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Costa Rican Business Environment Keeps Investors Coming In

Mike Godfrey, Tax-news.com, New York

17 October 2000

Costa Rica is not a typical offshore centre, in fact it has no offshore regime as such except for the Free Zones. For incoming investors the tax bill is low, not non-existent. Gone are the days when foreign residents of Costa Rica could import cars or household furnishings duty-free, or enjoy other tax benefits (much to the chagrin of locals), but new figures from the United Nations show that the quality of life and business environment keep investors flocking in.

According to UN statistics, Costa Rica attracted $625 million in foreign direct investment last year – more than double the $300 million of its nearest competitor, Nicaragua. Panama was the clear leader. With a booming financial industry nurtured by strict banking secrecy laws, Panama brought in nearly $1.3 billion last year.

These nations do not offer "discriminatory incentives" favouring investors. Armando Heilbron, investment manager for Costa Rica’s investment promotion office CINDE, says that without laws creating a "fiscal paradise", the success of Costa Rica and Panama comes down to stablility and the business environment. Commenting on the perks offered by Costa Rica's neighbouring competitors, he said: 'The lack of these types of benefits for foreign investors has, luckily, been no obstacle for us'. Costa Rica eliminated such incentives in 1992. He added: 'The companies that come to us for advice may complain about the high prices of automobiles or household appliances here, but they see that those prices apply to everyone equally, and view it as a benefit that is sustainable in the long term.'

Heilbron said that what distinguished Costa Rica from its neighbours was the quality of education, a secure living environment, political stability and overall friendliness toward foreigners: 'The friendliness is far more important to investors than importing their furniture duty-free,' he said. 'Are you better off being able to buy a cheap car, if you have to go everywhere with a bodyguard?'

In agreement is Ryan Piercy, general manager of the Residents’ Association of Costa Rica, who commented: 'I think those benefits were taken away because everyone saw that they were unconstitutionally giving something to foreigners that Costa Ricans couldn’t have themselves. Incentives will always be offered to try to attract people to less desirable countries, but Costa Rica doesn’t have that problem.'

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