Nearshoring, a US$1.5 billion opportunity for Costa Rica

With the disruption of Asian supply chains, the nearshoring concept has gained strength due to the closures and restrictions that were experienced during the most critical years of the Covid-19 pandemic.

This concept refers to the decision of a company or business conglomerate to locate or relocate part of the supply chain of a product (be it a good or service) to a country close to the target consumer market.

Due to the above, this becomes an opportunity for the countries of the region, and in this case Costa Rica, to continue strengthening itself as an ideal destination for the attraction of Foreign Direct Investment (FDI) and manage to attract US$1.5 billion in investments in the short and medium term, stated Martín Ibarra, Honorary President of the Association of Free Zones of the Americas

“These investments will in turn allow the generation of more quality jobs, productive chains, exports. As well as technology transfer and boosting the economy”, highlighted the businessman.

According to the projections of the Inter-American Development Bank (IDB), Costa Rica alone has the potential to attract US$1.545 billion, and in total for Latin America it could represent an increase of up to US$78 billion in new exports of goods and services, with important opportunities for the region in the automotive, textile, pharmaceutical and renewable energy industries, among others.

Carlos Wong, general director of Coyol Free Zone, explained that the country offers the right environment as an alternative for companies that are looking to relocate their operations.

He said that one of the characteristics of Costa Rica that most attract foreign investment is human talent. Which allows us to stand out in a sector with high added value such as Life Sciences.

Annually, 52% of Costa Rica’s Medical Devices and Precision Equipment are exported from the Coyol Free Zone, and only during 2021, Costa Rica managed to attract 103 investment projects attracted by this trend.

Wong explained that, through the multiple trade agreements, especially the one with the United States, Costa Rica can also take advantage of the friendshoring trend, which refers to the transfer of operations to nearby countries with which values and visions are shared.

“These investments will, in turn, allow the generation of more quality jobs, productive chains, exports, technology transfer and boost the economy.” Ibarra based his comments on projections from the Inter-American Development Bank (IDB).

Ibarra emphasized that currently 70% of the countries are democratic and there is a tendency to trade with countries that share the same principles and political regimes.

In addition, Costa Rica, like many other Latin American countries, has a competitive advantage: clean energy. “The best argument is clean energy. In Latin America, 60% of energy is clean, while in Asia it is 8.5% and in Europe it is 10%. This is an irrefutable argument, a new way of seeing business in the future.”

A series of companies that wanted to reinstate their investments to be closer to their parent company or “nearshoring”, saw Costa Rica as the ideal place during the pandemic.

The country attracted more North American companies that have a similar time zone, which allows it to have its supply chain close by and thus improve export and import processes.

However, Ibarra warned that, despite the achievements, the region needs to improve its infrastructure for trade, especially that used for digital connectivity, transport and logistics.

With information from Bloomberg Línea