San José, Costa Rica, since 1956
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Industry leaders say Costa Rica's poor business climate drove out iconic snack food company

Citing high production costs, increasing electricity rates and taxes, the Costa Rican food company Alimentos Jack’s announced plans this week to move 50 percent of its operation to the U.S., El Salvador and Nicaragua. The move will take place over the next five years.

“Our plan is to increase our manufacturing processes in those countries, either with our own investment or through business ventures,” Alimentos Jack’s CEO Andrés Ignacio Pozuelo Arce said in a public statement released Thursday. “We will invest in those markets and also in the Costa Rican market. But not from here, as the country has gotten very expensive and risky.”

The Costa Rican company opened for business 51 years ago in San José and the move initially will represent the dismissal of at least 150 of the company’s 700 employees. Following relocation of the manufacturing plant, the company likely will dismiss more workers. The plant employs 450 people.

Pozuelo had harsh criticism for the Costa Rican government and the country’s business climate.

As an example of the country’s relatively high production costs, Pozuelo said that the per-kilogram cost of producing Jack’s corn snacks in El Salvador or Nicaragua is 25 percent lower than in Costa Rica. He said the per-kilogram cost of producing Jack’s potato chips in the U.S. is around 30 percent lower than in Costa Rica.

The move appears to be part of a gradual exodus out of the company’s native land. In the past three years, Jack’s has moved 15 percent of its operations abroad.

Pozuelo accused the Costa Rican government of having a “voracious” appetite for taxes from national industry, and he urged the government to work out a strategy to lower costs for the sector. He also said Costa Rica should stop spending money on privileges for the public sector and start investing in infrastructure.

On Thursday evening the Costa Rican Food Industry Chamber also voiced its concern about what it said was the country’s loss of competitiveness. The food industry group warned the government about the need to implement immediate action to improve the country’s business climate and reduce costs for companies that create jobs.

“We can only expect the growth of our sector to stagnate and job generation to stop considering excessive red tape from the finance, agriculture, health, environment and energy ministries, plus the high costs of electricity,” chamber president José Manuel Hernando said.

Hernando claimed that a series of recent Finance Ministry guidelines and regulations constituted “barriers to the industry,” as they require companies to hand over large amounts of information, which takes time, money and staff to produce.

“These are just a few examples out of many others that make Costa Rica an unattractive country to maintain operations,” Hernando said.

The food industry group voiced similar concerns in December, saying immediate action was needed to allow industrial production to grow from the 1.8 percent recorded at the time to the minimum 6 to 7 percent it said was needed to create new jobs.

According to the Union of Private-Sector Chambers and Associations, an organization that represents 50 businesses and major sectors of the economy, the wave of layoffs across several sectors of the economy last year culminated in more than 228,000 unemployed Costa Ricans at the end of the third quarter of 2014. The group cited figures from the National Statistics and Census Institute.

Contact L. Arias at larias@ticotimes.net

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John

Corporations are not afraid of governments; they criticize governments at every opportunity, and have powerful lobby groups helping them get their way.
Remember, corporations pull most strings of most governments.
And do not fall for the corporate line of blaming well-paid workers (including union members) for the low wages of other workers and for other labor force problems.
Well paid workers, union and non-union, eventually force employers to raise all people’s wages.
Lowering union wages just gives corporations the excuse, and the power, to lower everyone else’s wages even further.
And any money that corporations save by lower wages will not result in lower prices, but in more profits they can take.
Just as well-paid union jobs were the biggest single driving force in creation of a large middle class in the U.S., well-paid government jobs were a huge factor in creation of a middle class in Latin American countries.
Taking something away from someone else does not make us better off.
Only getting more for ourselves makes us better off.

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Rodrigo U

90% of the time companies leaving still have something to lose in CR and cannot say the REAL reasons for leaving. Mr Pozuelo is to be commended for speaking the truth and saying what most do not. ¿WHo are you going to tax now Mr President?

In order to keep jobs in CR, The wise thing to do would be Tell all Sindicatos / Coops and Public Sector abusers:
[IF and WHEN unemployment is under 10%, you are able to cry out and pressure for more perks and salary increases, BUT when it is over said percentage ALL BETS ARE OFF, you are obliged to show some solidarity and put your money where your mouth is, give up something for the sake of the poor and jobless, show that you really care]

Is this bulletproof logic or what? On the other hand > Can logic be applied in a liberal country with too many lawyers? Or Does a politician have the guts to apply logic and justice — DON’T HOLD YOUR BREATH. Why is it that leftists only do the right thing with OPM – OTHER PEOPLES MONEY?

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John

This decision seems to have little to do with the current government, in office only a year, as the president of the company specifically said he had no “direct” problem with this government.
He said that for many years, his industry has not been a priority of governments, while the agricultural industry and tax-free zone corporations have been.
Too bad newspapers do not dig deeper into the relative costs of production here, in El Salvador, in Nicaragua and in the U.S., with a documented analysis, instead of just taking at face value what Jack’s is saying.
The announcement may be entirely on the money.
Or it may be just the company’s way of trying to get more breaks from government, the way corporations always do, with threats about leaving, complaints about red tape, etc.
Costa Rica cannot (and this is a good thing) compete with El Salvador and Nicaragua on wages.
Would be interesting to know and compare the actual electricity rates, etc. in those countries and here, and also in the U.S., where Jack’s says it may expand.
And do the potatoes for it’s potato snacks come from here or the U.S.?
And are potato growers subsidized significantly in the U.S., as agriculture there generally is?
Stories about this announcement generally onlyl parrot the company press release and statements.
When governments make announcements, they are normally, and justifiably, questioned; when corporations make announcements, they aren’t, even though they should be.

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Ben

The President and the PAC party are driving business out of Costa Rica. I see Costa Rica as a failed state and now expect private business just to close and run out of the country. The President of CR is showing he wants to be very Leftwing and maybe even Communist. I expect HP and IBM to leave CR in a few months and that what the president of CR wants. The crisis is coming and expect something big to happen.

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Ben

The President and the PAC party are driving business out of Costa Rica. I see Costa Rica as a failed state and now expect private business just to close and run out of the country. The President of CR is showing he wants to be very Leftwing and maybe even Communist. I expect HP and IBM to leave CR in a few months and that what the president of CR wants. The crisis is coming and expect something big to happen.

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