1:53 AM, October 4, 2023

Sustainable productivity: Costa Rica’s track record as a sustainable nearshoring FDI destination

Foreign Direct Investment
| The European | 19 October 2021

Backed up by record figures, Costa Rica’s proven track record as a sustainable nearshoring FDI destination is a product of innovation and adaptability

The last year has been incredibly challenging for the global community, with the COVID-19 pandemic spreading a feeling of deep uncertainty throughout the world. Costa Rica was not exempt from these challenges, yet through a framework of response, recovery and reimagining, the country was able to turn what seemed to be a grey year into its greenest one.

In 2020, Costa Rica received a total of 81 investments, with 55 of these being re-investments from multinationals already established in the country. The remaining 26 investments came from entirely new companies from 11 different countries, and more than half of these new investments came from non-traditional markets such as the UK, Denmark, Bosnia, Japan, and India. Additionally, over 20,000 new jobs were generated in 2020, an 18% increase from 2019. This investment activity is the result of business continuity. Costa Rica’s modern, agile legal framework meant that 98% of service companies could pivot to a 100% remote working model – a feat involving some 70,000 workers – in just a few days. Yet, the benefits of the country’s free trade zone regime could still be enjoyed. Additionally, operations related to life sciences and advanced manufacturing companies suffered no disruption.

This continuity was also reflected in Costa Rica’s exports, the least volatile of the Americas during 2020 according to UNCTAD’s 2021 Global Trade Update with a 0.03 score (where zero is the least volatile). This rating was equal to that attained by the USA, with only Japan (0.02) and the EU-21 (0.01) faring better. Additionally, Costa Rica’s exports of goods grew 1.9% in 2020, reaching a historic record of $11.6bn, $214m more than 2019. This figure exceeds the performance of Latin America and the Caribbean, where countries suffered a 13% decline in their exports during the same period.

World-class talent

The preparedness and adaptability displayed by Costa Rica, as well as the record figures achieved, reflects the country’s proven track record as a sustainable nearshoring FDI destination. “Sustainable productivity”, is the term coined by the Costa Rican Investment Promotion Agency (CINDE) to refer to this growth mindset. CINDE, which has been ranked as the world’s number-one investment promotion agency on four occasions by the United Nations’ International Trade Centre, describes the companies under this flagship as, “companies that not only want to grow, but who want to do it in the best way possible.”

This sustainable productivity is attained by leveraging three pillars: “people”, “prosperity”, and “planet”.

Knowing the value of its people, Costa Rica abolished its army back in 1948, redirecting this budget towards education, health, and infrastructure. Today, Costa Rica commits 14% of total government expenditure towards elementary, high school, and post-high school education, nearly double the average 7.9% of OECD countries (OECD, 2019). Thanks to this and many other efforts, Costa Rica is the number-one country in Latin America for Workforce Skills and Quality Education, according to the World Economic Forum’s 2019 Global Competitiveness Report.

This highly skilled, multifaceted talent pool is behind the decision of many multinationals to consistently channel their resources and business operations to Costa Rica, which now hosts more than 320 multinational companies. Industry leaders such as Intel, Amazon, Zollner, Bourns, Bayer, and Roche, can be found among a vast array of sectors, including life sciences, smart manufacturing, wellbeing, corporate and business processes, creative industries, digital technologies, and tourism infrastructure. These companies have preferential access to two-thirds of the world’s GDP including the USA, the EU, China, Singapore, and South Korea via multiple free trade agreements. This has made Costa Rica a technology-enabled, integrated, and collaborative ecosystem, where multinational companies can thrive and innovate thanks to a dynamic mix of resources and capabilities. Ultimately, Costa Rica is a nation of prosperity.

Green thinking

Parallel to its economic ecosystem, Costa Rica is also renowned for the stewardship of its natural ecosystem. Ninety-nine per cent of the country’s electricity comes from renewable resources, which has a special significance for companies seeking to achieve carbon neutrality. Moreover, a staggering 72% of the industrial parks and multinational facilities in Costa Rica are LEED-certified, which amounts to an estimated one million-square meters. Furthermore, a group of Costa Rica’s multinational companies are deeply committed to leading the world on ESG standards. Among them, AstraZeneca, GlaxoSmithKline, Microsoft, and Edwards Lifesciences, have all set ambitious sustainability goals for 2030. There is no wonder why the country is home to 25 RE100 companies.

Overall, Costa Rica has consistently demonstrated why it is the best option for nearshoring companies, even in a context as complex as COVID-19. It maintains an exemplary economic ecosystem of growth and innovation, yet it focuses on the wellbeing of its people and the sustainability of its natural resources.

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