C.R. Looks to Put More Pedal to the Metal

May 2, 2008

Costa Rica may not be producing its version of the Peugeot or Fiat in the near future, but government officials say this is the perfect haven for foreign companies looking for a place to plop down factories for automobile parts.

Foreign Trade Minister Marco Vinicio Ruiz pumped up the benefits of working in Costa Rica as he spoke to several dozen suits and ties representing the automobile industry and pro-export organizations at the Hotel Real Intercontinental in Escazú this week.

“The automotive industry is very wide and global,”Ruiz said. “Costa Rica can grab a good piece of it.”

Gone are the days when a country would manufacture its own brand (remember the Yugo?) from the ground up. Today, government officials prefer to woo foreign carmakers to manufacture parts or assemble cars on local soil.

Ideally, both sides benefit – with companies taking advantage of cheaper labor and host countries gaining specialized jobs.

The phenomenon is nothing new in Costa Rica. In 1967, Bridgestone Firestone Costa Rica, S.A., was the first to set up shop, Ruiz said. The company now pumps out 12,000 tires each day from its Alajuela facility, according to information provided by the Costa Rican Investment Promotion Agency (CINDE).

Hutchings, Deshler, Continental AG and Daewoo are just a few among a long list of other companies who now have in-country sites providing anything from assembly and electronics work to packaging.

“Yesterday’s Central American industry has to transform itself into the advanced industry of today,” Ruiz said.

Costa Rican exports have grown steadily over the past five years. In 2007, the country exported $240 million worth of automobile components and final products, according to Emmanuel Hess, general manager of the Foreign Trade Promotion Office (PROCOMER).

That marks a 214% increase over 2003, when exports hit $112 million.

Gabriela Llobet, the general director of CINDE, listed four reasons Costa Rica should be a preferred destination for foreign companies: its strategic location, especially its proximity to the United States market; its skilled workforce; its political and economic stability; and its economic incentives, such as free trade zones.

Hess said 74% of Costa Rica’s automotive exports in 2007 came from companies located in free trade zones alone.

As with many industries, the automotive sector is betting on a boom with the implementation of the Central American Free-Trade Agreement with the United States (CAFTA). The Legislative Assembly has until Oct. 1 to approve 12 bills before CAFTA can go into effect. To date, seven have been approved.

Beyond the United States and Central America, the Costa Rican government is setting its sights on the European and Chinese markets in coming years.

Currently the country exports 120 different automotive products to 97 different companies in 53 countries, according to Hess.

 

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