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Doing Business in Costa Rica; A Procomer Overview

by | Apr 15, 2023

Andrew Crawford
Trade Commissioner US Southwest & Mexico – Commercial Director
Promotora del Comercio Exterior de Costa Rica (PROCOMER)
acrawford@procomer.com

LATAM FDI: Welcome to another episode of the Latin FDI podcasts. In these recordings, we speak to experts from Latin America on issues that have to do with business in the region, foreign trade, manufacturing, and other pertinent things. Today we have Andrew Crawford with us. Andrew is the Trade Commissioner in Houston for Costa Rica. He represents an organization that is called Procomer. I’ll let him introduce himself, explain what his organization does, and expand on the subject of doing business in Costa Rica. Andrew, welcome.

Andrew Crawford: Thank you for having. It is a great pleasure for me to join this conversation. As you said, my name is Andrew Crawford. Currently,  I am a director of the trade promotion agency of Costa Rica named Procomer. I’ve been doing this for a while, but now I’ve been doing it for the US. Southwest and Mexico for the last two years. I am based out of Houston, Texas, and have over 20 years of experience in different areas of trade development, including industrial engineering, supply chain project management, trading services, and logistics in general. I love this, and I feel great about representing and talking about doing business in Costa Rica around the world and promoting our country’s capabilities and capacities.

LATAM FDI: Costa Rica is very popular amongst people for the tourism aspect of its economy. I was at a conference lately, and they asked the audience how many people have been to Costa Rica, and three-quarters of the people raised their hands. So, we know that it’s a lovely place. But what people may need to learn is that Costa Rica has significant export industries. Some of those are in manufacturing. Some are primary products. Can you give us an overview of what Costa Rica exports worldwide?

Andrew Crawford: Yes, that’s a great question. Regarding Costa Rica as a business destination, we are a hidden diamond. Many people do not relate to our country as an advanced manufacturing destination when they consider doing business in Costa Rica. When they come over, sit down with Procomer, and have constructive conversations, their whole view of Costa Rica changes. So, they moved from the concept of tourism and leisure to an industrially advanced manufacturing country where they could do business. And it is accurate to say that 30% of our GDP is related to non-tourism exports. Our main exports at this very moment are medical devices and medical instruments. All of this didn’t happen overnight. It has taken a few years, and I will explain it further and more clearly during our conversation. Also, our main exports go to the United States. 42% of our exports go to the United States, then the European Union and Central America respectively.

We are currently exporting more than 4200 products to more than 150 countries. That reflects the level of maturity our export basket is having right now. And going back into tourism, let’s say, a narrative you mentioned when you started your question. Yes, we receive millions of tourists yearly, and tourism represents 5% of the GDP, but Costa Rican manufactured exports represent 35% of the GDP. So, there’s a dramatic difference between the composition of the tourism GDP and the composition of manufactured exports GDP. Regarding the changing aspect of doing business in Costa Rica, everything started back in 1987. If I go back to manufacturing, this is when Baxter decided to open up a facility in the country. Everybody asked Baxter’s management, why are you going down there? Why is it that you decided to get into a location that is related to tourism? Well, they started to discover that there was an opportunity to develop advanced manufacturing out of the country and that doing business in Costa Rica was a good option. That’s how everything started. And I can give you more details by the time we keep moving forward with the conversation.

I can mention companies like Baxter, Boston Scientific, Edwards, Cooper, Hologic, Phillips, Smith and Nephew, Coloplast, IQ Medical, Abbott, Terumo, Heraeus, and Cardinal Health. And the last two will mention that Bayer and DDS Lab are building new Costa Rica facilities. That explains how deep things are getting into the country. And this is the level of maturity of the company we see in there is connected to the policies we bring to the table. So even though the concept has become more relevant during the last few months, Costa Rica has always been a friend-sharing destination for the United States. So, we know what an eco-friendly vision is. Our nature and sustainability may be Costa Rica’s best-known assets, but sustainable productivity has made the country a thriving destination for foreign direct investments. Mentioning these types of companies, which we are discussing and putting on the table right now, is related to our talent pool. Doing business in Costa Rica is attractive because the country decided in the late 1940s to abolish the army and invest in talent. This is what these companies find in Costa Rica.

So,  an educated workforce, a bilingual workforce,  a great cultural connection with the United States in general, and a commitment to sustainability are our selling points as a stable democracy. But suppose you put it into the conversation that investments starting at $150,000 include incentives such as no income tax for several years and no taxes on assets to be paid off. In that case, that makes doing business in Costa Rica very attractive. For your project, there are no fees, taxes, or withholdings in repatriating your income once this facility produces financials in black numbers like that, along with the perks I mentioned in the first part of my explanation. It brings a perfect combination of perks for companies to say yes. Moving forward with Costa Rica as allied to do business here in Latin America makes a lot of sense.

LATAM FDI: One of the things I’ve been seeing from the business that I do in Costa Rica is that Costa Rica, as well as much of Latin America, is benefiting from the near-shoring phenomenon occurring during the COVID crisis as it has accelerated. So, as a result, companies saw that bringing supply chains from places like Asia closer to home would be a better strategic decision. Do you see that playing out with companies that are considering doing business in Costa Rica?

Andrew Crawford: Our demand for exploring and analyzing the feasibility of Costa Rica becoming a site for greenfield operations has grown by 40% from year to year, starting in 2020. So, dealing with a more significant number of imbalances in the world in terms of financial markets, cybersecurity concerns, supply chain constraints, limitations in the protection of IP, and the rule of law in some areas of the world. So, it gives an excellent opportunity to Costa Rica, where we can solidify our friend-shoring advantage and ensure policies and capabilities based on our proven history. We are already the home of more than 380 high-tech companies and 40 Fortune 500 companies. Thirty of the world’s top med tech companies are also doing business in Costa Rica. And the numbers are still growing. I can only disclose more upcoming projects once they start digging and installing the brick-and-mortar, but things look positive. So, Costa Rica has emerged as a leading global destination for investment for companies in the life science sector. And we have become a benchmark as an exporter in this area of the world. And that motivates our policymakers to keep improving and striving for better services in allocating more capabilities in favor of these investments to make it more interesting for companies that are considering doing business in Costa Rica.

LATAM FDI: Now, we talked about the medical device industry in Costa Rica. It would be interesting for the listeners if you could give an overview of the products manufactured in Costa Rica.

Andrew Crawford: Yes, and let me just put that in another context. Costa Rica is currently the second largest exporter of medical devices in Latin America. Only Mexico is ahead. But we have to add context here. Mexico is 135,000,000 people. We are just 5.2 million citizens. This country acts like a boutique regarding medical devices, and we must keep improving. But we are doing something well if we say that a small country with only 5.2 million attracts many projects and companies interested in doing business in Costa Rica. We have a lot of specialties in the industry. We can name cardiology. We can do medical aesthetics. We can produce for dentistry, neurology, orthopedics, ophthalmology, and gastroenterology. And a lot is happening in some other industries that are making their feasibility process for bringing more categories into the market segment. So that is a great thing to say. And on the other hand, it’s not just inviting the company and getting them interested in doing business in Costa Rica. We have created an ecosystem in this industry where an outstanding level of linkages also participates in the market.

Procomer leads a program in which we provide aftercare to international companies to facilitate the growth of the supply chain. We have developed projects where a multinational, for example, only source one part from Costa Rica upon arrival. Some outsource hundreds or even thousands of parts and components to local suppliers. So, with this in mind, that means that we work not only on identifying potential companies to come down to Costa Rica, but we also worry about the other part of the story, which is fostering capacities, standards, and certifications on those contract manufacturers so they can better deal with the demands and needs of these OEMs that are engaged in doing business in Costa Rica.

LATAM FDI: Another exciting development I’ve noticed recently is that Costa Rica is developing another advanced industry, aerospace. What’s going on in your country in that sector?

Andrew Crawford: Yes, that’s an exciting topic that has been happening. First, it is good to know that a former NASA astronaut is a Costa Rican guy. His name is Franklin Chang. He’s developing an engine out of plasma, the fourth state of matter. And he’s basically at a stage where he has received sufficient funds to ensure the plasma runs correctly for many hours. And this engine reduces the cost of launching rockets and artifacts into space in an amazing way. So, we might see the Ad Astra project, the name of this engine, being heard of in much more vocal and different avenues pretty soon regarding what’s been going on with this plasma. With this engine, Chang is seeking to take care of debris around the orbits of the earth, which is the mission he’s planning. This can be done since it’s a very cost-efficient engine. It’s going to be pretty cheap to go out there to the orbits of the world and start picking up debris from satellites and other types of materials that are orbiting the Earth.

So that’s one thing. The other thing is the aerospace companies that are doing business in Costa Rica. This is a cluster of a group of companies, 30 plus companies with technological capabilities that complement each other to enable the development of aerospace solutions. So, we collaborate with them to centralize the needs and opportunities we tackle in international markets. And their focus is on critical and noncritical electromechanical systems, the development and testing of software embedded to the high standards in terms of the industry. In addition, we experienced the incorporation of a great deal of our MRO with Boeing. Our MRO is a US Federal Aviation Administration and a European Aviation Agency-certified maintenance and repair and overhaul facility in our airport. And these guys have been doing a great conversion of Boeings for many years, as Boeing has received an increasing number of conversions from commercial 737 800 to 737 800 converted freighters. So, this MRO is doing a great job in the area. So, we’re doing electromechanical, we’re doing software, we’re doing MRO, we’re doing stuff in the space that pretty much says how we’re doing, Steven, which is an interesting world that people may not know that it’s been taking place in Costa Rica as well.

LATAM FDI: Beyond aerospace and medical devices, what other opportunities exist for advanced manufacturers that are interested in doing business in Costa Rica?

Andrew Crawford: Well, you know that everything is on a concept of sustainability right now. So particularly parts and components that hold any IP. And that may require certain levels of hardware and equipment that can impact the future of energy consumption in our daily lives is becoming an excellent opportunity to be hardwired manufacturing in Costa Rica. We must remember that Costa Rica produces 99% of its energy from alternative or clean energies. So, there is already a country brand and thus a great image a foreign company can use as an endorsement in their projects and operations that they can say we produce sustainable products in advanced manufacturing in Costa Rica. This country produces 99% of its energy from alternative or clean energy. Broadcast manufacturing is a growing industry because of the growth of the entertainment world and everything. We already have experience in this industry. So, there’s an opportunity to keep growing in the area.

IoT AI needs machines and devices, where the electronics and the houses of those devices can be manufactured by companies doing business in Costa Rica. Those are some of the ideas that I can tell you and things that we’ve seen according to the capabilities of our talent and what we’ve seen in terms of experiences that we can extract from what we are already doing. Those are additions that we could have soon.

LATAM FDI: Well, can you tell me and our listening audience how people can contact you and your agency to discuss further hooking up with a contract manufacturer or starting a new project there? And also, do you have any upcoming events that people could attend?

Andrew Crawford: Sure, I’m totally and completely available on my mobile. It’s a Texas phone. The number is 832-940-8587. As I said, 832-940-8587. My email is acrawford@procomer.com. Please bear in mind to the audience that in our role as a government agency, our services are entirely free of any charges. We don’t charge anything for our services. We work as great facilitators as public policymakers. We are time savers for those seeking the right contract manufacturers in Costa Rica or who would like to understand better how to settle down and make a greenfield investment in Costa Rica. We usually ask the US company to fill out a profile form under a band model B-A-N-T which is the buying. They understand who is the buyer, the buyer, what authority this person will have during the process, what specific needs this person has, and the timeline to put a project in place.

After we gather this information and do an internal assessment, we jump into the capabilities we have with our companies to analyze the data and narrow down the potential contract manufacturers that can connect adequately with the specific need of doing business in Costa Rica. We suggest different avenues to get connected. It can be as simple as an email connection. We can set up a remote call between the parties. We organize the remote call so we can do introductions properly. We can suggest site visits on both ends. Either the Costa Rican company with great potential to come by and understand what the needs in the facility in the United States are that have to be tackled down in Costa Rica or vice versa. Have the US company go to a facility in Costa Rica as well. That can take place at any time of the year. And in the meantime, we can offer sourcing events. There’s a sourcing event that we do every year. It’s our annual event known as BTM Buyers Trade Mission. This event will be held in the last week of September 2023. The interesting thing here is that we cover accommodation for up to four nights.

Additionally, we cover meals. We cover facility tours during the first two days of the event. So, we schedule many site tours for companies according to their needs in the United States. And then the very last day, the third day, we do like a one-on-one business agenda, so it’s also adding up companies that you might not visit the site tours but might be interested in having conversations about doing business in Costa Rica. Too. So, we add up a third day in our National Convention Center to have one-on-one meetings with companies you didn’t meet during the first two days. And in the same spot, there will be some other chapters of different things going on during that week because it’s a pretty busy week, and we account for 400 buyers from about 50 countries every year that visit our buyer’s trade mission. Last year, our Advanced Manufacturing tour chapter was a great success, mainly with companies from Canada and the US. Mexico and Europe. They were focused on visiting facilities and learning more about how they’re doing things, companies are doing things, and how Procomer supports these companies to scale up in terms of capabilities.

LATAM FDI: That sounds like an incredible opportunity for companies interested in doing business in Costa Rica. And thank you. We thank you for speaking with us today and providing good contact information so that people who want to take advantage of Procomer services can contact you directly. So, thank you for that, Andrew.

Andrew Crawford: We appreciate it. There are a significant number of incentives that we have available for people to establish a greenfield operation in Costa Rica. It’s just a matter of giving me a call or sending me an email, and we can further discuss how Costa Rica has become an excellent platform for doing business oriented to the United States and with a great group of incentives together to make it profitable and feasible in the long run.

LATAM FDI: Well, thanks again, and have a great day. Listeners to this podcast can also contact LATAM FDI for further information about doing business in Costa Rica.

 

 

Contact LATAM FDI to discuss your foreign direct investment plans in Latin America.

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