Foreign Direct Investment (FDI) is a pivotal driver of economic growth and development for nations across the globe. The Dominican Republic, nestled in the heart of the Caribbean, has emerged as an attractive destination for FDI due to its strategic Caribbean location, pro-business policies, and abundant natural resources. As investors seek to diversify their portfolios and tap into new markets, sectors for investment in the Dominican Republic stand out as promising avenues for profitability, each presenting unique opportunities and potential rewards. Among the most attractive investment sectors in the Dominican Republic are:

Tourism and Hospitality: Unlocking the Beauty of the Caribbean

The Dominican Republic’s picturesque landscapes, pristine beaches, and vibrant culture have established it as a premier tourist destination. Investment in the Dominican Republic in its tourism and hospitality sector has been a cornerstone of the country’s economic growth, drawing visitors worldwide to its alluring resorts and historic sites. With a welcoming investment climate and government incentives, this sector offers abundant opportunities for FDI. Investors can participate in developing high-end hotels and luxury resorts, and supporting infrastructure, fostering economic growth and employment opportunities for the local population.

Export Processing Zones: Manufacturing Excellence

The establishment of Export Processing Zones (EPZs) has been a significant catalyst for investment in the Dominican Republic in its manufacturing sector. These zones offer a range of incentives, including tax exemptions and streamlined administrative processes, making them a magnet for foreign investors. The manufacturing sector encompasses textiles, apparel, electronics, and medical devices, focusing on export-oriented production. By leveraging the country’s skilled workforce and competitive advantages, investors can tap into global supply chains while contributing to employment generation and technology transfer.

Agribusiness: Nurturing Nature’s Bounty

Agriculture is deeply ingrained in the Dominican Republic’s history and culture. The country boasts fertile soil and a diverse climate supporting crops like cocoa, coffee, bananas, and tropical fruits. Investment in the Dominican Republic in its agribusiness sector presents promising opportunities, including investment in modernizing farming techniques, value-added processing, and international distribution. Foreign investors can play a pivotal role in enhancing productivity, promoting sustainable practices, and connecting Dominican agricultural products to global markets, thus elevating the livelihoods of local farmers and contributing to food security.

Renewable Energy: Powering Sustainability

The global push for renewable energy has not bypassed the Dominican Republic. With abundant sunlight and wind, the country is well-positioned to harness the potential of solar and wind energy. Foreign investors can contribute to developing renewable energy projects, reducing the nation’s reliance on fossil fuels and mitigating environmental concerns. Investing in clean energy aligns with global sustainability goals and opens doors for technology transfer, job creation, and long-term cost savings, ultimately benefiting both the investors and the nation.

Real Estate and Infrastructure: Building for Tomorrow

Rapid urbanization and population growth have spurred demand for real estate and infrastructure development in the Dominican Republic. As cities expand and tourism flourishes, there is a need for investment in the Dominican Republic in modern residential, commercial, and industrial spaces and enhanced transportation and logistics networks. Foreign investors can seize the opportunity to participate in large-scale infrastructure projects, contributing to the country’s connectivity and economic progress. Real estate investments can also provide stable returns and hedge against market fluctuations.

Information Technology and Business Process Outsourcing: Nurturing Tech Talent

The Dominican Republic’s workforce is increasingly tech-savvy, making it an appealing destination for Information Technology (IT) and Business Process Outsourcing (BPO) investments. With a young and educated population, the country offers a pool of skilled professionals who can contribute to software development, call center operations, and other technology-related services. FDI in the IT and BPO sectors fosters job creation and enhances the country’s reputation as a hub for technology-driven innovation.

Mining and Natural Resources: Unveiling Hidden Treasures

Rich in mineral resources such as gold, nickel, and other precious metals, the Dominican Republic holds untapped potential in the mining sector. Foreign investors can contribute to responsible mining practices by prioritizing environmental conservation and social well-being. While mining projects require careful consideration of ecological impacts, they can stimulate economic growth, generate revenue, and create employment opportunities in areas with untapped resources.

In conclusion,  investment in the Dominican Republic offers a multitude of attractive sectors for foreign participation, each presenting unique opportunities and potential rewards. From the captivating allure of the tourism and hospitality sector to the sustainable potential of renewable energy and agribusiness, foreign investors have the chance to contribute to their financial success and the country’s economic growth, job creation, and technological advancement. As investors seek new horizons and nations seek economic transformation, the Dominican Republic stands ready to welcome and collaborate with visionary investors who seek to be part of a dynamic and thriving economy in the heart of the Caribbean. However, it’s important to remember that investment decisions should be based on thorough research, up-to-date market analyses, and a nuanced understanding of local regulations and conditions. For assistance, contact Latam FDI.

Shared service centers in Costa Rica seek to manage and consolidate transactional or routine processes in a central organization. Around 70 Shared Services Centers in Costa Rica have generated more than 30,000 direct jobs.

The ecosystem for shared service centers in Costa Rica is mature. The sector hosts a range of multinational companies across industries such as finance, healthcare, technology, and manufacturing. This ecosystem provides networking opportunities, access to best practices, and a talent pool with shared services experience, further enhancing the viability of establishing a shared service center in Costa Rica.

A Deloitte study evaluates shared service centers in Costa Rica

Recently, Deloitte launched the first study on the state of maturity of the shared services centers in Costa Rica, yielding very promising results for the country. This study was carried out with the objective of obtaining a current overview of the degree of maturity enjoyed at present.

Establishing a shared service center in Costa Rica can significantly reduce a business’s cost through various operational and strategic mechanisms. Here’s how:

1. Economies of Scale:

By consolidating certain back-office functions, such as HR, finance, IT, and customer support, into a shared services center, a business can benefit from economies of scale. Operating these functions centrally for multiple business units or locations enables the organization to take advantage of bulk purchasing, standardized processes, and optimized resource allocation. Shared service centers in Costa Rica reduce duplicative efforts, minimizes excess capacity, and lead to cost savings.

2. Resource Optimization:

In a shared services model in Costa Rica, resources like skilled personnel, technology infrastructure, and office space are utilized more efficiently. Instead of each department or location having its own separate team and infrastructure. Shared services concentrate resources, enabling better resource allocation, reduced redundancy, and cost-effective utilization of facilities and equipment

3. Process Standardization and Efficiency:

Shared services centers in Costa Rica often implement standardized processes and best practices across the organization. This leads to streamlined operations, reduced errors, and faster processing times. As processes become more efficient and consistent, employees spend less time on repetitive tasks, allowing them to focus on higher-value activities. This increased efficiency directly translates into cost savings.

4. Labor Cost Arbitration:

Shared services centers can be established in Costa Rica with lower labor costs. This is often referred to as labor cost arbitration. This means that companies can hire skilled Costa Rican talent at a reduced cost compared to regions with higher wage levels. This arbitration potential is especially significant when it comes to functions like customer support, data entry, and routine administrative tasks.

5. Reduced Overhead:

A shared services center in Costa Rica consolidates administrative and support functions into a single location. This consolidation reduces overhead costs associated with maintaining separate administrative teams, offices, and infrastructure across multiple business units or locations. This includes savings in rent, utilities, office supplies, and other administrative expenses.

6. Technology and Automation:

Shared services facilities in Costa Rica often leverage technology and automation solutions to further streamline processes. By implementing digital tools, robotic process automation (RPA), and other technology-driven solutions, companies can optimize workflows, eliminate manual tasks, and reduce the need for extensive manual intervention, leading to both time and cost savings.

7. Expertise and Training:

Shared services centers in Costa Rica bring together specialized expertise and knowledge in various domains. This centralization allows for focused employee training and development programs, enhancing their skills and making them more efficient in their roles. Better-trained employees lead to fewer errors, faster resolution of issues, and improved overall productivity, all of which contribute to cost reduction.

8. Enhanced Supplier Negotiations:

A shared services center can also centralize procurement activities, enabling better negotiation with suppliers due to higher purchasing volumes. This can lead to favorable contract terms, discounts, and cost savings on supplies and services

Because of increased control, efficiency, standardization, and significantly reduced costs, Costa Rica has established itself in the region as a “preferred” country for the establishment of a company of this type, ahead of Colombia, Mexico, and Uruguay.

In Costa Rica, around 70 Shared Service Centers have generated more than 30,000 direct jobs and countless indirect jobs around their operating ecosystem.

The survey that Deloitte recently completed applied to 37 of these companies yielded promising results that indicate that the shared service centers in Costa Rica are at an important level of maturity and ready to evolve in their maturity model towards higher-end services and processes.

The study determined that 70% of those surveyed confirm that their current processes are robust and strong and that they are ready to expand their operations, be it via greater geographical reach or by increasing the capacity of the processes it supports; This translates into an increase in qualified and well-paid jobs for Costa Rican workers.

A digital transformation is taking place in Costa Rican shared services centers

The study’s other results are related to digital transformation and the application of new technologies in shared services centers in Costa Rica.

Most of the respondents recognize that digital transformation will be a fundamental and strategic pillar in the next three to five years. Although practically half of the companies surveyed acknowledge that they have already implemented some process automation through Robotics (RPA), at the same time, 47% acknowledge that the efforts are still isolated or limited and that they should seek to integrate a robust digital strategy to the service center as the natural incubator to permeate this new way of thinking throughout the organization and internal customers.

Costa Rica has the workforce

One of the most important issues in the establishment of shared service centers in Costa Rica has to do with the employability of the country’s workforce. The shared service centers are creators par excellence of jobs for qualified personnel. They have very robust training processes, teaching their employees new skills that allow them to carry out more complex tasks.

In conclusion, establishing shared services centers in Costa Rica can help reduce costs for a business by capitalizing on economies of scale, optimizing resources,  increasing process efficiency, reducing labor costs, reducing overhead, using technology and automation, developing expertise, and improving supplier negotiations. By strategically centralizing certain functions in a Costa Rican shared services facility businesses can achieve significant financial benefits while simultaneously enhancing operational effectiveness and service quality.

The Central American country’s government has created a new agency to attract foreign direct investment to El Salvador.

Considered one of the most challenging countries in Central America for foreign direct investment (FDI), the Nayib Bukele Government of El Salvador has begun to act to try to change this state of affairs. At the beginning of June 2023, the Salvadoran Congress approved the Law for the Creation of the Investment and Export Promotion Agency. This organization (INVEST) is intended to attract more foreign direct investment to El Salvador. It will seek to gain Spanish investment that is far from reaching its potential volume today. This is even though Spain is the third investor in the Central American nation.

Spain’s foreign direct investment in El Salvador leads Europe

Spanish investment in El Salvador, which had been increasing modestly, has slowed its pace in recent years. According to the ‘XV Report on Spanish Investment in Ibero-America’ by IE University, the country will be one of the markets where FDI will not grow significantly in 2023. All in all, Spain is El Salvador’s leading political and economic partner in Europe. The countries have a bilateral treaty for the Promotion and Reciprocal Protection of Investments and an agreement to avoid double taxation. Spanish firms have asked San Salvador for regulatory improvements to further facilitate their foreign direct investment in El Salvador.

In El Salvador, where Spanish investment has traditionally been modest and variable, even though Spanish firms rank third in capital flow to the country (10% of FDI, 900 million stock), companies are present in the modernization of transport and energy infrastructures and play a key role in agribusiness and tourism. Present with investment in El Salvador are Spanish firms such as Barceló, Calvo, Acciona, Abantia, ACS, FCC, Indra, Atento, Santander, Mapfre, Inditex, Mango, and Iberia. Telefónica, within its divestment strategy, closed the sale of its subsidiary there in 2022 for 125 million euros to the General International Telecom investment fund.

More promotion of foreign direct investment to El Salvador

The new Invest Agency will replace the existing Export and Investment Promotion Agency of El Salvador (Proesa), which will be dissolved. Once the law goes into effect, Invest will promote foreign direct investment in El Salvador to investors and increase exports. However, the power to set up committees for each Public-Private Partnership project is separate from the law, and the Ministry of Economy will assume this responsibility.

A study prepared by the KPMG firm recently indicated that El Salvador is among the most challenging countries for investment in Latin America. It ranks as the fifth most attractive country to invest in, surpassed by Costa Rica, Honduras. the Dominican Republic and Panama. According to the survey, the country ranks 13th in attractiveness for doing business. It only exceeds Guatemala, Nicaragua, Bolivia, and Venezuela. However, San Salvador has been indicating in the last year that the country has improved in terms of investment, which they attribute to different reasons, such as the significant improvement in security and the adoption of Bitcoin.

According to the survey carried out among 400 business leaders in the region, El Salvador still needs to register among the ten most attractive countries to invest in Latam in a context where opportunities for mergers and acquisitions are increasing. The first place on the list is occupied by Mexico since 79% of companies and investors consider that country the most attractive to do business. After Mexico, Brazil (69%); Costa Rica (54%); Chile, Colombia, and Peru are recognized as the best investment venues. The list analyzes 17 of the 19 Latin American countries.

The lack of abundant foreign direct investment in El Salvador (the country continues to be the country that attracts the least foreign capital flow in Central America) could be due, according to the study, to the fact that it does not yet offer what companies are looking for: clarity in the opportunity to invest, diversify and grow. In the KPMG report ‘In an uncertain world, mergers and acquisitions in Latam are increasing,’ it is emphasized that investors now perceive less legal certainty in the country.

International campaign for foreign direct investment in El Salvador

The Central Bank itself of El Salvador points out that in 2022 the flow of investments in the country, that is, the inflows and outflows in monetary terms, was US -99.1 million dollars, a negative figure that reflects that more investments left El Salvador than those that entered, despite the official speech of the Government of Nayib Bukele, which highlights that the exception regime in public security and the adoption of bitcoin have been vital in attracting investment.

Despite the government’s efforts, more foreign direct investment in El Salvador is needed. As a part of this effort, in recent times, San Salvador has made an effort to define the country as a safe place for investment, notably in tourism. It did so in Madrid in January 2023 through the Minister of Tourism, Morena Valdez. Likewise, in March, the Government of El Salvador reinforced its campaign to attract foreign capital with a campaign focused on the fact that the country has a “propitious” climate for doing business and hopes to become a place where investors pay attention and multinationals are established.

Both the Minister of Economy, María Luisa Hayem, and other ministers highlight the opportunities offered by El Salvador in sectors such as logistics, construction, aeronautics, water, technology, tourism, agribusiness, health, railway, airport, and transport infrastructures, ‘outsourcing ‘ and specialized textiles, thanks to “legal security, macroeconomic stability, the promotion of innovation, the development of public infrastructure and a legal framework defined in the Investment Law that is governed by the principle of non-discrimination and equal treatment of national and foreign investments.

The Salvadoran economy, highly dependent on remittances, grew at a rate of 2.6% in 2022 and is expected to slow to 2% in 2023. This is the case even though the IMF is optimistic and has praised that the country has experienced “solid” growth in the last year, with a reduction in inflation, despite the “adverse” impacts; and highlighted the security improvement, which is giving a “greater than expected” boost to private investment and growth.

The Panamanian economy is dominated by services with a contribution to GDP of approximately 80%. This blog post will examine the importance, characteristics, and benefits of local and international logistics in Panama, which is considered the engine of the nation’s economy.

In addition, there will be a review of key events that have strengthened the sector in recent years. Additionally, we will examine actions, policies, and strategies employed in the Panamanian logistics sector to increase competitiveness.

First, we can easily define logistics activity as getting a product from one place to another in the shortest possible time at the lowest possible cost (efficiently) by air, sea, and land.

Second, we will state why the Panama Canal, the Colon Free Zone (ZLC), the international ports, and the Tocumen Airport are efficient growth engines within Panama’s logistics sector, forming an essential part of the global transportation trade.

These growth engines are part of the national development strategy for logistics in Panama originated in the 1970s with the vision of integrating these activities into the country’s growth.

Therefore, the national banking system was created to provide dynamism to credit and finance the activities of the ZLC and other logistics companies.

Similarly, port concessions were granted to international companies of world prestige in port activity. In addition, the Tocumen International Airport was remodeled and expanded, and through Copa Airline’s strategy, the country is promoted as a transportation hub of the Americas.

As for telecommunications, Panama is connected to seven fiber optic submarine cables that allow expanding connectivity and national and international communication.

As all these activities related to transport, storage, and communications play an essential role in economic growth and human capital development, we will focus this analysis on national and international logistics in Panama from the perspective of competitiveness and how to integrate the logistical dynamism with other sectors.

Main components of logistics in Panama

Canal

The Panama Canal is one of the most critical components of the Panamanian economy. Approximately 14,000 ships transit through it annually, carrying 325 million net tons of cargo, generating about US $2 billion in tolls.

The Canal also generates income through the export of services, which multiplies national economic activity since -by circulating foreign currency- it causes secondary demands for other goods and services. The preceding has an economic and social impact on a series of economic activities directly and indirectly linked to the Canal.

Ports

Logistics in Panama includes a network of ports that provide a wide variety of services to containerized, bulk, liquid, and general cargo and passengers at cruise terminals. There are five international ports in the country, and a sixth one located in Corozal is being planned to meet the demands in the logistics supply chain. Approximately 7 million TEUs are mobilized per year. The port of Balboa is the leading installation of the port complex, followed by Manzanillo International Terminal (MIT)  and Cristóbal. All these ports have some connectivity with ZLC, Canal, Railroad, and logistics parks at short distances making the country a competitive logistics center among the world leaders.

Maritime services such as fuel sales, food sales, repairs, maintenance, and ship registrations, provided to ships that pass through the country, generate approximately $500 million in revenues annually.

In the same sense, 200 cruise ships visit Panama each year, transporting 500,000 tourists who inject foreign currency into the Panamanian economy.

Airports

Logistics in Panama include airports. Tocumen International Airport is the country’s leading facility for air travel and has the most significant and advanced infrastructure in Latin America. It is an important air transportation hub in America from which Copa Airlines operates.

Copa connects 69 frequencies and 35 destinations worldwide, attracting airlines from other continents with direct flights. This highlights the Panamanian airline as one of the most important in the Americas. About 4.3 million passengers use Tocumen in direct transit. The cargo terminal handles more than 116,000 tons of cargo, mostly transshipment.

Tocumen is developing an expansion plan to provide world-class service, increasing frequencies, flights, and destinations. It is working on streamlining immigration, customs, and passenger check processes. Also, Tocumen has a wide range of commercial and hotel infrastructure to meet the needs of an increasing number of passengers.

Railway

Rail transportation plays a crucial role in logistics in Panama. In 1998, the State granted the concession for 50 years to the Panama Canal Railway Company (PCRC) consortium. The PCRC comprises the union of Kansas City Southern and Mi-Jack Products companies that provide train transportation services for passengers and cargo. Shipments between the cities of Panama and Colon are containerized. The central role of the railway is to serve as a transshipment link for container shipments between Atlantic, Pacific, and ZLC ports, moving around 420,000 containers a year.

Free trade zone

In 1948, the Colon Free Zone began its operations as a duty-free zone and continues to be employed as such until now. It is currently the second most important free zone in the world. Approximately US $29 billion annually is mobilized in imports and exports. All this movement is possible due to factors such as the Panama Canal, banks, ports, airports, Panama,  and the short distances between them.

In addition, there are 15 free zones in the country on a smaller scale that offer various tax incentives. They give added value to commercial activity related to logistics in Panama. Since 2011 with Law 32, this modality began with an investment of $200 million to promote the country’s development and generate employment.

Three types of free zones exist: private, state, and mixed. The types of companies that can operate in these special zones include manufacturers, assemblers, processing of finished or semi-finished products, general services, logistics, higher education, scientific research centers, and health services, among others.

Logistics park

The Logistics Activity Zones or logistics parks in Panama include storage, transportation, transfers, and value-added activities such as customer service, inventory management, assembly, and labeling. There are currently 8 of these parks near the Canal in the provinces of Panama and Colón. The logistics parks complement the maritime and air centers. Therefore, US$ 200 million is currently being invested in a logistics park near the Tocumen Airport.

Road infrastructure

The Panama highway system is going through a series of changes to improve traffic in the Capital and the province of Colón. At the same time, the main highways in the interior and the Pan-American highway are being improved.

Another critical project is the expansion of the Pan-American highway from Santiago province of Veraguas to David province of Chiriquí; the objective of this work is to reduce the cost of transporting items that travel from Panama City to the Costa Rican border in Paso Canoas and from the Capital to the agricultural areas of the country.

Central American logistics integration

An ambitious international project seeks to modernize the highway from Mexico to Central America and Panama; its name is the “Pacific Corridor.” This plan is being promoted by the Inter-American Development Bank (IDB) at a cost of $3.5 billion to build a road network with the necessary infrastructure for the Integrated Mesoamerican Corridor (CMI).

Some of these roads are in poor condition and unsafe, which increases travel time and cargo insurance premiums, increasing costs that are eventually passed on to the consumer. This initiative seeks to reduce the distance, travel time, and costs, joining a proposal for a Customs Union in the region.

The importance of logistics in Panama to the country’s economy cannot be overstated. Panama has a strategic geographic location that makes it a crucial hub for global trade and transportation. Its position as the narrowest point in the Americas between the Atlantic and Pacific Oceans has led to the construction of the Panama Canal, which has had a transformative impact on international shipping and commerce.

Logistics plays a vital role in Panama’s economy by connecting global markets, facilitating international trade, and attracting foreign investment. The country’s ongoing commitment to enhancing its logistics capabilities further solidifies its position as a key global supply chain network player.