Executive Summary: Rica Cheesecake & Coffee Company Imagine sitting at a trendy and relaxing caf’e in the middle of a dynamic and energetic town square, in Latin America, enjoying a cup of fine coffee with a slice of delicious American style cheesecake. You have just entered the world of Rica Cheesecake and Coffee Company. Our team was tasked with developing a concept or service in a foreign country and delivering a research project. The key to this project was selecting the country and a product that would have the greatest chance of success.
We focused on the Central American region of the world. We evaluated the seven countries that comprise Central America and chose one country with the most potential to deliver our product. The countries that were evaluated were; Guatemala, Belize, El Salvador, Honduras, Nicaragua, Panama and Costa Rica. As you can gather from our name of our concept, we have selected Costa Rica. Each country was evaluated by the geographic, cultural, political, infrastructure, economic and overall risk to determine the optimum country. The countries in Central America had similar characteristics, from their religious beliefs to their “Mestizo” population.
They also depend on agriculture and tourism for their economies. Central America is plagued with political corruption, economic challenges and a continued drug trafficking problem. One thing that these countries do have is the abundance of natural resources, fertile land, water and wonderful weather. This is what drives thousands of tourists to this part of the world. We found that a large number of U. S.
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citizens vacation in Central America, especially in Costa Rica, in fact, they like it so much, they retire there. We have developed our concept with these and may other demographics in mind. In an effort to attract customers and create a competitive advantage, we will commit ourselves to a differentiated product / service strategy and will differentiate ourselves based on customer service, product quality and product uniqueness. Our start-up strategy is to establish a joint venture with the well regarded coffee company, Aventura Ltd. This will help reduce our initial capital investment and help minimize risks associated with Greenfield operations.
By establishing a joint venture we are able to recognize synergistic transfers of product knowledge, this adds more value to our company and our product which ultimately can be passed on to our consumers. Now it is time to imagine the “American” style cheesecake, with a touch of local flavor in coffee. So sit back and relax and enjoy the experience. Introduction The following portion of our paper will detail the Central American countries of Guatemala, Belize, El Salvador, Honduras, Nicaragua, Panama, and Costa Rica that we have researched. It will provide insight in the following areas: Geographic, Social, Economic, Political, as well as the Infrastructure of these countries. This analysis will help illustrate our decision in terms of the country we have selected and the product and service we have chosen.
Also, the following segment will provide illustrative tools that we have employed to derive the best location and best possible product. Country Analysis: Central America Guatemala, Belize, El Salvador, Honduras, Nicaragua, Panama, and Costa RicaGuatemalaGeographic: Guatemala is located in Central America, below Mexico. It borders El Salvador and Honduras to the east, Mexico to the north and west, and Belize to the Northeast. The Pacific Ocean is south of Guatemala. Social: The population of Honduras is 14, 280, 596 million (2004 est. ) with an annual growth rate of 2.
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61% (2004 est. ).
Ethnic groups are divided as follows: approximately 55% Mestizo, 43% Amerindian and 2% whites and others. The official language is Spanish (60%), although there are 23 existing vernacular languages (40%) comprising the cultural patrimony. The most important are: Quich’e, Kakchiquel, Quekch’i and Mam. Guatemalans are classified as highly religious.
Roman Catholicism is the primary religion. Small sub sectors include Protestantism as well as indigenous Mayan beliefs. The literacy rate of the population is approximately 70. 6%. The Guatemalan government provides free education which has helped increase the literacy rate considerably in the last 10 years.
Political: Republic of Guatemala is the official name of Guatemala. The capital is Guatemala which is largest city in the country. The government is a Constitutional democratic republic and the current president is Oscar Berger. There are three principal branches Executive Branch: president, vice president, Council of Ministers (cabinet); Legislative Branch: unicameral National Congress (Congreso Nacional) and Judicial Branch: Supreme Court of Justice (Corte Suprema de Justicia).
Corruption is one of the most prevalent problems in Guatemala.
Since January 2004, a new government has taken power since then many cases of corruption as a result of the prior government have been discovered. This has caused a growth in tax fraud by many private companies. As a result, the government has fewer resources to spend on public institutions such as the educational system. Guatemala has a civil law political system which politicians have continuously manipulated. As a result, the U. S.
government de certified Guatemala on counter narcotics cooperation in January 2003. According to the U. S. Department of State, about 40 percent of the cocaine that arrives in the United States each year passes through Guatemala. The country is suffering one of its worst political crises since democratic reforms took hold nearly 20 years ago Economic: Guatemala’s GDP for the year 2003 was $56. 53 billion.
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Guatemala is classified with a C economic risk rating. The GDP real growth rate is 2. 1% (2003 EST. ).
Its economy is based on agriculture, which accounts for 25% of GDP, employs about 60% of the labor force, and supplies two-thirds of exports.
Coffee, sugar, and bananas are the main exports at $2. 763 billion annually (2003).
The cost of total imports is estimated at $5. 749 billion. The main imports are fuels, machinery, transport equipment, construction materials, grain, fertilizers, and electricity; these constitute the largest portion of imports. The country of Guatemala has very limited economic freedom.
Because of the general weakness of the economy, Guatemala’s unemployment rate remains high at circa 13%. People as young as ten years of age comprise the current labor force. The total labor force was 4. 2 million for the year 2003 with 78.
2% being men and the remaining 21. 8% being women. Infrastructure: The roadway system consists of 14, 118 km of roadway of which 4, 871 km are paved and 9, 247 km are unpaved. The Pan-American Highway, the main highway of the Central American Net, travels through Mexico and ends in El Salvador. It runs along the Pacific and Atlantic Oceans. This highway is the main means of transportation in Guatemala.
The main railroad is 886 km in length and unites the capital with the ports Quetzal and Neighborhoods, as well as the Mexican frontier (City Tec ” un Um ” an).
The taxis system is another common form of transportation. Taxis circulate the streets of all main cities. They are generally located in the main hotels, parks, and in the International Airport, La Aurora. Speaking of airports, Guatemala has 11 well functioning airports; the primary airport is la Aurora and is responsible for most international connections. Since 1998 telecommunications has been growing steadily as a result of the government instituted privatization of the national telephone company Gua tel.
Since then four companies have successfully entered the telecommunications market, driving down the costs meanwhile increasing the quality and quantity of the services. In 2002, 846, 000 telephone lines and 1, 577, 100 cellular lines were in use. In the same year there were 400, 000 registered internet users. Belize Geographic: Belize has a favorable geographic location. The country borders Mexico and Guatemala on the west, and the Caribbean Sea on the east. Belize is located very close to the United States, which makes it the primary trade partner for import and exports.
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Social: The Belizean population, according to country watch. com for 2004 is 282, 500, with an annual growth rate of approximately 2. 44%. The Belizean population represents 0.
07% of Central America’s total population. Belize is culturally diverse, due to a heterogeneous ethnicity and religion. The ethnic groups that compose the Belizean population are: Mestizo 43. 7%, Creole 29.
8%, Maya 10. 0%, Garifuna 6. 2% and others 10. 3%.
The religious groups in the country are: Roman Catholic 62%, Protestant 30%, and the group “other” 6%, which is represented by Muslim, Hindu, and Buddhist. Two percent of the population does not practice a specific religion. The official language for the country is English, but due to the multiple ethnic groups, other languages are spoken. Some of these languages are: Creole, Spanish, Garifuna, and Mayan. Belize has a social class division. There is a gap between the upper, middle, and lower class.
In the educational system, until recently, primary education was the only level available for all classes; higher education and university was available only to the middle and upper class. The education system has sponsorship from the government (Scholarship).
Scholarships are granted based on academic performance rather than financial need. Poor families continue to lack access beyond the primary level of education.
Political: Belize is a member of the UN, WTO, OAS, Caricom (Caribbean Community and Common Market).
Belize has a parliamentary democracy. It has three main branches, Executive, Legislative, and a Judicial Branch. Belize has two main political parties, the People’s United Party (PUP) and the United Democratic Party. The latest elections in 2003 were won by the PUP, which now holds a majority in of the House of Representatives.
Belize External relations have been dominated by a territorial dispute with Guatemala. Recently both countries agreed to a facilitation process through the Secretary General of the OAS to discuss a peaceful resolution to the territorial dispute. Since the election in March 2003, the government has concentrated its effort on the decentralization of political and administrative authority, strengthening the judiciary system and the regulatory framework and enforcing law on money laundering and drug trafficking. The country continues to have problems with high unemployment, growing involvement in the South American drug trade, and increased urban crime. Economic: Belize is the third wealthiest country in Central America after Costa Rica and Panama, with a GDP of $3, 611. Despite this index, there is a strong gap between the upper, middle, and lower class.
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The Labor force of Belize is approximately 94, 172; there are 84, 720 employed and 9, 453 unemployed. These numbers represent 57. 3% of the population 14 years and over, and 35. 9% of the total population.
The unemployment rate for the country is nearly 10%. The economy depends mostly on agriculture, and lately on tourism. The United States constitutes the largest portion of trade, accounting for approximately 53% of the exports and 58% of the imports. Other major trade partners include Mexico, United Kingdom, Western Europe, Canada, and CARICOM. Recently, Standard and Poor’s lowered Belize’s rating for its long-term foreign currency sovereign credit rating to B-, its long-term local currency sovereign credit rating to B, its short-term local currency sovereign credit rating to C, and its short-term foreign currency sovereign credit rating to C, because of a possible problem refinancing its debt.
The main economic strategy for the government of Belize is based on the agricultural economic diversification and expansion of the tourism industry towards import substitution and increased foreign exchange earnings. Foreign investors are required to register any investment with the Central Bank to facilitate the repatriation of profits and dividends. Potential investment opportunities for Belize include agro-industries, tourism, light manufacturing, and forestry-based industries. Infrastructure: Belize has instituted a construction program to improve its road network system. There are four major highways, two of which provide border crossing to Mexico and Guatemala. Roads to the capital, Belmopan, and to Belize City connect all villages and main towns.
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One company provides the bus transportation in Belize between the main towns. The country has two main ports in Belize City. One is a modern deepwater port that can handle containerized shipping. The second is used for medium size vessels to export banana production and citrus. There are also nine approved ports of entry across the country. A new cruise ship facility was opened in 2001, and plans for a new facility were announced in 2004.
One company owns the Port facility, and they have the intention to create an 80 hectares industrial free zone. The main international airport is in Belize City, and is served by four international carriers and two domestic airlines. In 2004, a contract was made with the Belize Airport Concession Company to manage the airport for 30 years. An agreement in 2003 with Free Zone International will provide investment in a free-zone operator on the airport perimeter. Belize Telecommunications Ltd (BTL) operates a telephone network linking most settlements.
The Public Utilities Commission (PUC) in 2003 issued licenses to competitors for Internet service provision and private networking services, as well as two licenses carrying the right to offer full range of telecoms services, of which one was taken by BTL and the other by its main challenger, Intelco. Intelco, who has started to offer services, has not been able to negotiate an agreement with BTL for interconnection. By mid-2004, Intelco had fallen behind its schedule of developing its telecommunication networking and had fallen into financial difficulties. In terms of media, there are six main newspapers, 15 radio broadcasting stations (all own by entrepreneurship), and 26 television broadcasting stations and providers of cable television. El Salvador: Geographic: El Salvador is located in Central America. It is bordered by Guatemala to the Northeast and Honduras to the Southwest.
The Pacific Oceans borders along the Southern coastline. El Salvador is 21, 476 sq. km. , approximately the size of Massachusetts (U. S Department of State, 2004).
The capital city is San Salvador.
El Salvador is separated into 3 distinct regions: southern coastal belt, central valleys and plateaus, and northern mountains. The climate is classified as semitropical with distinct wet and dry seasons. Social: The current population of El Salvador is circa 6. 6 million and about 1. 7 million live in the capital of San Salvador. The annual growth rate is roughly two percent.
Approximately 45% of the population resides in rural areas. Spanish is the primary language of the country. There is very little ethnic diversification whereby 90% of the population is Mestizo, another 9% Caucasian, and about 1% is indigenous. Culturally, very few Indians have retained their traditions and customs. Most of the population, 55% are Roman Catholic but there is significant growth in the number of Protestant groups.
Education is free and provided by the government through grade nine. About 85% of the students in this range attend school. The national literacy rate is 84. 1% and 75. 3 % in the rural areas.
The literacy rates in both rural and urban regions have been increasing steadily at 2. 9% over the last decade. The work force is roughly 2. 7 million of the population. The main sectors are agriculture 22%, services 18.
7%, construction 5. 4%, transportation and communication 4. 6% and other at 4. 5%. Political: El Salvador is classified as a democratic republic. El Salvador has had a constitution in place since December 20, 1983 and claimed its independence from Spain on September 15, 1821.
El Salvador is governed by an elected president and an 84-member unicameral Legislative assembly (US Department of State, 2004).
Similar to the US, the government is comprised of three branches: Executive Branch, the president and vice president; the Legislative Branch, an 84 member legislative assembly; and the Judicial branch, consisting of an independent supreme court. There are several political parties: Farabundo Marti National, Liberation Front (FMLN), Nationalist Republican Alliance (ARENA), National Conciliation Party (PCN), Christian Democratic Party (CDP), and the United Democratic Center (CDU) (CIA Report 2004).
Politically over the last few decades El Salvador has been extremely unstable.
Until 1993, civil wars plagued the country. As a result many political parties’ left wing and right wing have formed. Prolonged negotiations helped aid radical opposing sides and helped put an end to years of civil and political unrest. Under these negotiations, former guerillas were allowed to form legitimate parties and participate in elections. In 2004 the ARENA party took office with Elias Saca as president. President Saca continues to concentrate on modernizing the economy and strengthening bilateral relationships with the US.
In this effort, El Salvador has become a committed partner in anti-terror efforts. They are also helping aid the reconstruction of Iraq by sending troops. El Salvador has recently played a key role in the negotiations for the Central American Free Trade Agreement. Regardless of these efforts, political instability still remains. The current administration still is faced with a complex political environment and many opposing political parties.
This makes FDI quite risky in El Salvador. Economic: The current GDP is 15 billion with an annual growth rate of 2%. The per capita income is $2, 258, which decreased last year by nearly 4% (Internet World Stats, 2003).
Unemployment is has decreased the last two years at 2.
3% but is still relatively high at 19%. Manufacturing is currently seeing the most growth at 6. 7% and accounts for 34% of GDP. Agriculture is approximately 14% of GDP, products include: coffee, sugar, livestock, corn, poultry, and sorghum.
Industry accounts for 24% of GDP and the primary products are: textiles, food and beverage processing, footwear and clothing and electronics. Current import and export trade have seen growth. Exports in 2003 grew 4. 7% while imports grew 11%. Exports in 2003 were 3. 1 billion including textiles, coffee, sugar, and shrimp.
Imports in 2003 were 5. 8 billion including: consumer goods, foodstuffs, capital goods, raw materials, and petroleum. Major export markets include the US at 63% and CACM (Central American Common Market) at 25. 5%. The major suppliers are the US at 48. 6%, CACM at 16.
1% and Mexico at 5. 7% (El Salvador, Bureau of Western Hemisphere Affairs, 2004).
El Salvador is pursuing aggressive export enhancing strategies. It has been a solid supporter and aid to free trade agreements such as CAFTA. These efforts are aimed at creating trade incentives within Central America in an effort to help promote FDI. Infrastructure: The public infrastructure is well supported by the Comission Ejectutiva Portuaria Autonoma (CEPA) and the Ministry of Public Works (WOP).
These government agencies help provide funding in many infrastructural areas in El Salvador such as seaports, roadways, airports, and railways. In 2003 the total investment from both agencies was close to one billion dollars (Country Commercial Guide, 2004).
The main roadway system is connected to the Pan American highway. It connects Guatemala, Honduras and El Salvador.
It provides access to most of the main Salvadoran cities. About 60% of the roadways are paved and about 2, 600 km are being refurbished. There is one central airport located outside of San Salvador. This airport is the main hub for Central American air transportation. There is a secondary airport reserved for the sole use of the military. There is one main seaport and one main railway.
Acajutla is El Salvador’s only operational port and is located 85 miles outside of San Salvador. The government is in the process of the Acajutla’s port services to help increase efficiencies. The main railway is The National Railway of El Salvador. In 2002 the government successfully privatized the telecommunications sector. Since then over 709, 000 phone lines have been installed and over 908, 000 cell phone subscribers have been recorded.
This effort has made it the largest phone market in all of Central America. Global communication has been made possible with services such as fax, direct dialing, and telex facilities. Honduras Geographic: Honduras is centrally located. It borders Guatemala and El Salvador to the east and Nicaragua to the south. Honduras borders the Caribbean Sea to the northeast and partially borders the Pacific Ocean to the Southwest.
Honduras is roughly the size of Louisiana at 112, 090 sq. km. The climate is classified as tropical to sub-tropical, depending on the elevation (U. S.
Department of State, 2004).
Social: The Honduran population, roughly 1/6 of the entire Central American population, is 6. 8 million with an annual growth of approximately 2. 24 percent (US Department of State, 2004).
Ethnicity is homogeneous whereby, 91% of Hondurans are classified as Mestizo while the remaining 9% are classified as having Arab, African, Asian, or indigenous ancestries. Hondurans are predominately Roman Catholic with about a 4% minority being Protestant and 2% comprising the group other.
The culture can be classified as extreme patriarchal and extension resulting from religious influences and beliefs from the Roman Catholic methodology. There is a great collectivity in the Honduran culture. This is most noticeable within the families. Hondurans are extremely family oriented with great respect for their elders and all extended relatives. Like most Central American cultures, families commune together and support the growth and well being of their family. One of the most noticeable and recent progressions socially is the Women’s Rights movement.
Although there are trends of feminization of labor in certain industries, woman in Honduras are beginning to enter the labor market on all levels more rapidly. In fact, this apparent movement is classified as the strongest in all Latin America. Political: Honduras is a member of the UN, WTO, OAS, SICA (Central American Integration System), and PAR LACAN and is presently working towards a regional customs union that will be effective starting in 2005; this would relax border controls and tariffs among Honduras, Nicaragua, and El Salvador. Honduras’s chief trading partner is the United States as a result the US is their most important international trading partner and largest bilateral relationship. Over 55% of all Honduran exports are to the US and over 50% of Honduran goods are imports from the US (Honduras Country Commercial Guide, 2004) In the last five years the government has supported a substantial liberalization of its economic policies, for example emphasis has been placed on lowering tariffs, reducing trade barriers, limiting restrictions of FDI, eliminating price controls, and gradually decentralizing market places (Honduras Country Commercial Guide, 2004).
Even with these movements there are substantial set backs. The government has monopolies on telecommunications, electricity, and IT. There are several political issues affecting the business climate in Honduras. Most recognizable are problems arising from deficiencies in the administration of justice and rule of law. The existence of deficiencies in judicial security, a deteriorating security environment, as well as endemic corruption make resolving business disputes and conducting business as fluidly as possible difficult at times (US Department of State, 2004).
Economic: Honduras is the second poorest country in Central America.
The current GDP is $17. 46 billion, second to Costa Rica. The annual GDP growth rate is 2. 5% and the per capita GDP is $2, 600. The current unemployment level is high at 27. 5% but has been decreasing steadily at 2.
7% annually since Hurricane Mitch in 1998 which caused several billions in damage to many agricultural and manufacturing industries (most severe and most noticeable were the damages to the main crops of the coffee bean and bananas).
The labor force is disaggregated into three main industries, agriculture and livestock 33%, commerce 25%, and manufacturing 15%, whereby manufacturing is seeing the most growth annually at 6. 7%. Sub-employment is increasing due to an im merging labor force entering into the informal labor market: the Mequila Industry. The Mequila industry is comprised of 176 textile manufacturing plants primarily for assembly for “re-export of textiles and apparel.” Honduras is the largest Central American supplier of textiles, ninety-percent of which are exported to the United States making Honduras the third largest supplier to the US behind China and Mexico. Natural Resources include arable land, forests, minerals, and fisheries.
Agricultural products consist of coffee, bananas, shrimp and lobster, sugar, fruits, basic grains, and livestock. There are several current economic trends, the two most noticeable are the increase in non traditional exports such as cultivated shrimp, melons, and tourism and the immerge nce and development of the Mequila textile industry. Infrastructure: There a four national airports in Honduras all of which are planning runway expansion in the immediate future. It is speculated that the San Pedro Sula, the most modernized airport in Honduras, will become a hub for regional air travel.
This hub enables many international and freight companies’ direct flights and connections around the world. Electrical power is provided by the state owned National Electrical Energy Company which distributes about 98% of the electricity consumed in Honduras. There is a great disparity between urban and rural access to energy. 91. 3% of urban homes enjoy electricity while only 31.
8% of rural homes have access (Honduras Commercial Guide 2004).
Telecommunications in Honduras is also a stated-owned monopoly. Honduras is well below the Latin American average for telecommunication services. About 309, 702 lines are in service, line penetration in the country is about 63 percent and growing (Honduras Commercial Guide 2004).
These numbers also reflect the scarcity of internet users in Honduras. There are 13, 603 km of official road connecting rural and urban areas as well ports on the Atlantic and Pacific side. The roadways are in good condition and allow companies steady distribution within Honduras and throughout Central America. Large investments in construction are seen in commercial, residential, and enhancements on roadways.
These are heavily financed by private sector companies a key strategy of the Honduran government to help continue and modernize the country’s infrastructure. The political infrastructure of Honduras welcomes FDI from the United States and supports and promotes joint ventures in the country. The US and Honduras share a traditionally close and friendly bilateral relationship. The United States is considered Honduras’ most important international partner (Wetzel, 2004).
Nicaragua Geographic: Nicaragua is located in Central America bordering both the Caribbean Sea and the North Pacific Ocean and lies between Costa Rica and Honduras. The climate is tropical in the lowlands and cooler in the highlands. Nicaragua is 129, 494 sq. dm. Partially due to its varied terrain, Nicaragua experiences earthquakes, volcanoes, landslides and occasionally severe hurricanes.
Social: The Nicaraguan population is 5. 36 million people, 1 million of which live in the capital of Managua. The population is centralized around the Pacific lowlands and the adjacent interior highlands. About half of the population, 54%, lives in urban areas.
53, 000 U. S. citizens reside in the country. The Nicaraguan growth rate is 1. 97% per year.
The official language is Spanish while English is often spoken, and indigenous languages are spoken along the Caribbean coast. There is not a wide variety of ethnic backgrounds in Nicaragua. The ethical percentages are as follows: 69% Mestizo, 17% white, 9% black (Jamaican) and 5% indigenous. The majority of people are of Indian and European ancestry with a mix of Iber o-European and Indian cultures.
The Indians on the eastern half of the country exhibit distinctly Indian customs. The Black minority lives along the Caribbean coast and are of Jamaican origin. Roman Catholicism is practiced most widely while an evangelical Protestant following is growing. Along the Caribbean coast, there are strong Anglican and Moravian communities. Political: Nicaragua is a member of both the WTO and the Central American Common Market (CACM).
Through the CACM, Nicaragua has agreements with the Dominican Republic and the Southern Cone Nation of South America (MERCOSUR).
It also has negotiated Free Trade Agreements with Mexico, the Dominican Republic, Chile and Panama. Nicaragua is a Caribbean Basin Initiative beneficiary, but is not a beneficiary of the US Generalized System of Preferences (GSP).
The Nicaraguan government has recently changed to a constitutional democracy; it was a dictatorship before. There are four major branches of the government: executive, which include the President and Vice President; legislative, National Assembly; Judicial, Supreme Court, other courts and tribunals; and the Electoral branch which consists of the Supreme Electoral Council.
Nicaragua is also the first country in all of the Americas to have had a female president. There are many political parties, but the two main ones are the Liberal Constitutionalist and the Sandinista National Liberation Front. Nicaraguan freedoms include peaceful assembly and association, religion, movement within the country and foreign travel. The people of Nicaragua extensively exercise their freedom of speech; media and academia liberally discuss diverse viewpoints. State censorship is not practiced in Nicaragua. Nicaraguans also have the right to unionize and do so often; nearly half of the work force is unionized, and unions are allowed to strike and collectively bargain.
Discrimination is forcefully prohibited. The government’s main priority is to increase the tourism industry. After the dictatorship ended, the government has realized the importance of the dollar. They are encouraging foreign businesses and tourism. The investment and legal environment in Nicaragua is very unstable.
There is uneven enforcement of contracts and it is cumbersome to receive predictable judicial rulings. Government proclamation and political considerations have the ability to significantly alter the rules of business without notice. Business seems to operate more on a “who knows who basis.” In addition, there is no reliable dispute resolution mechanism. Nicaragua does not have adequate protection of rights for either tangible or intangible property, and even so, enforcement is lax.
However, the future looks promising; Nicaragua will be employing a WTO compliant customs valuation system rather than doing arbitrary customs procedures and valuations. Economic: Nicaragua’s economy has its backbone in several industries. The Agricultural industry makes up 31% of GDP. The main crops grown include corn, coffee, sugar, meat, rice, beans and bananas. Industry makes up about 23% of GDP which includes processed food, beverages, textiles, petroleum, and metal products.
Services make up 45% of GDP which includes commerce, construction, government, banking, transportation, and energy. Despite these industries, the economy depends heavily on remittances from Nicaraguans living abroad. The country’s GDP in 2004 is $11. 4 billion dollars with an annual growth rate of 1.
4%. The per capita GDP is $2, 200 and the inflation rate is 5. 3%. Although the official monetary note is Cordoba Oro, U.
S. dollars are widely accepted. The exchange rate is 1 US dollar for 16. 0655 Cordoba Oro.
Nicaragua’s natural resources include arable land, livestock, fisheries, gold, and timer. The country began free market reforms only recently in 1991. Exports for Nicaragua are a key force behind economic growth. In 2001, its trade exports were worth $640 million which included coffee, seafood, beef, sugar, and industrial goods. Its major markets were the U.
S. (imported 43% of Nicaragua’s exports), European Union (33%), and the Central American Common Market (CACM) (17%), and Mexico (2%).
Being essentially an agricultural economy, Nicaragua does not manufacture much. Therefore, it is dependent on imports for most manufactured goods. The imports were worth $1. 7 billion, 32% of it was from the U.
S. , 21% from CACM, 11% from Venezuela, and 9% from the European Union. Imports include petroleum, agricultural supplies, and manufactured goods. Because Nicaragua’s industrial sector is so small, there is almost no local competition. The country has rapidly developed their free trade zone regime. Nicaragua has recently expanded their industries in construction, mining, fisheries, and general commerce.
The government wants to increase its tourism industry, which includes planning an extensive tourism infrastructure. Because education is not enforced, there is a low literacy rate of 67. 5%. Only 28% of first graders finish 6 th grade.
22% of Nicaraguans are unemployed and 36% are underemployed. Infrastructure: The infrastructure in Nicaragua is not very developed. There are 19, 000 kilometers of roads of which only 2, 000 kilometers are paved. Road maintenance is very poor however the government, realizing that their infrastructure needs improvement, restored 18% of all roads in 2001 which are now said to be the best in the world. The majority of the paved roads are located in the western part of Nicaragua. There is one major highway that runs north south located on the Pacific side of the country, The Pan American Highway.
The country also lacks all weather roads between the two coasts. Transportation is usually accomplished with small packaging sent through the country either by boat or the limited number of roads. Not only are the roads and ocean waterways unreliable sources of transportation, but the airway is also an unpromising means of sufficient transportation. The U. S. Federal Aviation Administration (FAA) has classified Nicaragua’s civil aviation authority as Category 2.
This means that the FAA finds the safety standards of Nicaraguan air carriers falling under internationally accepted standards. Therefore the US FAA has increased surveillance of category 2 air carriers. Limitations on air carriers of Category 2 include no additional flights to the United States, no new services, and no added capacities. Panama Geographic: Panama is located in the narrowest and lowest part of the Isthmus of Panama which forms a link between North America and South America. Panama enjoys a strategic location as it lies between Costa Rica and Columbia bordering the Caribbean Sea in the north and the North Pacific Ocean in the south. Panama is approximately 78, 200 square kilometers, in size.
It has a tropical maritime climate with a prolonged rainy season from May to January. Social: The Panamanian population is 3. 1 million and its annual growth rate is 1. 31%, according to the U. S Department of State. More than half of the population resides in the capital-Panama City and the rest mainly in Colon and David.
People between the age of 15 to 64 constitute 63. 6% of the population. 70% of the Panamanians are Mestizo, 14% Amerindian and mixed, 10%Caucasian and 6% Amerindian. Panama’s population is ethnically diverse mainly due to the immigration during the canal construction period in the early 20 th century. There are also many people of Chinese, Indian, Middle Eastern, European and North American descent.
84% Panamanians are Roman Catholics, 15% Protestants and 1% comprise the group other. Spanish is the official and dominant language. 14% of the population speaks English, among them are businesspeople and professionals. Many Panamanians are bilingual. The literacy rate is 92.
6% and 95% of primary school age children go to school. The average age of school attendance is 6. 7 years. Unfortunately, higher education is not adapted to the needs of the workforce which results in lack of technically trained professionals. This constrains the country’s ability to attract foreign direct investment. Panama has a rich culture and popular traditions.
The Salsa- a mixture of Latin American popular music, rhythm and blues, jazz, and rock- is a Panamanian specialty. Political: The Panamanian Government is a constitutional democracy and has three branches: the Executive, comprising of the president and two vice-presidents, a unicameral Legislative Assembly whose 77 members (presently) serve a five year term and the Judiciary with five supreme courts and three courts of appeal. Panama has a system of compulsory universal adult suffrage although those who do not vote are not penalized. On September 1, 2004, the presidential candidate of the Democratic Revolutionary Party (PRD), Martin Torri jos, won the presidency and took power. The president has promised to tackle major problems of panama regarding high unemployment, vast income disparities, widespread corruption, decision regarding the widening of the Panama Canal, reform of the Caja Seguridad Social (CSS), the social-security system and the pension systems. Panama’s most important international relations are with the U.
S. In Dec 1999, U. S transferred the sovereignty of the Panama Canal to Panama and withdrew its troops completely and since then there have been friendly ties between the two. Cultural ties between the countries are strong.
Many Panamanians come to United States for higher education and Panama has a number of U. S tourists visiting Panama and retirees settling in Panama. U. S accounts for 47. 8% of Panama’s Exports and 34.
3% of its imports (Nationmaster. com).
Cuba broke off relations with Panama to protest the former Presidents decision to pardon four Cubans accused of plotting against Fidel Castro. Columbia is the main customer of the Zonal Libre De Col ” on and accounts for 40% to 50% of the trading activity in the Zone, despite its internal conflicts. Panama has controversial relations with China Due to its relations with Taiwan. Economic: Panama’s economy is primarily based on its service sector that accounts for almost 80% of its GDP.
Services include mainly operating the Panama Canal, the Colon Free Zone, banking container ports, maritime services, construction and tourism. A slump in the Colon Free Zone and agricultural exports, the withdrawal of U. S forces from the canal and the global slowdown lowered Panama’s economic growth in 2000-03. The current GDP is $18. 62 billion, the GDP growth rate is 3.
2% and the annual per capita GDP is $ 3, 906. (U. S Department of State, 2004).
The unemployment rate is 13. 8% and structural unemployment is high in Panama. The economic downturn experienced prior to 2003 brought an increase in cyclical unemployment.
A trend established in the past two years has been the rise in informal employment which rose by 3. 8% in 2003, according to the Ministry of Economy and Finance’s 2003 annual report. The inflation rate is 1. 4% which is expected to rise due to the weak dollar and the sharp rise in fuel prices as Panama is highly dependant with regards to its fuel supply.
Panama has a shortage of skilled labor and an oversupply of unskilled labor. Its labor force by occupation is agriculture 20. 8%, industry 18% and services 61. 2%. A total population of 40. 5% lives below the poverty line.
Panama has vast income disparities. According to the UN, human poverty index measure of income inequality, the richest 20% of the population accounts for almost 36% of income and consumption, whereas the poorest 20% accounts for only 3. 6%. Panama’s natural resources include timber, seafood and copper. Agriculture accounts for 5% of its GDP and the products comprise of bananas and other fruits, corn, sugar, rice, timber, coffee and livestock. Panama’s exports account for $5.
3 billion and are mainly bananas, petroleum products, sugar, coffee, shrimp and clothing. Its imports are worth $6. 5 billion and the goods include capital goods, crude oil, foodstuffs chemicals and consumer goods. According to the Ministry of Finance, Panama has registered an increase in activity of 23% in the second quarter of 2004 in the Zona Libre de Col ” on (ZC), the Col ” on Free Zone, the world’s second-largest free zone. Infrastructure: Panama has a total of 103 airports and 5 main ports and harbors.
Tocumen international airport is a regional hub serving 16 airlines. Ports have improved considerably since the privatizations of the mid-1990 s, and Panama has become one of the most important destinations in Latin America for container transshipment. Panama has a poor road network system and a highly inefficient public transport system. There has been a sharp rise in car ownerships in Panama lately.
Telecommunications and energy are under government control. There are about 386, 900 telephone lines in use and about 834, 000 cellular phones in use. Panama has 120, 000 internet users which a very low number compared to Panama’s population. (CIA World Fact book).
Panama’s main energy sources are hydroelectricity, and petroleum fuels which are mostly imported. Venezuela and Ecuador supply almost all of Panama’s crude oil imports. There has been an increase in the demand for electricity due to a rise in Panama’s commercial activities. The demand is met by thermoelectricity generation which is dependant on rainfall.
SWOT and Risk Analysis: This next section will contain the tools we have used to elicit the best possible location for our product / service . In addition to each team member’s primary research and location specific input we also felt the need to perform a SWOT and Risk analysis. These tools helped legitimize our location decision. Before the paper proceeds in discussing the Geographic, Social, Political, and Infrastructural elements of Costa Rico, we feel it is necessary to provide the following analysis and thereafter detail Costa Rica more thoroughly as Costa Rica was our majority selection. (It must be noted that several countries offered potential but overall Costa Rica was the best fit) The first analysis and one that we felt most critical in our decision was the Risk Assessment of each our countries.
Regardless of positive growth indicators of many of the Central American countries, Costa Rica as illustrated, see chart below, had the highest overall score and was ranked number one in the region. It was also the only country not to receive a D in any of the risk categories. Country Risk Summary Region Overall Data Overall Score Political Risk Economic Policy Risk Economic Structure Risk Liquidity Risk Costa Rica 1 C Oct-04 45 B C C CEl Salvador 2 C Aug-04 52 C B C Guatemala 4 C Oct-04 59 D C C Honduras 6 D Oct-04 61 D C C Nicaragua 4 C Oct-04 59 C C D Panama 2 C Oct-04 52 C B C Belize Source: Economist Intelligence Unit (EIU~a 2004) It must also be noted that the overall risk rating for all counties was relatively high, but we made our decision based on our product, the best fit location, and least amount foreign investment friction. In addition to our Risk Assessment we also constructed a SWOT analysis, see Exhibits 1 and 2.
This analysis facilitated a clearer understanding of the potential each country has as well as the feasibility of what each country could offer in relation to our product / services success. The second component of our SWOT is the input / output analysis. The following chart illustrates the inputs such as, Political, Geographical, Infrastructural, Social, Economic and Risk Assessment in order to give the best output, in this case, the country selection of Costa Rica. With these assessments we are now able to introduce Costa Rica.
The next section of this paper will provide a more detailed analysis of Costa Rica in order to illustrate our selection. The first section will detail the Geographic, Social, Economic, Political, and Infrastructural elements of Costa Rica. The subsequent section will then discuss the Business environment in detail. Costa Rica Geographic: Costa Rica is located in Central America between Nicaragua and Panama, bordering both the Caribbean Sea and the North Pacific Ocean, between Nicaragua and Panama. The climate is tropical and subtropical with a dry season from December to April and a rainy season from May to November. The terrain consists of coastal plains separated by rugged mountains including several major volcanoes.
Costa Rica has occasional earthquakes, hurricanes along the Atlantic coast; frequent flooding of lowlands in the rainy season and landslides and the potential for volcanic activity (CIA 2004).
Social: The estimated population of Costa Rica as of July 2004 was 3. 9 million people with the largest segment of the population being 15-64 year-olds at 65 percent of the population. The estimated population growth rate in 2003 was 1. 52 percent per year. The estimated 2003 unemployment rate was 6.
7%, with an inflation rate of 9. 4%. This is based on a labor force of approximately 1. 758 million (CIA, 2004).
In Costa Rica a person is considered literate if they can read and write by the age of 15. The official literacy rate for the total population ages 15 and over is 96 percent, proportioned equally between males and females (CIA 2004).
The major ethnic group in Costa Rica is white, including “mestizo,” the mixture of Europeans (Spanish) and Indian ancestry (Amerindians), totaling 94 percent of the population. The other ethnic groups represented are three percent black, one percent Amerindian, one percent Chinese and one percent other. The official language of the Costa Rican people is Spanish with some English spoken. The Roman Catholic religion is the strongest at 76.
3 percent of the population with Evangelical at 13. 7 (CIA 2004).
Costa Ricans are profoundly self-conscious of their self-image, which drives their behaviors of the individuals, as well as the nation. The behavior is focused on humility. Costa Ricans are unique because of their ‘whiteness’ and the lack of an indigenous culture. (Identity, 2004) These cultural characteristics offer a unique differentiation that should be taken into account when determining product or service needs of the Costa Rican people.
Issues of pride and self-esteem can affect the types and quality of products people are willing to use or purchase. The culture is traditional and conservative. Women are playing an increasing role in business and government. This transition could affect the way one markets to this group. Costa Rica is steeped in religious celebrations. These celebrations are focused around families.
Costa Rica celebrates Easter Week or Semana Santa, Christmas Week and August second, which is the celebration of the Virgin of the Angels. “Costa Rica is also different from other Latin American countries, because it practices a ‘lukewarm’ Catholicism that causes a strange mixture of partying and religious celebration during these holidays” (Culture, 2004).
POLITICAL: The Costa Rican government is considered a democratic republic. There are seven provinces, Alajuela, Cartago, Guanacaste, Heredia, Limon, Puntarenas, and San Jose. They achieved their independence from Spain on September 15, 1821, which is now their national holiday. The Constitution of November 7, 1949 is based on the Spanish civil law system with judicial review of legislative acts in the Supreme Court.
Similar to the United States, the governing parties consist of the Executive, Legislative and Judicial branches. Costa Rica maintains diplomatic representation both in the United States and has a United States diplomatic representative located in Costa Rica. Costa Rica is a member of many international organizations including the United Nations, the World Bank and the World Trade Organization. According to the Economist Intelligence Unit, 2004, Costa Rica’s political risk is rated at a “B.” ECONOMIC: Costa Rica’s main industries are tourism, agriculture and electronics exports. They produce agricultural products such as bananas, sugar, pineapples and coffee and manufacture medical equipment and electronic components. But by far, tourism is their main economic driver.
This is derived by a significant amount of FDI into the tourism industry (Tourism, 2004).
Costa Rica’s exports in 2003 totaled $6. 1 billion, while their imports of raw material, consumer goods, capital equipment, and petroleum totaled $7 billion (CIA, 2004).
Costa Rica’s number one top trading partner in both imports and exports is the United States at over 29 percent exported to the U. S. and 35.
4 percent imported from the U. S. The other major trading partner countries include Japan, Netherlands and Mexico (CIA, 2004).
Costa Rica’s economy is stable with heavy reliance on the tourism industry.
They have been successful in reducing the level of poverty over the past 15 years and they have created a “strong social safety net.” Some of the issues that Costa Rica has been facing are the low prices for their agricultural products such as coffee and bananas, as well as the large deficit and internal debt. They are concerned about reducing inflation. There is also a concern because the cost of imports is rising. Costa Rica has agreed to terms with the US over the Central American Free-Trade Agreement (CAFTA) in January 2004, Costa Rica joined its Central American counterparts Guatemala, El Salvador, Honduras and Nicaragua in signing the agreement. The US is unlikely to ratify it before November’s presidential and congressional elections (EIU, 2004).
Costa Rica has had an increasing GDP, in 2003, their GDP grew 5.
6%. The sectors that account for the growth were agriculture, at 8. 5%, Industry, 29. 4% and Services at 62. 1%. The industries consist of microprocessors, food processing, textiles and clothing, construction materials, fertilizers and plastic products (CIA, 2004).
INFRASTRUCTURE: Costa Rica has a significant number of airports, waterways, railways, highways and many ports and harbors. According to the CIA World Fact Book, Costa Rica has approximately 30 paved airports and 119 unpaved airports. There is also approximately 950 kilometers in the rail system. There is a significant roadway system in Costa Rica with approximately 35, 982 miles of highway of which 7, 896 are paved and 227, 996 are unpaved. According to the CIA World Fact Book, Costa Rica’s communication infrastructure is state-owned. The country has a good working system in place with approximately 1.
1 million lines in use. There are approximately 528 thousand cell phones. The broadcast infrastructure in Costa Rica consists of 20 TV broadcast stations and 65 AM and 51 FM radio stations. Business Environment in Costa Rica Openness to Foreign Investment Costa Rica gives a lot of importance to the influx of foreign investment into the country.
The UNCTAD in its 2002 World Investment Report classified Costa Rica as one of the six most successful countries in the attraction of the FDI. The Costa Rican Government welcomes foreign direct investments in the country and consistent efforts have been made in this area by Ministry of Foreign Trade (COMEX) and the Costa Rican Coalition for Development Initiatives (C INDE), a private non-profit association originally created in 1982. Costa Rica’s cost of living is low and the quality of life is the highest among the Central American nations. Its strategic location between the America’s and its duty free access to the US has been the greatest contributing factors attracting investment in Costa Rica. Costa Rica has an educated, motivated and productive workforce but the operating costs are very low.
The country’s economic and political stability have created a stable and friendly business environment. Costa Rica has 8 free Trade Zones which offer many incentives to investors. The Foreign Trade Zones (FTZ) provides investors exemption from taxes on corporate profits, dividends, municipal taxes, import duties and sales taxes. The procedures and regulations for investment, trade and customs are fairly simplified and easy. Thus the operating risk becomes very low. The high quality infrastructure offers Costa Rica wide connectivity with the world.
These factors have facilitated foreign direct investment in Costa Rica. International Investment Agreements Costa Rica has duty free access to U. S through the Caribbean Basin Initiative and has very good relations with them. It has bilateral investment treaties with several Latin American and European countries like Mexico, Chile, Panama, Trinidad, Tobago, Venezuela, Argentina and France, Germany, Spain, Switzerland and others.
It is also negotiating with Canada and Dominican Republic. Costa Rica is currently involved in the CAFTA negotiation. Currency Conversion and Transfer Policies The Costa Rican currency is called the Colon. 100 centimos make a Colon. Smaller denomination coins are not much in use but 25 or 50 centimo coins are in circulation. The foreign currency exchange system allows free possession and conversion of foreign currency into local currency and vice versa, through banks and financial institutions.
The US dollar is the best known foreign currency and is easily convertible. The rate of exchange is… Currency other than US$ can be exchanged only with difficulty. Canadian dollars and British Sterling can be exchanged at Banco Lyon, C.
2, Av. Central. Canadian dollars can also be exchanged at Bane x, C. Central, Av.
1. German currency can be exchanged at the Banco Nacional inn San Jose. The black market for exchanging money does unofficially exist in San Jose, the capital city. There are no limitations or restrictions on transfer of funds associated with investments, in any available currency, at a legal market rate. No restrictions are imposed on reinvestment’s or on the repatriation of earnings, royalties, or capital except when these rights are covered in contractual agreements with the government of Costa Rica.
Banking and Capital Market Costa Rica’s banking system comprises of The Central Bank responsible for the monetary and foreign exchange policies, three state-owned commercial banks namely: Banco Cr ” edit o Agr’i cola de Cartago, Banco de Costa Rica, Banco Nacional de Costa Rica, twenty private banks and two service banks: BANHVI and Banco Popular. Costa Rica has more than seventy financial institutions. Other international banks doing business in Costa Rica are: Citibank, Scotia Bank and other regional banks such as Bancrecen and Cuzcatlan. Current interest rates range from 12% to 15% in dollars and between 25% to 29% in colons. Financing real estate in Costa Rica is not easy. Only residents are provided loans from banks.
Banks traditionally do not loan money to foreigners for the acquisition of fee-simple properties, unless they are residents. Foreigners who have legal residency generally qualify for bank loans if they can provide evidence of a job and adequate income. The National Stock Exchange, (“Bolsa Nacional de Valores”), Costa Rica, was the first to open in Central America. It started its operations in 1976 and since then the trading activities have grown full fledged. Trading is done mainly on government securities. Insurance The National Insurance Institute is the primary insurance agency in Costa Rica and it is one of the largest insurers in Central America.
The agency is state-owned and enjoys a monopoly in the region. The National Insurance Institute offers policies covering most types of insurable interests (e. g. , fire, earthquake, automobile, crops, life, medical, occupational risk, flood, avalanche, professional liability etc. ).
Insurance with foreign companies is allowed but under certain limitations.
Expropriation and Compensation Article 45 of the constitution of Costa Rica, states that no property can be expropriated from a Costa Rican or foreigner by the government without full and advance payments and without any justifiable proof of public interest. If the property is not used by the government for some public purpose, it has to be returned to the owner at the current market value. Dispute Settlement Costa Rican Courts offer a fair and adequate system of resolution of disputes which is ranked as the best in Central America. Costa Rican Constitution has recognized every person’s right to settle disputes through the use of arbitration. Costa Rican courts sometimes take years to settle disputes and hence people have access to other alternative ways.
For settlement of local arbitrage people approach lawyers and arbitrators. Majority of the disputes involve expropriations. Taxation Taxation in Costa Rica is much more simplified than that of many other countries. There are different limits of taxation depending on your income: the more you earn, the more you pay; if you earn less than the minimum amount established by Costa Rican law, you pay no taxes.
In Costa Rica, the tax year begins in October 1 and ends September 30, both for individuals and corporations. Under the Costa Rica tax system, residents and corporations are taxed only income earned in Costa Rica or from Costa Rican sources. Costa Rican Laws do not tax income derived from a foreign source. Income earned from real estate transactions, from assets, goods and rights invested or used in Costa Rica or from commercial, and industrial, agricultural and any other trade or business activities carried out within the country is subject to tax. Sales tax is 13% on the amount paid for goods and services. A municipality tax of 0.
25% is charged on real estate. A transfer tax of 1. 5% of the real value of the property or the value registered with the tax authorities, whichever is higher, is paid. Stamp taxes are levied on legal documents and an Education and Culture statutory stamp tax is assessed on all business entities. Individuals are subject to a progressive tax schedule and nonresidents, either employed or self-employed, are subject to a flat 15% withholding tax, on all income derived from personal services performed in Costa Rica and are not required to file income tax returns in Costa Rica. Self-employed nonresidents receiving rental or business income must file an annual tax return and are subject to the Self-employment Progressive Tax Rate schedule.
Import Duties According to the Central American Customs System Book (SAC), each type of good has a number or classification for customs purposes, and the rates vary accordingly. Import duties are normally subject to a maximum of 20% and a base of 5%. Certain luxury items are charged almost 100% duties on the value of these goods. Among the highest taxed items are arms and ammunition’s (75 percent), costume jewelry (50 percent), fireworks (50 percent), whiskey (50 percent) and wine and beer (40 percent).
A one percent surcharge is imposed on most imports, except medicines and raw materials for human consumption and industry. Tax Incentives Companies established in the Free Trade Zone are offered some incentives: 100% exemption from all exports and re-exports of equipment and machinery, 100% exemption from sales and consumer taxes levied on remittances abroad, 100% exemption on import duties on raw materials, components and capital goods, 100% exemption on taxes on profits for 8 years, and 50% for the following 4 years. The government offers job bonuses and subsidized training programs for labor. Protection of Property Rights Protection of intellectual property rights is among the best in Latin America, although it is highly inefficient with regards to other nations in the world. Secured interests in both chattel and real property are recognized and enforced, and mortgage and title recording is required by law.
Proper care must be taken with regards to title of property as there is always fear of squatter invasions and encroachments. Delayed judicial proceedings and lack of efficiency on the part of judges specializing in intellectual property enforcements have caused problems in the business software industry. The government has taken steps to improve intellectual property rights (IPR) enforcement and bring its copyright laws into compliance with TRIPS. Right to Private Ownership In matters of land and property ownership, foreigners and Costa Rican citizens have equal rights under the law. Foreigners do not have to live in Costa Rica to own property. One can own and manage a business in most areas except those that are owned and operated by the government.
Foreign companies can set up branches, wholly owned subsidiaries or locally incorporated companies in Costa Rica and can fully own them without appointing Costa Ricans as shareholders. There are certain sectors that are reserved for the state and that require Costa Rican citizenship or residency like electrical power, broadcasting, beachfront property, professional services and wholesale distribution. No private ownership of beachfront property is allowed. The Costa Rican government owns the first 200 meters of the beach front area, known as the Zona Mar ” it imo Terrestre, or the Maritime Zone. There can be no construction on the first 50 meters of the beach property, but investors may lease the next 150 meters, provided they are a part of a special zoning district. Labor and Regulations Costa Rican labor force is well educated, skilled and motivated.
It is known for its efficiency and productivity. Costa Rica has the highest United Nations’ Human Development Index among developing nations and the highest literacy rate among the Central American nations (96%).
This is mainly owing to the subsidized education offered by the government. The National Vocational Training Institute (INA) and private-sector groups provide technical and vocational training to the people of Costa Rica. Costa Rica has a vast pool of professionals probably the largest in Central America.
Costa Rica has a number of registered engineers with foreign work experience. It has also many registered medical doctors, dentists, and oral surgeons. Labor related issues are governed by the 1943 Labor Code (C’origo de Trabajo).
These issues include salaries, working conditions, hours of work and overtime, labor disputes and many other such related issues. Labor Courts throughout the country must comply with the code. The National Wage Council states the minimum wage rates for private and public sectors twice a year.
According to the code all workers are entitled to a two-week paid vacation and a Christmas bonus equal to one month’s salary on completion of one year of employment, every year. Women are entitled to four months of maternity leave. The Hourly daily wage rate for non-Qualified workers including benefits is $1. 34 and for qualified workers is $1. 54. For a specialized worker it is $ 1.
85. Overtime rate is hourly rate plus 50%. Thus we can see how cheap the labor in Costa Rica is. Costa Rican Labor Laws require employment contracts between the employer and the employee. All employers must hold an insurance policy with the National Insurance Institute to cover occupational risks. The Employee Protection Act requires the employer to create a contribution of 3% on the employee’s monthly salary.
Foreign nationals without residency status or labor permits are not allowed to work in Costa Rica. According to the labor code 90% of the workers in a country must be Costa Ricans and foreigners cannot occupy jobs for which Costa Ricans are available. Certain flexibilities are provided on request. From this detailed examination of the geographic, social, economic, political, and infrastructural elements of Costa Rica as well as its business environment / climate we were able to construct our business concept, and financing so to reduce most costs associated with barriers of entry. Costa Rica as such has no significant trade barriers affecting entry of goods and services. Costa Rica has agreed in its Uruguay Round of talks to eliminate all import quotas and reduce tariffs significantly to enhance its trade relations with the U.
S as well as the Central American nations and Latin American nations. However, there are certain barriers in the investment and service sector. see exhibit 4 for a detailed examination of potential barriers of entry. After reading the preceding sections, one should recognize that Costa Rica is extremely conducive to FDI. From a cost benefit perspective, we feel that there are ma.