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Why Costa Rica?

Strategic Location Political and Social stability Economic Stability Human Resources Incentives Infrastructure Legal Security Quality of Life Great Potential Business Sectors Professional Assistance from CINDE. Why Costa Rica?. Strategic Location. In the center of the Americas

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Why Costa Rica?

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  1. Strategic Location Political and Social stability Economic Stability Human Resources Incentives Infrastructure Legal Security Quality of Life Great Potential Business Sectors Professional Assistance from CINDE Why Costa Rica?

  2. Strategic Location • In the center of the Americas • Central Standard Time Zone • 2:50 hours flying time to • Miami • Duty free access to the U.S. • through CBI

  3. Political and social stability • Tradition of peace and stability • Army abolished in 1948 • Government • More than 100 years of democracy • 3 independent powers • 4 year term with reelection • Presidential System

  4. Political and social stability • No financial crisis for more than 20 years • Yearly output growth of 4.2% • $4,361 per capita income in 2004 • As a result, Costa Rica benefits from good access to the world’s capital markets and moderate risk premium • Costa Rican Long Term Bond Ratings: Moody’s Ba1 (non investment grade) FITCH Ratings BB (speculative) Standard & Poor’s BB (speculative)

  5. Economic Stability Macroeconomic Stability in spite of world economic crisis periods Source: CINDE

  6. Foreign Direct Investment Annual Growth of FDI

  7. Open Economy * Goods trade as porcentage of the GDP, 1980-2003; China: 2002. Source: WTO y IMF, 2004

  8. Strategic market access • Tax free access to: • USA through the CBI • Mexico • Canada • Central America • Chile • Dominican Republic • Panama • CARICOM • Preferential access through the GPS to: • Europe and Asia • Free Trade Agreements negotiations: • USA (signed) • Investment Promotion and Protection agreements with several countries

  9. Human Resources • Population to October, 2005: • 4.3 million • 34.2% of population is 15 to 35 years old • Labor force 2004: 1.8 million • Unemployment, July 2005: 6.6% • Underemployment, July 2005: 8.4% • Universal Health Care and Education System • Pillars for the national stability • 6.5% of the GDP’s destiny is for education Age Structure by Gender

  10. Literacy Rate Source: United Nations, Human Development Index, 2004

  11. Education • Universal, free and compulsory education since 1870 (the first in Latin America) • Computer labs in 50% of the primary schools and 100% of high schools • English teaching in 50% of public schools and 100% of private schools • 92% of high school students will present graduate English test (*) *Source: Ministry of Public Education

  12. Education • Training centers • Technical High Schools (81) • University Foundations • INA: Free on-site technical training • CEFOF: Center for training trainers • CENFOTEC: Software training • Universities, 56 (52 private, 4 state) • Including HBS/INCAE.

  13. Education Source: Estado de la Nación

  14. Labor Force • Costa Ricans are healthy and motivated learners • High observed productivity and learning speed by Free Zone Companies • Favorable labor environment: non-union worker organization (Solidarismo) • Low Turnover

  15. Low Turnover

  16. Minimum wages In US$ • Category C o s t T o t a l • per hour per year (thousands) • Non qualified 1.81 4.52 • Semi qualified 1.96 4.89 • Qualified 2.11 5.26 • Specialized 2.43 6.06 • NOTES: • 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

  17. 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. Investment Incentives FREE TRADE ZONE REGIME • 100% exemption on: • Import rights for raw materials, equipment and components. • Export taxes, local sales tax, excise taxes, etc • Profits repatriation taxes. • Those incentives dependents on the exporter’s performance must follow the WTO Guidelines starting from December 2007.

  19. Investment Incentives • Minimum Investment: • US$ 150,000 inside free trade industrial parks • US$ 2,000,000 outside free trade industrial parks • With possibility of sale to other exporters in the country and up to 25% of the production in the local market.

  20. Investment Incentives ACTIVE FINISHING REGIME • Suspension of 100% of the import taxes over: • Raw materials • Components • Packing • Machinery and equipment • It does not apply a minimum amount of investment • Proportional payment of sales taxes for the Central American markets

  21. Infrastructure • Industrial Parks • Designated areas for Free Trade Zone companies • Privately owned and managed • Variety of services: • On site expedited customs • Health • Security • Maintenance • Day care • Garbage disposal, etc • Located 7 km away from the Juan Santamaria Intl. Airport

  22. Industrial Parks

  23. Water and Electricity Abundant water availability Enough and trustable electric power supply Hydroelectric, geothermic and other sources Electric service coverage: 97% Installed capacity of 1.962 MW Approximated cost of $0,07 - $0,12 per KW/Hour, industrial rate Clean energy: 97.5% of the energy sources are renewable. Infrastructure

  24. Transportation Ports on both shores 24 maritime cargo lines service Main airport located 15 km away from San Jose 2º better airport of Latin-American 3º better airport of the world (5 million passengers per year category) Competitive maritime rates to the USA, Europe and Asia Infrastructure

  25. Telecommunications Direct dialing worldwide Tone dialing, call waiting, call forwarding, etc. Redundant fiber optics network Point to point connections Direct world wide fiber optic access through Maya 1 & Arcos cables Infrastructure

  26. Submarine Cables

  27. Legal Security • Foreigners have no limits of property handling and they can drive business activities freely. • Foreigners have constitutional equality of rights and obligations. • Free capital movement • Intellectual property laws in accordance with WTO Guidelines.

  28. Life expectancy: 78.7 years Health-Care Public Services Coverage: 98.3% Infant Mortality very similar to those of developed countries: 9.75 death per each 1.000 born alive Quality of life

  29. Quality of life • San Jose is among the cities with the best quality of life in Latin America • The Economist Intelligence Unit, Liveability Rankings 2005 • Costa Rica is the 35° country of the world in Quality of life. • The World in 2005, The Economist • The surveys highlight Costa Rica as the country with the most solid and uninterrupted democracy

  30. Great Potential • “Central American Country of the Future” • FDI Magazine, 2005 • 5th High-Tech exporter of the world • United Nations Human Development Report 2005 • 35th in the Trade and Development Index • UNCTAD, 2005 • One of the most successful FDI attraction advantage countries • UNCTAD: World Investment Report, 2002; and CEPAL “FDI in Latin America” 2003

  31. Success Story William Abraham, General Manager, INTEL Costa Rica

  32. Electronics • US $1,514 million exported in 2004 • 12,000 direct employees • US$ 172.5 million in FDI (2004) • Product Lines: RF Microwave Autotronics Semiconductors Other subsectors • 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...

  33. Medical Devices • US $521 million exported in 2004 • 4,800 direct employees through 2004 • US $152 million in FDI in 2004 • Product Lines: Cardiovascular Orthopedic Image diagnostics • It is one of the most dynamic and productive sectors in Costa Rica. • Exports increased by 5% during 2003. • Baxter Healthcare and Hospira, leaders of the industry, have operations in Costa Rica. • Industry growth has created the need to attract new company suppliers to provide the industry with: molding, filters, packaging, resins and other supplies.

  34. Services • US $37.3 million in FDI in 2003 • 6873 direct jobs through 2003 • 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: • Shared service Centers • Back Offices • Software Development • Call Centers • Engineering, Architecture & Design

  35. Others Sectors • Special Projects • Existing industrial fashion designing capabilities. • Back office services (offshoring /outsourcing) in marketing, logistics, sourcing, quality assurance and others. • Assembly of medical & other specialized products. • Tourism • The national tourism market maintains a 7.1% annual growth. • Rooms have been expanding at an annual 4.5%. • More than one million tourists visit Costa Rica every year. • 48% of all tourists come from the USA, 16% from Europe and 36% from other countries. • Great tourist real estate development presence, golf courses and marinas

  36. Support Industry • Plastic injection, extrusion, blow molding • (Electroplast, Plásticos Modernos, Plásticos Star, PPC) • Sheet metal • (DIMMSA, Leogar, Perfiles Ranurados) • Precision Machining • (R&R, Prolex, Oberg Industeries, FEMA, Weststar, Techshop, Microtechnologies, Olympic Machining, MOTROSA) • Tools and Dies, Stamping & Plating • Quality and manufacturing systems: • ISO 9000, ISO 14000, QS9000, TL9000, 5S, TQM, Six Sigma.

  37. Assistance from CINDE • CINDE, the Costa Rican Investment Promotion Agency, is a private non-profit nonpolitical organization, founded in 1982. • Providing assistance to investors through the New York and Costa Rica offices • Active promotion of foreign investment, local support, and post establishment services. • Support for new projects and reinvestment

  38. Solidarista Associations • Employer-sponsored workers’ associations • Each company has an organization, in which white and blue collar workers participate • The organization operates as a credit union which provides multiple benefits to workers • It is funded by employers, with part of the severance provisions, and by employees • Solidarista organizations ARE NOT sector-wide bargaining instances, as American unions

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