 billion in 2015, which accounts for 38% of all purchases made by FTZ companies, including imports.