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Viewing cable 07SANJOSE63, 2007 INVESTMENT CLIMATE REPORT - COSTA RICA

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Reference ID Created Released Classification Origin
07SANJOSE63 2007-01-12 15:03 2011-03-03 16:04 UNCLASSIFIED Embassy San Jose
Appears in these articles:
http://www.nacion.com/2011-03-03/Investigacion/NotasDestacadas/Investigacion2697430.aspx
http://www.nacion.com/2011-03-03/Investigacion/NotaPrincipal/Investigacion2697496.aspx
http://www.nacion.com/2011-03-03/Investigacion/NotasSecundarias/Investigacion2697489.aspx
http://www.nacion.com/2011-03-03/Investigacion/NotasSecundarias/Investigacion2697532.aspx
http://www.nacion.com/2011-03-03/Investigacion/NotasSecundarias/Investigacion2697535.aspx
http://www.nacion.com/2011-03-03/Investigacion/NotasSecundarias/Investigacion2701964.aspx
http://www.nacion.com/2011-03-03/Investigacion/Relacionados/Investigacion2701965.aspx
VZCZCXYZ0000
RR RUEHWEB

DE RUEHSJ #0063/01 0121539
ZNR UUUUU ZZH
R 121539Z JAN 07
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 6978
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEHRC/USDA FAS WASHDC 1891
UNCLAS SAN JOSE 000063 
 
SIPDIS 
 
DEPT FOR EB/IFD/OIA 
USDA FAS PLEASE PASS TO US TRADE REPRESENTATIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR
SUBJECT:  2007 INVESTMENT CLIMATE REPORT - COSTA RICA 
 
REF: STATE 178303 
 
1.  The 2007 Investment Climate Report requested in reftel 
follows.  As instructed the following report has also been 
submitted via unclassified email. 
 
2007 Investment Climate Statement for Costa Rica 
 
A.1. OPENESS TO FOREIGN DIRECT INVESTMENT 
 
Costa Rica has a generally open international trade and 
investment regime, with the exception of a few sectors that 
are reserved for state companies.  Two high profile 
parastatals will lose their monopolies if the U.S.-Central 
America-Dominican Republic Free Trade Agreement (CAFTA-DR) 
is ratified and implemented.  For several years, the 
government of Costa Rica has campaigned at senior levels to 
attract high quality foreign investment to Costa Rica, a 
policy which is a high priority for the administration of 
President Oscar Arias that took office in May 2006.  The 
Costa Rican investment and development board (CINDE) leads 
these investment promotion efforts through offices in Costa 
Rica, the United States, Europe, and the Far East.  The 
country's commercial code details all business requirements 
necessary to operate in Costa Rica.  The laws of public 
administration and public finance contain most requirements 
for contracting with the state.  All businesses must be 
registered in the national registry, thereby becoming 
national companies that may have national or foreign 
owners.  The investment requirements for foreign and 
national persons and companies are identical.  Businesses 
may be established starting from nothing, acquired, merged 
with, or taken over in much the same way as is done in the 
U.S.  Foreign partnerships with local businesses are quite 
common. 
 
The judicial system generally upholds contracts, but 
caution should be exercised when making investments in 
sectors reserved or protected by the constitution or by 
laws for public operation.  Investments in state-protected 
sectors under concession mechanisms can be especially 
complex due to regular challenges in the constitutional 
court of contracts permitting private participation in 
state enterprise activities. 
 
The Arias administration has stated an interest in using 
the 1998 concessions law to build infrastructure and manage 
public works projects.  One new concession agreement for 
the operation of the country's principal Pacific port 
commenced successful operation in the latter half of 2006. 
However, several earlier concession agreements negotiated 
under the l998 law have encountered and continue to face 
very serious difficulties, including cancellations, when 
these agreements have been reviewed by the GOCR comptroller 
general and supreme court. The administration has proposed 
legislative changes to remedy defects in the l998 law, 
changes which are expected to become law in early 2007. 
 
Industry surveys by CINDE and the Costa Rican foreign trade 
corporation (PROCOMER) suggest that investors are most 
attracted by Costa Rica's economic and political stability 
and a well educated workforce.  On August 5, 2004, Costa 
Rica, together with El Salvador, Guatemala, Honduras, 
Nicaragua, and the Dominican Republic, signed the U.S.- 
Central America - Dominican Republic Free Trade Agreement 
(CAFTA-DR) with the United States.  Although Costa Rica is 
the only signatory that has not ratified the agreement  it 
is generally believed that a majority of the full 
legislature favor ratification of the treaty which is 
expected to occur in mid-2007.  To bring the treaty into 
force several laws and regulations must be changed to 
conform with treaty provisions. Especially difficult will 
be laws opening the telecommunications and insurance 
sectors to competition. 
 
While the government focuses on promoting foreign 
investment in export industries, foreign franchises have 
prospered in the domestic market for the past thirty years. 
Investments have been made in a wide array of sectors, 
including fast food (such as Taco Bell, Kentucky Fried 
Chicken, Pizza Hut, Domino's Pizza, Papa John's Pizza, 
McDonald's, Burger King, Subway, and TCBY Yogurt), car 
rentals (including Hertz, Avis, Dollar, and Budget), hotels 
(such as Marriott, Intercontinental, Regents, Hampton Inn, 
and Best Western,), and designer clothing boutiques 
(including Tommy Hilfiger and Liz Claiborne).  Price Smart 
(formerly Price Club in the U.S.) has opened four Costa 
E 
Rican stores since mid-1999.  In March 2006, Wal-Mart 
acquired a 51% interest in a local grocery-store holding 
company and brought it under the aegis of Wal-Mart Central 
America.  Wal-Mart Central America is the region's largest 
retailer, with 394 supermarkets and 23,000 associates in 
Costa Rica, Guatemala, El Salvador, Honduras, and 
Nicaragua. 
 
A.2.  CONVERSION AND TRANSFER POLICIES 
 
There are no restrictions on receiving, holding or 
transferring foreign exchange.  There are no delays for 
foreign exchange, which is readily available at market 
clearing rates and readily transferable through the banking 
system.  Costa Rica had maintained a crawling peg exchange 
regime with the U.S. dollar since 1983, but in October 2006 
transitioned to a crawling band regime designed to better 
control inflation, a persistent problem.  While in 2005 
Costa Rica had the second highest inflation rate in the 
western hemisphere, in 2006 the country posted its lowest 
inflation in over fourteen years, albeit at over nine 
percent.  Dollar bonds and other dollar instruments may be 
traded legally.  No restrictions are imposed on 
reinvestments or on the repatriation of earnings, 
royalties, or capital except when these rights are 
otherwise stipulated in contractual agreements with the 
government of Costa Rica.  Royalties are taxed in 
accordance with Title IV of the Income Tax Law, No. 7092, 
extensively reformed in October 1988, at rates varying from 
10 to 25 percent. 
 
A.3.  EXPROPRIATION AND COMPENSATION 
 
Expropriation of private land by the government without 
prompt or adequate compensation has hurt some Costa Rican 
and foreign investors in the past.  These incidents usually 
involved land expropriated to create national parks, 
indigenous reserves, or agricultural projects for poor 
farmers.  One long-standing case involving a U.S. citizen 
still awaits settlement in the courts. 
 
Article 45 of Costa Rica's constitution stipulates that no 
property can be expropriated from a Costa Rican or 
foreigner without prior payment and demonstrable proof of 
public interest.  The 1995 Law 7495 on expropriations 
further stipulates that expropriations can take place only 
after full and prior payment is made.  Foreigners and Costa 
Ricans are supposed to receive equal treatment.  Provisions 
include: a) return of the property to the original owner if 
it is not used for the intended purpose within ten years 
or, if the owner was compensated, right of first refusal to 
repurchase the property back at its current value; b) a 
requirement that the expropriating institution complete 
registration of the property within six months; c) a one- 
month period during which the tax office must appraise the 
affected property; d) a requirement that the tax office 
itemize crops, buildings, rental income, commercial rights, 
mineral exploitation rights, and other goods and rights, 
separately and in addition to the value of the land itself; 
and e) provisions providing for both local and 
international arbitration in the event of a dispute.  The 
expropriations law was amended in 1998 to expedite some 
procedures, particularly those necessary for acquiring land 
for the construction of new roads. 
 
Invasion and occupation of private property by squatters, 
who are often organized and sometimes violent, has occurred 
in Costa Rica.  The squatters seek to take advantage of 
adverse possession devices in laws permitting occupants to 
receive title to unused farmland.  The Costa Rican police 
and judicial system have at times failed to deter or to 
peacefully resolve such invasions.  It is not uncommon for 
squatters to return to the parcels of land from which they 
have been evicted, requiring expensive and potentially 
dangerous vigilance over the land. 
 
A.4.  DISPUTE SETTLEMENT 
 
Costa Rica uses the Roman civil law system rather than 
common law.  The jury system is not used, although judicial 
reform efforts currently include testing the use of juries 
in some cases.  The fundamental law is the country's 
political constitution of 1949, which grants the unicameral 
legislature a particularly strong role.  The civil and 
commercial codes govern commercial transactions.  The 
courts are independent, and their authority is respected. 
Judgments of foreign courts are generally accepted and 
enforced.  The Constitution specifically prohibits 
discriminatory treatment of foreign nationals. 
 
Monetary judgments are usually made in Costa Rican Colones. 
However, if the dispute involves a dollar-denominated 
transaction, the award may first be calculated in dollars 
and then converted to Colones for payment. 
 
Litigation can be long and costly.  The legal system is 
significantly backlogged, and civil suits take over five 
years on average from start to finish.  Some U.S. firms and 
citizens have satisfactorily resolved their cases through 
the courts, while others have seen proceedings drawn out 
over a decade without a final ruling.  The process to 
resolve squatter cases through the courts can be especially 
cumbersome.  The legal owner of land can be at a 
disadvantage in a system that has recognized adverse 
possession rights acquired by squatters, especially when 
the disputed land is rural and is not being actively 
worked.  Also, civil archives recording land title are at 
times incomplete or contradictory.  These records should be 
carefully researched by potential buyers to avoid disputes 
over conflicting claims. 
 
Arbitration 
 
Arbitration has long been possible under the civil and 
commercial codes; U.S. investors have experienced mixed 
results from such proceedings organized by local attorneys. 
A 1998 law governing alternative conflict resolution (Law 
7727) sought to encourage arbitration and simplify the 
procedures under which arbitration takes place.  Several 
arbitration centers have since been established, including 
one at the Costa Rican - American Chamber of Commerce.  A 
few cases reportedly have been successfully and quickly 
resolved under the new law. 
 
Costa Rica has been a member of the U.N.'s International 
Center for the Settlement of Investment Disputes (ICSID) 
since 1993, when it acceded to the Washington Convention. 
One land expropriation case was successfully resolved in 
that forum.  Costa Rica is also a member of the World Bank 
Multilateral Investment Guarantee Agency (MIGA), which 
provides a forum for international arbitration in 
investment disputes, as well as investment guarantees. 
Private energy producers have included international 
arbitration clauses in their contracts.  Costa Rica has not 
joined the United Nations Protocol for the Compulsory 
Settlement of Disputes between Countries or the New York 
Convention of 1958 on the Recognition and Enforcement of 
Foreign Arbitral Awards. 
 
Bankruptcy 
 
The Costa Rican bankruptcy law, addressed in both the 
commercial code and the civil procedures code, is similar 
to corresponding U.S. law.  Title V of the civil procedure 
code outlines creditors' rights and the processes available 
to register outstanding credits, administer the liquidation 
of the bankrupt company's assets, and pay creditors 
according to their preferential status  Compared to other 
countries in the region, Costa Rican bankruptcy laws 
function less agilely, and affected creditors recover 
proportionally less from judgments, according to World Bank 
analysis. 
 
A.5.  PERFORMANCE REQUIREMENTS/INCENTIVES 
 
Three investment incentive programs operate in Costa Rica: 
the free trade zone system, a so-called active finishing 
regime and a duty drawback procedure.  These incentives are 
available equally to foreign and domestic investors.  These 
incentives include tax holidays, free or subsidized 
infrastructure and industrial parks, training of 
specialized labor force, and protective tariffs in some 
cases. 
 
The export processing law of 1981 established publicly 
operated free trade zone (FTZ) industrial parks in Santa 
Rosa (Puntarenas) on the Pacific Coast, and Moin (Limon) on 
the Caribbean seaboard.  Presently, eight FTZs operate 
throughout Costa Rica, six of which are privately managed. 
Companies in FTZs receive exemption from virtually all 
taxes for eight years and at a reduced rate following this 
period.  In addition to those benefits, companies operating 
in FTZs enjoy simplified investment, trade, and customs 
procedures.  The tax holidays provided for investment in 
FTZs are scheduled to phase out in accordance with World 
Trade Organization (WTO) agreements.  The Government of 
Costa Rica is considering a plan to equalize corporate 
income tax rates for all companies operating within the 
country, including companies operating in the FTZs. 
 
The active finishing regime, created by decree in August 
1997, suspends taxes for renewable six-month periods on 
imported inputs of qualifying companies, and then exempts 
the inputs from those taxes when the finished goods using 
or containing them are exported.  The regime also 
facilitates a five-year renewable suspension of taxes on 
capital goods used to manufacture exported goods. 
Companies within this regime may sell to the domestic 
market if they have registered to do so and pay pro rata 
import duties on capital equipment used for the domestic 
market.  Finally, the drawback procedure provides for 
rebates of duties or other taxes that have been paid by an 
iporter for goods subsequently incorporated into an 
exported good. 
 
A.6.  RIGHT TO PRIVATE OWNERSHP AND ESTABLISHMENT 
 
All private entities and pesons, domestic or foreign may 
establish and own businesses and engag in all but a few 
forms of remunerative activity.  The exceptions are in 
sectors that are reserved for the state (legal monopolies) 
or that require participation of at least a certain 
percentage of Costa Rican citizens or residents (electrical 
power generation, broadcasting, professional services, and 
wholesale distribution).  Many state-owned companies are 
monopolies, such as insurance, telecommunications, and 
energy.  Under CAFTA-DR the first two monopolies will be 
phased out.  In other activities, such as medical services, 
state firms operate, but do not preclude private sector 
competition, which generally receives equal treatment to 
state companies.  Three banks owned by the state receive 
some advantages over their 15 private competitors, namely 
that they can not be forced into bankruptcy, a guarantee 
not afforded to private banks. 
 
A.7.  PROTECTION OF PROPERTY RIGHTS 
 
Secured interests in both chattel and real property are 
recognized and enforced, and mortgage and title recording 
is mandatory.  The laws governing investments in land, 
buildings and mortgages are generally transparent. 
However, there are continuing problems of overlapping title 
to real property and fraudulent filings with the national 
registry, the government entity that records property 
titles.  The Costa Rican government does not prevent 
foreign title companies from operating.  U.S. title firms 
have established operations in Costa Rica, including 
Stewart Title Company and First American Corp., which 
operates a subsidiary (First Costa Rican Title and Trust). 
Other U.S. title companies have announced plans to enter 
the Costa Rican market. 
 
Investment in real estate requires care; some past 
investors have experienced problems with title and adverse 
possession by squatters.  In the latter case, this often 
occurs where absentee owners of undeveloped or vacant rural 
properties confront a Costa Rican agrarian law regime that 
is relatively quick to confer title to occupants of land 
considered "abandoned."  Landowners thus should be sure to 
demonstrate a continuing presence on and control over their 
land. 
 
Investment in beachfront property in Costa Rica faces a 
unique set of circumstances. Almost all beachfront is 
public property for a distance of 200 meters from the high 
tide mark, an exception being in long established port 
cities.  The first 50 meters from high tide cannot be used 
for any reasons by private parties and the next 150 meters, 
also owned by the state, can only be leased from the local 
municipalities for specified periods and particular uses, 
such as tourism installation, vacation homes, etc. 
Investors should exercise caution and obtain qualified 
legal counsel before purchasing property, particularly near 
beachfront areas.  Potential investors in Costa Rican real 
estate should also be aware that the right to use 
traditional paths is enshrined in law and can be used to 
obtain court-ordered easements on land bearing private 
title.  Disputes over easements are particularly common 
when access to a beach is an issue. 
 
Intellectual Property Rights (IPR) 
 
Costa Rica is a signatory of many major international 
agreements and conventions regarding intellectual property. 
It ratified the GATT agreement on Trade Related Aspects of 
Intellectual Property (TRIPS), which took effect in Costa 
Rica on January 1, 2000.  Eight bills to implement the 
TRIPS agreement were passed by the Legislative Assembly in 
1999 and 2000.  One of these bills extended Costa Rica's 
patent protection to twenty years.  CAFTA-DR requires 
significant strengthening of Costa Rica's IPR laws. 
 
While the legal framework governing intellectual property 
is basically in place, enforcement is often ineffective. 
At the beginning of 2002, the Costa Rican Government 
announced steps to improve intellectual property protection 
through a government strategy for improving the enforcement 
of IPR.  Since then, the government has taken minor steps 
to increase enforcement efforts and to increase IPR 
training for judges and prosecutors.  However, the current 
attorney general has publicly stated that given limited 
resources IPR enforcement is a low priority.  In 2002 the 
United States Trade Representative (USTR) moved Costa Rica 
from the Priority Watch List to the Watch List in its 
annual Special 301 Report.  In 2006 Costa Rica remained on 
the Watch List.  According to the USTR, there remain 
deficiencies in Costa Rican intellectual property 
protection that have not been addressed.  The USTR noted 
that significant delays in judicial proceedings and a lack 
of official investigators, public prosecutors and criminal 
and civil judges specializing in intellectual property 
continue to hamper effective enforcement.  Since 2005 the 
U.S. Embassy in Costa Rica has actively recruited 
candidates for various IPR training seminars offered and 
funded by the United States Patent and Trade Office 
(USPTO).  In late 2006, the U.S. Chamber of Commerce and 
the local American Chamber of Commerce announced an attempt 
to assess the scope of the piracy problem in Costa Rica 
using a polling technique the U.S. Chamber developed in 
Brazil. 
 
A.8.  TRANSPARENCY OF THE REGULATORY SYSTEM 
 
Costa Rican laws, regulations and practices are generally 
transparent and foster competition, except in state 
monopoly sectors where competition is explicitly excluded. 
Tax, labor, health and safety laws are not considered to 
interfere with investment decisions.  Environmental 
regulations and the Costa Rican organization that reviews 
environmental impact statements have caused problems for 
investors resulting in delays for completing projects. 
There are several independent avenues for appealing 
regulatory decisions, and these are frequently pursued by 
persons or organizations opposed to a public sector 
contract or regulatory decision.  The avenues include the 
comptroller general (Contraloria General de la Republica), 
the ombudsman (Defensor de los Habitantes), the public 
services regulatory agency (ARESEP), and the constitutional 
chamber of the supreme court when constitutional rights 
appear to be affected.  The attorney general's office 
(Procurador General de la Republica) is frequently a 
participant in its role as the government's attorney.  The 
process has kept the regulatory system relatively 
transparent and free of abuse, but it has also rendered the 
system for public sector contract approval exceptionally 
slow and litigious.  There have been several cases in which 
these review bodies have overturned contracts, thereby 
interjecting uncertainty into the process.  Bureaucratic 
procedures are frequently long, involved and can be 
discouraging to new investors. 
 
A.9.  EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
There are no controls on capital flows in or out of Costa 
Rica or on portfolio investment in publicly traded 
companies.  Larger investors arrange their financing abroad 
where rates tend to be lower and lending limits are higher. 
Foreign investors are able to borrow in the local market, 
but they are also free to borrow from abroad. 
 
Within Costa Rica, long-term capital is scarce.  Dollar- 
denominated mortgage financing is popular and common, even 
for Costa Ricans who do not earn their income in dollars 
because of more favorable lending terms for dollar- 
denominated vs. Colon-denominated loans.  There is a small 
secondary market in commercial paper and repurchase 
agreements.  The securities exchange (Bolsa Nacional de 
Valores) is small and is dominated by trading in government 
bonds.  Stock trading is of limited significance and 
involves only a dozen of the country's larger companies. 
Volume traded is often in the range of $ 1 million per 
week.  Stock ownership must be registered in the owner's 
name.  Bonds may not be issued in bearer form. 
 
Credit is allocated on market terms, although the state- 
owned banks are sometimes obliged to act as development 
banks for activities deemed to be of public interest. 
Credit is currently not available for intangible and or 
movable property such as future crops and equipment because 
such items can not be used as collateral under current law. 
The three state-owned commercial banks accounted for 60 
percent of the banking system?s assets in December 2005. 
The fifteen private commercial banks had been steadily 
increasing their share of the market, but private banks are 
disadvantaged by the existence of implicit state guarantees 
for deposits in state-owned banks.  Entreaties by private 
banks to establish deposit insurance for private deposits 
have so far been rejected by the state monopoly insurance 
provider. 
 
Consolidated total assets of the country's public 
commercial banks were approximately USD 6.6 billion in July 
2004, while consolidated total assets of the private banks 
were approximately USD 3.1 billion.  The combined assets of 
all bank groups (including affiliated pension funds and 
brokerage houses) are approximately USD 14 billion. 
 
Costa Rica's national council for the supervision of the 
financial system (CONASSIF) oversees Costa Rica's financial 
sector and consists of two principal components.  The 
country's general superintendent of financial institutions 
(SUGEF) regulates banks and other financial institutions. 
The general superintendent of securities markets (SUGEVAL) 
oversees the securities exchange.  The Costa Rican 
government is working to strengthen supervision of the 
financial sector with assistance from international donors. 
 
Legal and accounting systems are transparent and consistent 
with international norms.  Many well-known accounting firms 
in Costa Rica are affiliated with large U.S. firms. 
 
A.10.  POLITICAL VIOLENCE 
 
Costa Rica has not experienced significant domestic 
political violence since 1948.  There are no indigenous or 
external movements likely to produce political or social 
instability.  In October 2006 public unions opposed to 
CAFTA-DR organized a two day national strike designed to 
disrupt normal business activity.  Although they had 
threatened to bring the country to a halt, the unions were 
unable to mobilize the masses and at best the street 
demonstrations were an annoyance.  These same groups have 
threatened similar actions in 2007. 
 
A.11.a  CORRUPTION 
 
Costa Rica has laws, regulations, and penalties to combat 
corruption, though the resources available to enforce those 
laws have been limited.  Corruption became a major issue in 
2004, when two former presidents were placed in 
preventative detention on corruption charges; allegations 
of lower-level corruption are common, and some prosecutions 
have resulted.  Amendments to make anti-corruption laws 
easier to interpret and apply, which had languished in the 
legislative assembly for years, were quickly passed in late 
2004. 
 
Costa Rica ratified the Inter-American Convention Against 
Corruption in February 1997.  This initiative of the 
Organization for Economic Cooperation and Development 
(OECD) and the Organization of American States (OAS) 
obligates subscribing nations to implement criminal 
sanctions for corruption.  The attorney general 
(Procuraduria General de la Republica), comptroller general 
(Contraloria General de la Republica) and ombudsman 
(Defensoria de los Habitantes) have mounted a common effort 
to combat corruption.  The comptroller general, the 
organization of judicial investigation (OIJ), and the 
public prosecutors' office investigate allegations of 
corruption.  The comptroller general is responsible for 
approving or rejecting auditing public contracts and 
detecting instances of corruption. 
 
While most U.S. firms have not identified corruption as a 
major obstacle to doing business in Costa Rica, some have 
made allegations of corruption in the administration of 
public tenders.  Developers of tourism facilities 
periodically cite municipal-level corruption as a problem. 
 
Acts of bribery, including those directed against 
government officials, are criminal acts punishable by 
imprisonment.  Public officials convicted of receiving 
bribes are subject to prison sentences from two to six 
years, according to the Costa Rican Criminal Code (Articles 
314-315, and 338-339).  Entrepreneurs may not deduct the 
proceeds of bribes or any other criminal activity as 
business expenses. 
 
b.  BILATERAL INVESTMENT AGREEMENTS 
 
Costa Rica has Bilateral Investment Treaties (BITs) with 
Argentina, Canada, Chile, the Czech Republic, France, 
Germany, Great Britain, Korea, the Netherlands, Paraguay, 
Spain, Switzerland, Taiwan and Venezuela.  Awaiting 
ratification in the legislative assembly are BITs with 
Belgium, Ecuador, Finland, and Luxembourg.  Negotiation a 
bilateral investment treaty with the United States was 
suspended in 1990, restarted in 1996, and suspended again 
in 1997.  The investment chapter of CAFTA-DR includes all 
aspects of a BIT thereby making the negotiation of a 
separate BIT unnecessary. 
 
c.  OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
The Overseas Private Investment Corporation (OPIC) offers 
both financing and insurance coverage against 
expropriation, war, revolution, insurrection and 
inconvertibility for eligible U.S. investors in Costa Rica. 
OPIC can insure up to $200 million per project for U.S. 
investors, contractors, exporters and financial 
institutions.  Financing is available for overseas 
investments that are wholly owned by U.S. companies or that 
are joint ventures in which the U.S. firm is a participant. 
OPIC holds a diversified portfolio of more than 300 
clients. 
 
U.S. investors should be aware that OPIC, in accordance 
with statutory requirements, may not offer insurance to 
projects with a detrimental effect on the U.S. balance of 
payments or employment.  These statutory requirements have 
led OPIC to offer only limited insurance coverage for 
textile and citrus investments.  The Government of Costa 
Rica approves prospective OPIC-insured projects taking into 
account possible balance of payments or labor problems. 
Costa Rica became a member of the Multilateral Investment 
Guarantee Agency, a member of the World Bank group, in 
1993. 
 
d.  LABOR 
 
The Costa Rican labor force is relatively well educated, 
skilled and easily trained, largely due to long-term 
government investment in public education.  The country 
claims a literacy rate of 95 percent, and many workers seek 
and receive additional specialized training.  Costa Rica's 
national vocational training institute (INA) and private 
sector groups provide technical and vocational training. 
 
The rapid growth of Costa Rica's service and tourism 
sectors has created such demand for English-language 
speakers that foreign investors have recently been facing a 
shortage of workers with sufficient English language 
skills.  The arrival of companies such as Intel, Procter 
and Gamble, Western Union, and various call center 
operators has drawn down the supply of speakers of fluent 
business and technical English.  The Costa Rican Government 
has made English language and computer literacy a national 
priority at all levels of education.  Several public and 
private institutions are attempting to meet the demand for 
English-language speakers, including the 50-year-old U.S.- 
Costa Rican binational center (the Centro Cultural 
Costarricense Norteamericano), which offers general and 
business English courses to as many as 5,000 students year 
round. 
 
Costa Rican law guarantees the right of workers to join 
labor unions of their choosing without prior authorization. 
Unions operate independently of government control and may 
form federations and confederations and affiliate 
internationally.  Many Costa Rican workers join "solidarity 
associations," under which employers provide easy access to 
saving plans, low-interest loans, health clinics, 
recreation centers, and other benefits.  Both solidarity 
associations and labor unions coexist at some workplaces, 
primarily in the public sector.  Business groups claim that 
solidarity associations provide for better labor relations 
than exist in firms where unions represent workers and 
there are no solidarity associations.  However, labor 
unions allege that private businesses use solidarity 
associations to hinder union organization in contravention 
of International Labor Organization rules. 
 
The constitution protects the right of workers to organize. 
The Labor Code enacted in 1943 provides protection from 
dismissal for union organizers and members and requires 
employers found guilty of anti-union discrimination to 
reinstate workers fired for union activities.  However, the 
labor courts are backlogged and the legal process can be 
lengthy. 
 
e.  FOREIGN TRADE ZONES/FREE PORTS 
 
Free trade zones have been established near the port cities 
of Limon (Caribbean) and Puntarenas (Pacific) as well as in 
various central valley locations.  The benefits, primarily 
fiscal, are described in Section A.5. 
 
f.  FOREIGN DIRECT INVESTMENT STATISTICS 
 
Total Foreign Direct Investment Flows into Costa Rica 
--------------------------------------------- -------- 
               Amount 
Year        (USD million)    Percent of GDP 
----        -------------    -------------- 
2005            861               4.3% 
2004            794               4.3% 
2003            577               3.4% 
2002            662               4.1% 
2001            454               2.8% 
2000            409               2.6% 
 
2005 Foreign Direct Investment by Country 
of Origin, Percent of Total 
----------------------------------------- 
Country             Percent 
-------             ------- 
USA                   69.7 
Canada                 5.2 
Mexico                 4.2 
Central America        2.8 
Panama                 4.3 
Netherlands            1.0 
Germany                0.6 
Italy                  0.4 
Spain                  1.9 
Japan                  0.0 
Other                  3.9 
-----                ----- 
Total                100.0 
 
 
2005 Foreign Direct Investment, by Sector 
----------------------------------------- 
                   Amount 
Sector          (USD million) 
------          ------------- 
Industry            345.0 
Real Estate         235.0 
Services             73.3 
Tourism              53.5 
Commercial