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Costa Rica remains one of the safest and most attractive country for foreign investment in Latin America.The Costa Rican government, its ministries and financial institutions maintain a decidedly pro-U.S. and continental stance in regard to financial security and tax laws.

Doing Business in Costa Rica

The stated aim is to entice primarily high-tech corporations to take advantage of Central America's most educated, computer literate and disciplined workforce, along with the modern production infrastructure the country is currently creating. The economy is being transformed from its longtime dependence on coffee, bananas and cattle raising to one centered on microprocessor production and high-tech telecommunications services.

AmCham
The Costa Rican-American Chamber of Commerce

AmCham is an important resource for anyone interested in doing business in Costa Rica.
http://www.amcham.co.cr/

This investment-friendly climate and government policy of making Costa Rica "the Silicon Valley of Latin America" has enticed commercial leaders such as Acer, Microsoft, GE, Abbot Laboratories, Continental Airways and Intel Corporation to make sizable investments here, both financially and physically, with major production and distribution facilities. Western Union has chosen Costa Rica to host its Latin American regional operations center. In 1998, for the first time ever, Costa Rica is poised to earn more from high technology exports than from coffee or bananas or even its lucrative, thriving tourism industry.

The World Bank has given Costa Rica an excellent bill of overall political and economic health. At its annual conference in El Salvador this year, the bank lauded the country as possessing "one of the most stable and robust" democracies in Latin America. It went on to praise the Costa Rica's "healthy economic growth rate" and "some of the best social indicators" on the continent.

Costa Rica is one of the most vocal supporters of continental free trade, and already has its own agreement with Mexico and other countries of the region. Costa Rica's numerous free trade zones and tax holiday opportunities are extremely enticing. They offer benefits such as exemption from import duties on raw materials, capital goods, parts and components; unrestricted profit repatriation; tax exemption on profits for eight years and a 50 percent exemption for the following four years.

A study done recently for the Ministry of Foreign Trade (COMEX) projects that by the year 2005, Costa Rica's export earnings will amount to $15.7-billion, about four times the current figure. Intel will be leading the way; its exports, from the three manufacturing facilities the processing giant is building here, are expected to reach an annual $3.5-billion by the year 2001.

High-tech companies will spur the export boom, while traditional exports, such as coffee and bananas, will fall in percentages of overall figures, but in terms of revenue, will continue to grow.

Costa Rica is building a competitive advantage for itself and the many high-tech companies who have chosen or are pondering the option to operate here. It is a country at a turning point in integrating itself into the modern world economy. Those doing business here will have the inside track.

Getting Here

The best way for potential investors to begin their search is to travel to Costa Rica and find out firsthand about the favorable business climate and opportunities. There are direct flights to San José from many cities in the United States and Canada. For all accommodations and tourism inside the country, there is no better service than Travel Web, which you can easily contact by phone at our toll-free number or on-line.

Amcham

Among the more knowledgeable and helpful sources of information on investing and doing business in Costa Rica is the Costa Rican-American Chamber of Commerce (AMCHAM), composed over 1,500 representatives from more than 330 multinational and local companies.

Business Resources

CINDE, the Costa Rica Investment and Development Board, has been officially commissioned by the government of Costa Rica to be the main promoter and advisor to foreign investors. CINDE is a private, nonprofit organization that provides complete and updated information on the economy and the business environment in Costa Rica, and helps in the initial contact with potential investors. It has an office in New York to provide tailor-made services. PROCOMER, the Foreign Trade Promotion Institute, can help exporters understand relevant legislation, acquire export permits, seize the advantages of market opportunities and chart their way through related fields of endeavor. CADEXCO, the Costa Rican Exporters Chamber, provides information to entrepreneurs, private and public institutions on export procedures and requirements; trade barriers and how to overcome them; how to sell products abroad; information on export credit lines and export contracts, international prices, etc.

Internet Services

Costa Rica's Internet services are the most readily available and sophisticated in Central America. Informática Internacional, the country's longest-serving private sector Internet services company; is one of the leading providers of Internet services nationwide. Through its diverse client base and wide range of products and services, Informática has ways to improve any business, personal communications needs, or assist in the electronic marketing of products and services. Through Informática, corporations and individuals planning to settle in Costa Rica can acquire Internet domains and E-Mail addresses in the country even before making the actual physical movement.

Real Estate

All individuals and private companies, local or foreign, can own land and property in Costa Rica. Few restrictions apply, the most important being physical occupancy and a 50-meter limit from the beach on oceanfront property. Potential real estate investors, and their lawyers, must first go to the National Registry for a title search, to the Ministry of the Environment and Energy for an environmental impact study, the local municipality for zoning laws and building permits, and then perhaps to other ministries and institutions for pertinent information. There are some excellent Real Estate agents who can find you the property you want. In addition, pick up The Golden Door to Retirement and Living in Costa Rica. It covers all aspects of living and investing in the country, and is required reading for anyone thinking of living full- or part-time here.

Privatization

The government of Miguel Angel Rodríguez has assumed a constitutional and legislative commitment to deregulation and privatization through a national consensus process. Instead of simply selling off state owned companies and institutions to the private sector, Costa Rica has opted for a phased opening up of areas such as telecommunications. For example, ICE, the Costa Rica Institute of Electricity, which today holds a constitutional monopoly in the field, will not be sold - the various telecommunications services will be offered as concessions, and ICE will become just another player in this modern, competitive branch.

For additional information on the privatization of Costa Rica, read the Latin America Weekly Report article entitled Costa Rica Moves More Slowly, Seeking Consensus

Starting Business in Costa Rica

For outsiders, doing business in a foreign country can be daunting--Costa Rica is no exception. Like many small countries, the business environment in Costa Rica is controlled by a few entrenched interests. However, the opening of the global marketplace has put pressure on those entrenched interests to yield to outside investment and investors. Costa Rica, a peaceful democracy for decades, has a history of actually inviting foreign investment. An example of this is that it is relatively simple to begin a business in Costa Rica. What one does after a business is begun is an entirely different matter.

Costa Rica is an enchanting place to live. Of course, there are some internal problems, but there are problems everywhere. Costa Rica is centrally located between two of the largest consumer markets in the world and, with all the neat, new technology, business can be done from here as easily as from Peoria, Illinois or Patagonia, Argentina! Costa Rica's government is as stable as one could want (in Central America) and the Costa Rican people are simply "a cut above."

The Costa Rican corporate legal system is like the country itself--"user friendly." Incorporating here is painless and suggested as the first step to doing any other kind of business. With a smattering of business sense, a rudimentary grasp of Spanish, a bit of ready cash, and the desire to become a global power (!), anyone can be a recognized business entity.

Formalization of a business venture in Costa Rica, as in most other jurisdictions, comes in a variety of packages:

  • General Partnership (Razón Social)
  • Limited Partnership (Compañia)
  • Limited Liability Company (Sociedad de Responsabilidad Limitada)
  • Corporation (Sociedad Anónima)
The Sociedad Anónima (S.A.) is probably the most popular. Comparable to the "Inc." in the United States, the S.A. confers upon the holder(s) the right (and obligations) to do corporate business in Costa Rica.

Because the process of establishing a business entity is a legal one, seeking the help of a qualified commercial attorney is a wise first step for those not familiar with the Costa Rican legal system. Most commercial sections of embassies or consulates can recommend a qualified attorney; the Yellow Pages of the phone book, under "ABOGADOS," is another place to look; recommendations from those who have gone before can also prove useful. In any event, almost any attorney with a specialty in Commercial Law will have the capacity to get you incorporated and on your way to doing business here in the land of eternal spring.

Unlike some Latin American countries, it is not obligatory to have a native Costa Rican as a partner in the establishment of any type of business entity. In certain instances, having a Costa Rican partner is a good idea; however, do not be pressured into accepting a native partner if you would rather not.

As an example, to start a Sociedad Anónima (S.A.) at least two stock holders must be named, and there must be at least three officers: President, Secretary and Treasurer. One person can hold various offices. A fiscal should also be named--in theory, this position is the corporate Comptroller. There also must be a designated Resident Agent, a person responsible for Judicial and Administrative notifications which might arise during the life of the corporation. The Resident Agent must be a resident of Costa Rica though not necessarily an attorney.

Choosing a corporate name is important. The name of the corporation must be in Spanish and unlike any other name already in use. Before the registration of the corporation, the attorney responsible for the work should check the registry carefully to determine the uniqueness of the chosen name. The corporate name will be the exclusive property of the company. Simultaneously with the registration of the corporation, a Cédula de Persona Jurídica will have to be requested. Analogous to a federal tax number, the Cédula de Persona Jurídica allows the corporation to operate freely in the market(s) defined in the corporate charter.

With the new tax laws just passed by the government, keeping corporate books up to date has become very important. These books--Minutes of the Board of Directors’ meetings, Minutes of the Shareholders’ meetings, Registrar of Shareholders, and three accounting books (Mayor, Inventario, and Diario)--must be kept up-to-date, accurately reflecting the activities of the corporation. Under the new tax law, if any tampering with the books is found, the corporate officers face fines and/or imprisonment.

The cost of incorporation, from beginning to end, runs between $300.00 and $600.00, depending on the attorney. It pays to shop around. Incorporation in Costa Rica by a foreigner requires that an amount equal to the total nominal value of the stock available be deposited in a special colones account with the government. This deposit is refundable the minute the corporation becomes active.

Incorporation takes between two and three months. No corporate business can take place before the process is complete. Should a person be in a hurry, some attorneys have new, clean corporations duly registered and ready to go. Cost for these is about the same, but there is no choice of names. A bit more overall caution should be exercised if this route is chosen.

The business environment in Costa Rica is changing rapidly. New laws impacting on every aspect of corporate life have recently been passed and more are on the way. The strictness of these laws reflect the government’s desire to restructure its house in such a way as to address the internal needs of the Costa Rican people as well as those of the visitors this beautiful country attracts. In a country with the reputation of being somewhat unstructured, these new laws represent, basically, a new way of life for all.

Regardless of the changes in the business community, Costa Rica is still an attractive place in and from which to do business. Hopefully, the new laws will deter some unscrupulous people, whether nationals or foreigners, from doing business here. Costa Rica is a beautiful, democratic and peaceful country. If you decide to do corporate business here, remember that.

 
Working Your Way Through Paradise

If this is paradise, why work? For one thing, not working, even in paradise, gets old after a while--most of us need something constructive to do to occupy our time. Work is also useful in helping one eat, a habit many of us have held onto since childhood. Even in paradise, one must eat!

According to Licenciada Teresita Alfaro Molina, head of the Work Permit Section in the Labor Ministry, if you come to Costa Rica as a tourist, you'd better stick to being a tourist--it's against the law to change your status from tourist to worker without some pretty convincing convincing! And, it's against the law (both the law governing immigration and foreigners, and the labor code) for a tourist to work for pay in Costa Rica.

Miss Alfaro is exceptionally knowledgeable in the area of foreigners working in Costa Rica. Before assuming her current post, she worked for 12 years with the Immigration Department's Labor section, approving applications from nonresidents for work permits. She indicated that it is common for nonresidents to spend a few weeks vacationing here, fall in love with the country and then wish to stay and work.

Current unemployment figures for Costa Rica hover around 4.5%, one of the lowest in Latin America. Even during times of slow economic growth, Costa Ricans work, and they work hard for relatively low wages. Neither the government nor local business want foreigners coming to this beautiful country taking jobs away from its motivated, well-trained residents.

Certain nonresidents can receive work permits fairly easily, but only a select few. These include:

  • Scientists
  • Sports figures - to play or coach a particular team in a particular sport
  • Artists (includes show-biz types who visit Costa Rica for performances)
  • Clergy of any religion
  • Spouses of ticos(as) in the process of applying for citizenship or residency
  • Immigrant workers (for the harvests of certain crops)
  • Students (but really only if it’s necessary in their study program, and then for only four years)

All work permits are issued for six months, but can be extended for up to two years.

Another group of foreigners permitted to work in Costa Rica are the owners and stockholders in registered Costa Rican companies. If you own stock in any corporate business in the country, you may work in any capacity in that enterprise. I’ll have more about this in my upcoming article on getting your residency in Costa Rica.

There is a clause in the law which gives the Director of Immigration the right to grant exceptions. This seems to happen on a regular basis, especially for doctors and nurses who come to Costa Rica for humanitarian service. Also, exceptions are granted to some bilingual professors, and specialists in a variety of areas where no such specialist is available here. These exceptions, when granted, are time or task limited and nonrenewable.

In the case of employees of transnational corporations, many are granted temporary residency (giving them working privileges), rather than work permits, for a period of two years. In a limited number of cases, if a business (either Costa Rican or transnational) is interested in hiring a nonresident, application can be made to the Immigration Office. According to Licenciada Alfaro, this is very unusual and almost always rejected.

Businesses in Costa Rica, whether national or transnational, can, by law, have no more than ten percent of their payroll nonresidents. However, for the agro-industrial sector, this ten percent does not include immigrant or refugee labor.

Refugees, you ask? Yes, Refugees

Central American refugees, specifically, have a special status in Costa Rica. Because of the political and military problems of many of our Central American neighbors, Costa Rica has created a refugee status for those fleeing their own country. This is neither a residential nor nonresidential status so typical work permit issues do not pertain. After three years in Costa Rica, a refugee may apply for a work permit. When granted, this permit is for an unlimited time or until the refugee is able to return to his or her own country.

As a humanitarian gesture, Costa Rica has made allowances for the Nicaraguan worker. Nicaragua's current unemployment level is around 60%. With so little work to be found in that country, many "Nicas" cross the Nicaraguan-Costa Rican border looking for something they can do to earn a living. Nicaraguans are allowed to work in Costa Rica under a special program which gives them a six-month permit to work during specified fruit and vegetable harvests.

Miss Alfaro also pointed out that, with the exception of refugees and the numerous Nicaraguans, all people wishing to work in Costa Rica under the existing laws should apply for their permits, or work visas, before entering the country.

So, if you are coming to Costa Rica as a tourist, enjoy yourself. This really is a wonderful and full- of-wonder country. If you decide you want to work here, do it right and abide by the laws. It will make your stay in Paradise even more enjoyable.


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