Costa Rica’s trade minister Andres Valenciano participating in a ministerial panel on 8 October as part of Barcelona New Economy Week, where he spoke with Investment Monitor. (Photo by Barcelona New Economy Week)
Looking at the big picture, how well is Costa Rica positioned for recovery and what are its foreign direct investment [FDI] prospects?
Our free trade zone regime and, importantly, our policy on export diversification has allowed us to use this moment as an opportunity. FDI in Costa Rica has actually grown during the pandemic, not only for new investments but also for expansions. That is because companies understand that they are going to find social, political and economic stability for the long term in Costa Rica, and also that we have a lot of value to add. We have been investing in our talent, and opening up new opportunities in terms of digitalisation.
Our energy policy offers companies the possibility of running their operations solely from renewable sources as well. We are a stable democracy, we have rule of law, and we have this vision of sustainability that has been working well for more than 30 years – that is what helps put Costa Rica on the map.
So, if you add these factors together, Costa Rica was actually well poised for when companies started asking themselves: where should I invest now? Where should I diversify? Costa Rica already had a proven track record. What I tell people is don’t believe my words, just look at the number of companies [investing in Costa Rica] and how diverse those companies are and the reinvestments that they have done in the past decade, and you will see that we have been able to deliver what companies are looking for.
At the same time we understand that we have to evolve, as companies are evolving, and we are working very closely with the private sector to understand current and future needs.
Costa Rica places a big emphasis on environmental, social and corporate governance [ESG] and sustainability, and we know that is part of your FDI strategy as well. How easy is it to balance ESG criteria with the need to develop the economy and create jobs?
We believe these [objectives] complement each other and seeing them as mutually exclusive is not the way to go.
Our track record speaks for itself and our value proposition of people, planet and prosperity will continue to be the driving force behind our FDI strategy.
Companies are increasingly saying they want to invest in places that can deliver on ESG and sustainability criteria. That has always been Costa Rica’s differentiator, and we pride ourselves in having no army and being able to use those resources to invest in people and in taking care of the environment [instead] – and just as taking care of the environment has paid off for us, for example, in terms of tourism, it now pays off more and more in terms of business. We look for companies that are speaking the same language when it comes to ESG and sustainability, and that has been a winning strategy for Costa Rica.
What kind of changes do you anticipate to the FDI landscape from the G20 tax reforms? Are you supportive of those reforms, and how might they impact Costa Rica?
That is a fascinating discussion. Now that we are OECD members – we just became member number 38 – we were recently in France at the 16th ministerial meeting of the OECD and this was one of the issues that was discussed. Obviously, the corporate taxation and BEPS framework is moving forward, there is a lot of momentum behind it. Most of the countries are on board now around the world, and Costa Rica is happy to take part in that conversation for a couple of reasons. One is that our free trade zone regime has already been updated to OECD standards, so we are well prepared to make sure that when investors are asking ‘do you comply with those standards?’ the answer is ‘yes’. However, at the same time, the conversation then quickly shifts into ‘well, if you level the playing field in terms of taxes, in terms of fiscal incentives, what else can the country offer?’.
Barcelona New Economy Week was a physical and digital B2B event. (Photo by Barcelona New Economy Week)
Then we go back to the answer to that first question that you asked, and we can say that Costa Rica actually offers a lot of other important variables, such as talent, sustainability, stability. Another important aspect is that international companies want to be able to offer the right living conditions for their executives. At the end of the day, people want to live in places where they have a good quality of life and Costa Rica can also offer that.
We are open for business and we are looking to have conversations with companies that want to invest in our country. Our track record speaks for itself and our value proposition of people, planet and prosperity will continue to be the driving force behind our FDI strategy.
Courtney Fingar is editor-in-chief of Investment Monitor and a widely known commentator on international investment trends.