Last year, foreign direct investment declined by 21 percent in Costa Rica, compared to the previous year. With foreign direct investment totaling just over $2 billion in 2014, this marks the first slowdown the country has experienced in foreign investment during the last six years.
Sectors in Costa Rica experiencing the most significant decreases included real estate, which saw a decrease of almost $400 million. Other sectors hit hard, included concessions for public works, tourism, and the commercial sector.
Why FDI Is on the Decline in Costa Rica
According to the general director of the Costa Rican Coalition for Development Initiatives, Jorge Sequeira, immediate action is required in order to increase Costa Rica’s competitiveness. Currently, the country is experiencing a number of challenges that have served to hamper its ability to compete, including the rising cost of electricity, the need for more training in vocational and technical trades, and a need to update labor regulations. The need to provide legal assurances for companies interested in expanding or setting up operations in Costa Rica is also a high priority. Among Costa Rica’s biggest competitors is Panama, which currently boasts the fastest growing economy in the region.
While the slowdown in investment last year was disappointing, the $2.1 billion recorded in foreign direct investment still exceeds the goal of $1.9 billion set by Costa Rica. At the same time, Costa Rica has also witnessed a 22 percent increase in investment in free trade zones. Such increases are largely driven by medical device manufacturers.
There is more good news on the horizon; however, as Costa Rica brought in 39 new foreign direct investment projects late last year. Those projects alone resulted in more than 10,000 new jobs.
In an effort to better understand why some companies may have opted not to invest in the country last year, the Costa Rican Investment Promotion Agency plans to conduct follow-up studies.