Nearshoring in Costa Rica – A smart move

COSTA RICA’S FAVORABLE CONDITIONS FOR NEARSHORING

Nearshoring is among us. The Covid-19 pandemic generated one of the most relevant disruptions in trade and transportation since World War II, thus accelerating the relocation of companies that started a few years ago.

The interruption in the logistics and production chains caused by Covid-19 lit the alarm light. While others are analyzing this new globalization model, we have adjusted our strategies to take advantage of these new commercial dynamics.

Nearshoring refers to bringing an operation closer to a nearby country, especially in preference to a more distant one.

“Nearshoring was born from the definition of ‘approach to markets’, a term that has gained special relevance in times of the pandemic, when transport logistics and customs facilitation have become complicated. Faced with this and to continue to supply markets, companies seek to bring their value chains closer together, and proximity and availability prevail over cost factors, strictly speaking,” said Carlos Wong, General Director of Coyol Free Zone.

Another factor influencing companies returning to the Americas is the commercial differences between the United States and China. A recent report by Bank of America Global Research indicates that more than 80% of U.S. companies based in Asia plan to do Nearshoring.

CONSIDER COSTA RICA FOR YOUR NEARSHORING PLANS

The alliances in Costa Rica between the public and private sectors to reinforce and modernize the operation of the Free Trade Zones can be an advantage in this scenario.

“The country’s proximity to European and North American markets could be crucial in attracting companies interested in moving their operations closer to their headquarters,” Wong added.

Furthermore, Costa Rica’s favorable conditions for investment, historical political stability and particularly regarding highly skilled human talent, make it a great option near the United States.In this process of chaining and transformation, distance is pivotal, in particular because of current complex phenomena, such as the shortage of containers. Today, transportation of the merchandise is three and four times what it used to cost.

Why is Nearshore Outsourcing in Costa Rica so Popular?
Costa Rica offers multiple advantages as a nearshoring location:
• +300 multinational companies
• +1000 weekly international flights
• +35 direct international flight connections
• 179% mobile phone penetration
• Competitive maritime transport costs
• Competitive Free Trade Zone Regime
• FDA headquarter offices in Costa Rica for Latin America

Therefore, reducing costs of the supply of raw materials and technology is fundamental for companies.

Coyol Free Zone represents an ideal opportunity for the Nearshoring plans of North American companies because of its wide offer of on-site suppliers and contractors, which allows the export of goods directly from Costa Rica to different destinations. Companies exporting from our park can save money in production, time, transportation, and warehousing.

Costa Rica: A Paradise for Medical Devices Companies

Medical devices are still the “star export” product in Costa Rica, currently representing 28% of the total sales of Precision and Medical Equipment products, according to the Foreign Trade Promoter (Procomer).

This sector was responsible for 34% of the country’s exports in the first months of 2022 and grew 20% (US$63 million more than in January 2021). Products such as medical devices (+28%), needles and catheters (+21%), and equipment for intravenous injection (+124%) were the most responsible for this growth.

Exports, overall, performed very well in Costa Rica amidst the Covid-19 pandemic, with exports of goods growing 24% last year, for a total of US$14,553 million, that is, US$2,858 million more than in 2020. This is the greatest increase in the last 15 years. And guess what? Medical Devices leveraged that growth, with a rise of US$1,289 million in exports compared to 2020.

The growth in exports also benefited from traditional products from the agricultural sector, which increased 6% from 2020 to 2021; the food industry with 26% growth and the pharmaceutical chemical sector with 10% increase, over the same period.

“We congratulate the export sector for this successful performance in 2021. This growth of 24% in goods and 6% in services (as of the third quarter) shows that the sector is dynamic and adapting to the changes that the world is experiencing. A solid trade policy, which allows us to send more than 90% of our exports to countries with FTAs, and a nearshoring trend that has added more companies to the Costa Rican export park, support this significant increase,” explained Andrés Valenciano Yamuni, former head of the Ministry of Foreign Commerce in Costa Rica and President of the Board of Directors of Procomer.

The good streak comes from 2020 when the outbreak started. Costa Rica’s exports of goods grew 1.9% that year, reaching a record of US $11,683 million ($214 million more than 2019). This figure even exceeded the trade performance of Latin America and the Caribbean, which saw a 13% decline in its exports during the same period.

Source: Trade News and Foreign Trade Promoter (Procomer Costa Rica)