Investment in Costa Rica (UN)
United Nations Conference on Trade and Development
World Investment Report 2009
Foreign Direct Investment (FDI)
Purchase or development of businesses in a given country, made by foreign companies.
Components of FDI:
- Shares and other equity
- Reinvested earnings
- Other capital
- Any other transaction or flow between a subsidiary and its parent company.
Considerations for FDI
- Much of FDI occurs through mergers and acquisitions. Not necessarily by the arrival of new projects.
- FDI has the potential to impact positively on quality of life.
- This relationship is not automatic. Action must be taken so that the benefits have an impact on the domestic economy and for these to be distributed appropriately: creation of linkages and redistributive policies correct.
- It must take into account two effects: countries receiving investment (FDI inflows) or invest in the rest of the world (outward FDI). Both directions have different impacts on development.
- There are different types of FDI:
- Search resources
- Search for markets
- Search efficiency
- The gains in the domestic economy will depend on the reasons why the firms do FDI.
- The crisis has changed the landscape of FDI. This since the fall of 2008 was not widespread throughout the world:
- Developed countries: - 29%
- Developing countries: + 17%
- Least developed countries: +43%
- Increased exposure in developed financial markets: mergers and acquisitions fell by almost 40%.
- Another influential factor: profit repatriation
- It is expected that 2009 be a year of declines for all groups of countries
Regional trends
Latin America
| 2006 | 2007 | 2008 | |
| Amount (billions) | $ 93.3 | $ 127.5 | $ 144.3 |
| % Of world total | 6.4% | 6.4% | 8.5% |
- Growth of 13%
- Emphasizes the exploitation of natural resources, FDI vanishes in manufacturing export sector and increasing public sector participation in ALBA countries.
Active year in terms of different policies to attract FDI.
Central
Panama and Costa Rica attracted almost 60% of FDI in 2008
| Country | Rank Potential Index of Attraction | FDI Flows 2008 (Million U.S. $) | % Relative | % Growth | % GDP |
| Panama | 67 | 2.402 | 32% | 26% | 10.4% |
| Costa Rica | 75 | 2.021 | 27% | 7% | 6.8% |
| Guatemala | 103 | 838 | 11% | 12% | 2.2% |
| El Salvador | 105 | 784 | 10% | -48% | 3.5% |
| Honduras | 111 | 877 | 12% | 7% | 6.2% |
| Nicaragua | 116 | 626 | 8% | 64% | 9.9% |
| Total region | -- | 7.548 | 100% | 4% | 5.6% |
- Costa Rica and Panama are nearly 60% of FDI inflows.
- The region receives 5% of total Latin American and 0.44% of total world
- In some countries, the FDI ratio to GDP is almost twice the global average
Trends in Costa Rica
Comments on the Evolution of FDI in Costa Rica:
- In 2008 it reached a record level, surpassing the two billion dollars.
- In the agricultural sector achieved a record (U.S. $ 426 million) it was lower than 21% of the total.
- MNCs have played an important role in the commercialization and modernization of agriculture.
- It is estimated a slowdown in 2009 (about 30%), with an upturn in 2010.
- Most affected sectors: tourism and real estate, whose recovery could occur in 2010-2011.
- Telecommunications investment could offset the decline in tourism and real estate sectors.
Strengths of Costa Rica to be competitive in attracting investment:
- Standards of good governance and quality education.
- Political stability.
- International integration policy - new trade agreements to increase diversification.
- Clustering in high technology, medical products and ecotourism.
- Innovation Strategy (Estrategia Siglo XXI, Atlas of Innovation, CENAT, Omar Dengo, TEC, etc).
- Advances in infrastructure.
Challenges the country has:
- Improving interagency coordination.
- Advancing infrastructure (Increased reliance Concession Law Public Works).
- Finish negotiations process (EU, China and Singapore).
- Reduced red tape in certain areas (immigration, municipal, etc.).
- Greater emphasis of the policy to attract investment in innovation, research and development and production chains.
- Reform of the Free Zones Act (promoting investment outside the GAM).
