Foreign direct investment in Costa Rica declines 21 percent, but still beats government prediction

Costa Rica in 2014 received $2.1 billion in foreign direct investment, representing a 21 percent decrease compared to 2013, according to the latest report from the Central Bank. Still, the figure exceeded the $1.9 billion goal originally set by government officials.

This is the first time in the last six years that the country has registered a decrease in foreign direct investment. The indicator reflects yearly data on investments made by foreign companies launching or expanding operations here, and those acquiring local corporations or properties.

According to reports from the Costa Rican Investment Promotion Agency (CINDE), the decline in foreign investment was driven mainly by decreases in four sectors: a $399 million drop in the real estate industry; a $121 million drop in public infrastructure projects, telecommunications, energy and insurance; a $106 million decline in tourism; and a $105 million decline in the commerce sector.

The decrease, however, was partially offset by a 22 percent increase in foreign direct investment recorded by companies operating under the free zone regime. That sector reported investments of $643 million, representing $118 million more than the total recorded in 2013, CINDE General Director Jorge Sequeira Picado said.

This increase was mainly due to a growth in the medical device manufacturing sector, which helped offset the drops recorded in the electronic and technology sectors due to the closure of Intel’s chip manufacture plant last year.

Investments by free zone-based companies represent 30 percent of Costa Rica’s foreign direct investment and 74 percent of the country’s manufacture sector.

Sequeira said it was “imperative to address issues to improve competitiveness and the investment climate for these companies,” including lowering electricity costs, implementing labor reforms, and increasing technical and language training for local workers.