Costa Rica offers an ideal situation for foreign direct investment, due in part to the establishment of the several free zones where businesses can gain incentives and exemptions to operate. The creation of the Dominican Republic-Central America Free Trade Act (CAFTA-DR) also helps promote stronger trade and stability throughout the countries of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. Foreigners who want to invest in Costa Rica can do so through stocks, real estate and establishing all or part of a business there.
Invest in Costa Rican Stocks
Costa Rica has a stock exchange called the Bolsa Nacional de Valores, or Bolsa for short. This exchange is extremely small with only around 60 stocks listed as of January 2019.
Investors looking for exposure to Costa Rica by using this stock market may have a tough time trying to gain access, as there isn’t much liquidity compared to most major exchanges. However, there is a range of companies with a heavy emphasis on financials.
Many countries offer easier access for foreign investment to its stock markets through the use of an American deposit receipt (ADR) or an exchange-traded fund (ETF). However, since Costa Rica has such a small stock market, there are no ADRs or Costa Rican-specific ETFs available to the public.
Invest in Real Estate
The most popular way to invest in Costa Rica is through its many different real estate options. The country has become increasingly popular with the baby boomer generation for its choice of vacation and retirement homes. Along with its beautiful year-round weather, Costa Rica also offers a low cost of living and affordable health care.
Costa Rica has an extremely low property tax rate of 0.25% of the registered property's value. The tax savings, along with the low cost of living, makes a great incentive for retirees who are seeking more value for their dollar. Costa Rica also offers a variety of different real estate options, such as oceanfront, lakefront, mountainside or city condo properties.
Investors seeking more commercial property have plenty of inventory to choose from as well. There are also several real estate firms located in the country that cater to the needs of foreign investors. Thus, investors can find a rental income property, farm, hotel, bar or restaurant located in Costa Rica. Land development projects have also become more popular with investors, with the possibility of allowing the rights to be used for either residential or commercial construction.
Do Business in Costa Rica
The Costa Rican Investment Promotion Agency (CINDE) is a great resource for investors who are looking to gain exposure to one of the many growth sectors of Costa Rica.
- The services sector promotes the growth of businesses coming to Costa Rica, either as a back office, regional office, call center, human resource office or digital technology office.
- Advanced manufacturing attracts companies that are in the metal, automotive, electronics manufacturing, electronic service or aerospace fields.
- The life sciences sector has a focus on companies that produce medical devices, biotechnologies, and pharmaceuticals.
- The light manufacturing sector has opportunities for companies in plastic, clothing, construction, textile and packing materials.
- The food sector promotes the growth of farming, processing and handling, and distribution of food companies.
The Costa Rican government has developed many incentives to attract businesses in these sectors. For example, they get a 100% tax exemption on all import, interest income, withholding, stamp and sales taxes. There's also a 10-year lock on all property transfer taxes.
Investments within the service or manufacturing sectors see even more incentives. For the first eight-year period, these companies get a 100% income tax exemption, followed by a four-year period of a 50% income tax exemption.