Government Commits Help to Little Guys
Thirty years ago, Humberto Chacón and a friend discussed starting a business. After surveying the economic landscape of Costa Rica at the time, Chacón and his friend identified a need.
Chacón set out to tackle the challenge after his friend lost interest.
Starting with his wife in their small garage, Chacón created a labeling company and began providing labels for national food and beverage products. Over the years, Chacón’s company, Corporación Robiisa Internacional (Robiisa), was hired by national food and beverage companies such as Dos Pinos, the nation’s largest dairy product supplier, the Monteverde cheese factory, and various other national chip and snack producers.
Robiisa is now a 35-employee operation in the hills of Aserrí, a small town southeast of San José. In 2009, the company earned $1.14 million, which makes Robiisa a small- to medium-sized business in Costa Rica.
“There aren’t really any desires or expectations to expand or keep growing,” said Chacón, whose other family members also work at Robiisa. “We are more concerned with limiting our waste, reducing our use of energy and ensuring that we are an environmentally friendly operation.”
July 16 was one of the most memorable days in company history, when President Laura Chinchilla visited the Aserrí plant to promote the government’s plans to improve support for small- and medium-sized businesses, or PYMES, as such enterprises are known in Latin America. Chinchilla joked that the government should run with the ease of Robiisa’s label making machines. She said her administration would work with national banks to make credit more accessible for small businesses, that the process of obtaining permits and licenses, known as trámites, would be streamlined, and that technical and vocational education for small business employees would be improved.
“The values on which small businesses are based have been fundamental in improving this country,” Chinchilla said. “In the next few years, (small businesses) will make up the essential core that guarantees that Costa Rica continues to see economic growth, solidarity and sustainable development.”
Big Words for Small Companies
Two days after Chinchilla’s declaration, Second Vice Ppresident Luis Liberman echoed the administration’s plans to provide more support to the 925 registered Costa Rican businesses that qualify as PYMES. In a presentation to retailers and merchants, Liberman’s agenda was topped by making bank credit more available and reducing the time needed to obtain documents, permits and licenses. In an e-mail to The Tico Times, Lucy Conejo, the director of the Economy Ministry’s PYMES program, detailed six points integral to improving small and medium sized businesses. Number one was simplifying trámites; number two was providing more access to finances.
It appears the government is aligned to confront these two glaring concerns, and small business owners are happy to hear it.
“To process of getting something approved here is terrible,” Chacón said. “Getting registered for a health permit takes three to four months. This is something that could be accomplished in one to two hours. It’s maddening. While you wait for something simple to be approved, your business is on hold.”
Several small-business owners, particularly those whose companies involve importing or exporting, echoed the frustration with trámites. Ryan Villalobos of Digital Imports, a computer, computer parts and electronic components importer, said the waiting time for distribution permits often disrupts sales.
“We just wait and wait,” he said. “When a permit is finally given, sometimes an updated version of the product has already been released. The length of the trámite process makes some of the products useless.”
Another hurdle for importers is the fluctuation in the taxes on products. Richard Middleton, an entrepreneur based in Puerto Viejo who is assembling BMX-style motorized road bikes, says that nearly every product he imports carries a different duty tax.
“They’ll tell you the tax is going to be 28 percent and then a broker will put their hand out and require 41 percent,” Middleton said. “There is no justification and no logic behind a lot of things I’ve run into … Duties on the bike parts they claim at 33 percent, but duties on computer parts go for 14 percent. Often the taxes are so high that Costa Rica puts products out of the price range to be sold.”
In addition to the bureaucratic trámite process, PYMES have long struggled to obtain bank credit to fund their operations. Considered high-risk loans, national banks often back away from funding small, start-up businesses, or require a leverage to counter the risk.
“I had to put a mortgage on my home to receive a loan,” Chacón said. “The bank wasn’t going to give me a loan without knowing that I was ready to risk something of my own to get it. But for some people trying to start a small business, they might not have a home to mortgage or anything to leverage, so the operation never gets off the ground.”
According to Chinchilla, the government is currently working with the Banco Nacional de Costa Rica and the Banco Popular to open up more credit to support small- and medium-sized companies. A bill will also be submitted to the Legislative Assembly that would guarantee up to 75 percent of the amount small business apply for from state banks participating in initiative.
“We will work to form and put in place financial mechanisms to make up for the lack of start-up capital, risk capital, discounts for contracts, and other items,” Conejo said.
Fundecooperación, a cooperative that funds sustainable companies, also announced intentions to provide financial support for smaller businesses that demonstrate sustainable development, as well as assist in marketing their products. Currently, Fundecooperación backs over 50 small- and mid-sized businesses, including agricultural companies, artisans, sustainable tourism operators and clean technology producers.
A Small Step for Small Businesses
While the support pledged by the government for PYMES has yet to materialize, small companies are pleased to be part of the national economic conversation.
“The fact that the government pledged to help us could be a huge lift for smaller businesses,” said Adriana Morera, administrator of Jabones Coco Rico Limitada, a soap making company. “Small businesses make up such an important part of the Costa Rican society and they need to be supported and recognized. The more support the better.”
If the trámite process is reduced and more bank credit is made available in the short term, life could improve in a big way for the small companies of the country.
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