Free-Zone Exports Growing Slowly in 2008

October 31, 2008

Growth in the country’s exports from free zones (zonas francas), areas where businesses of a certain size pay no taxes, has slowed considerably this year, dropping to about 5 percent, compared to 17 percent growth last year.

But the director of the Association of Free-Zone Businesses (AZOFRAS), Timothy Scott, said he expects sales for 2009 to be significantly better and grow by 10 percent.

“A few textile companies that shut down their operations in Costa Rica have affected sales this year, but won’t next year,” Scott said. “Other important companies have recently opened in the country but are just starting their operations … so they will grow next year.”

To be part of a free zone, a company must make an initial investment of $150,000 in the Costa Rican branch of their business. The free-zone companies do not have to pay sales or consumer tax, among other benefits.

The United States, which has been rocked by a financial crisis the past few months, is the principal buyer of goods from the free zones.

AZOFRAS estimates that total sales for this year will reach $5.49 million, compared to just under $5.1 million in 2007.

About 215 businesses benefit from freezone tax cuts, and together employ around 50,000 people. More than half of all Costa Rica’s exports are generated in free-zone businesses.

–Elizabeth Goodwin

 

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