INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2006. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

Provides the reader with an overview of doing business in Costa Rica.

Market Overview

· The United States is Costa Rica’s main trading partner, accounting for over half of Costa Rica’s total imports. According to U.S. Census Bureau trade data, the U.S. had a trade surplus of US$637 million in the trade of goods with Costa Rica in 2007. This compares to a surplus of US$288 million in 2006 and a US$183 million in 2005, and a deficit of US$27 million in 2004.

· Total foreign direct investment in the country topped the $1 billion mark in 2006 (the latest available year for this data), a dramatic increase from $861 million in 2005. The United States accounted for just under half of the total. U.S. companies like Intel, Procter & Gamble, Hewlett-Packard, Baxter and a number of franchising and service companies have invested in facilities in Costa Rica, and others have followed in the past year.

· Overall, Costa Rica’s economic indicators are showing positive signs. Economic growth continues at a steady pace, with GDP rising at about seven percent in 2007, or roughly the same level (6.8 - percent) in 2006. GDP growth may decline next year to five percent due to inflationary pressures and oil prices.

· The poverty rate (16.7 percent), the unemployment rate (4.6 percent), and the external debt have all decreased in the past year.The Government recently announced that it had achieved a slight budget surplus for the latest fiscal year, the first time in over 50 years. Inflation, however, remains high, hovering at around 10 percent annually.

Market Challenges

· Full accession to CAFTA-DR will not be achieved until Costa Rica passes a package of laws that will provide compliance to the agreement’s provisions, particularly in IPR protection, and openings in telecommunications and insurance.

· As of the drafting of this report, the Asamblea had approved only six of the 12 implementing laws, and many will require a review by the Constitutional Court. Furthermore, USTR and Costa Rica must agree on the regulations that support the package of laws. This makes it unlikely that Costa Rica will become a participating country in the Agreement by the deadline of February 29, 2008. The Government has announced it will request an extension of the deadline, although the time period involved is not known.

· Although the overall investment picture is bright, the Costa Rican Government has not enjoyed great success with many of its concession schemes for its public works projects, including the Juan Santamaria Airport in San Jose. As a result, infrastructure in many instances has deteriorated and will need to be improved if Costa Rica is to remain competitive in the regional and world economy.

· Enforcement of intellectual property laws has been lacking in many cases, due to insufficient resources and training and weaknesses in the country’s criminal code. The legal process in general is often sluggish, making binding arbitration an attractive option.

· Costa Rica recognized the People’s Republic of China this past year, giving greater impetus to competition from products originating from that country. Costa Rica is also part of the Central American effort to negotiate a Free Trade Agreement with the European Union.

Market Opportunities

· Market prospects are excellent in the following sectors: auto parts, travel and tourism services, construction equipment, audiovisual equipment, hand power tools/hardware, dental equipment, and hotel and restaurant equipment.

· Future prospects in these and other sectors are likely to improve with Costa Rican participation in the CAFTA-DR. More than 80 percent of all non-agricultural goods, and more than 50 percent of agricultural products, will be duty-free immediately upon Costa Rica’s accession to the agreement. In addition, Costa Rica is committed to market openings in the wireless telecommunications and Internet markets, along with insurance.

· In addition, CAFTA-DR will strengthen Costa Rica’s IPR protection regime, eliminate the dealer protection regimes, allow non-discriminatory treatment for U.S. firms in government procurement bids, and provide stronger protection for investors.

Market Entry Strategy

· U.S. products enjoy an excellent reputation for their quality and price competitiveness. Proximity to the Costa Rican market is also a major advantage for U.S. exporters who wish to visit or communicate with potential customers. This facilitates close contacts and strong relationships with clients, both before and after the sale.

· The U.S. Commercial Service Costa Rica advises U.S. companies to consult with local research companies and legal firms to conduct the necessary due diligence before entering into contracts with local firms. These partners will be instrumental in penetrating and expanding the market for a company’s exports.

· If CAFTA-DR is approved, trade should be further facilitated with the market access improvements and tariff reductions listed above.

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U.S. exporters seeking general export information/assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's Trade Information Center at (800) USA-TRADE, or go to the following website: http://www.export.gov
For a complete copy of the Country Commercial guide (2008) please go to: http://www.buyusainfo.net/docs/x_1156706.pdf

To the best of our knowledge, the information contained in this report is accurate as of the date published. However, The Department of Commerce does not take responsibility for actions readers may take based on the information contained herein. Readers should always conduct their own due diligence before entering into business ventures or other commercial arrangements. The Department of Commerce can assist companies in these endeavors.