TOMÁS Dueñas, president of the Costa Rican Investment Board (CINDE), this week warned business leaders that failure to approve the Central American Free-Trade Agreement (CAFTA) with the United States would put an end to Costa Rica’s hopes of continuing to attract foreign investment.
“I believe the non-approval of CAFTA is a scenario we should avoid,” Dueñas told members of the Costa Rican-American Chamber of Commerce (AmCham) at the organization’s monthly luncheon on Tuesday. “…It’s clear there is no other option.
Not entering CAFTA would be the end of foreign investment in the country. It would be serious,” he said.
However, Dueñas said he remains confident CAFTA will be approved by the Costa Rican and U.S. governments in the coming months. Forming part of the CAFTA bloc of countries would serve as an invaluable tool that would make the country a more attractive destination for foreign companies to set up shop, he said.
He mentioned the Costa Rica-Mexico Free-Trade Agreement as an example of how a trade agreement can increase investment between participating countries. Since the trade agreement with Mexico went into effect in 1995, the amount of Mexican investment in Costa Rica has multiplied several times.
However, to make the most of the investment opportunities CAFTA would create, Costa Rica will need to work hard to make itself a more competitive investment destination, he said.
The CINDE leader stressed there’s urgent need to improve education in Costa Rica, particularly in English and information technology, and enact more flexible labor laws, draft a clear, fair and internationally competitive tax code, improve roads, ports and telecommunications infrastructure and reduce red tape at government institutions, particularly at customs offices.
While he admitted Costa Rica was a dominant force in the region in terms of attracting foreign direct investment, Dueñas stressed the need for the country to set its sights higher and compete with international investment-attraction powerhouses such as Chile, Ireland, Malaysia, Mexico and Singapore.
In terms of business competitiveness, Costa Rica ranked 45th out of 95 countries monitored by the World Economic Forum in its 2003-04 Global Competitiveness Report, which was released last October.
While Costa Rica ranked above countries such as China (46), Mexico (48), Panama (59) Dominican Republic (61) and El Salvador (63), it still ranked far below most of the countries it aims to compete with, including Singapore (8), Ireland (21), Malaysia (26), Chile (32) and Czech Republic (35).
Finland was ranked number one on the list, followed by the United States.