HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements…Costa Rica

# 					2023 Investment Climate Statements: Costa Rica			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                    -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct 
                -  Additional Resources                    -  Climate Issues 
                -  9. Corruption                    -  Resources to Report Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics 
                -  14. Contact for More Information 

## EXECUTIVE SUMMARY

Costa Rica is the oldest continuous democracy in Latin America and the newest member of the Organization for Economic Cooperation and Development (OECD), with an established government institutional framework, and a diversified upper-middle-income economy. The country’s well-educated labor force, relatively low levels of corruption, geographic location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives all appeal to investors. Foreign direct investment inflow in 2022 as estimated by the Costa Rican Central Bank was USD 3.045 billion, or 4.45 percent of GDP, with the United States accounting for USD 2.23 billion (73 percent of total FDI). Costa Rica recorded 4.3 percent GDP growth in 2022 as it recovered from the effects of the Covid-19 pandemic.

Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. A similar transformation took place in the tourism sector, with a plethora of smaller enterprises handling an increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. Costa Rica is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness. The FTZ economy continued to expand during the pandemic, while the tourism sector did contract but is rebounding. Total 2022 tourist arrivals of 2,349,537 represent more than double the 2020 pandemic low of 1,011,912 but are still only 75% of the 2019 pre-pandemic high.

The Costa Rican investment climate is threatened by a persistent, although currently shrinking government fiscal deficit, high unemployment (Q422, 11.7%) and underemployment (9.7%), high energy costs, deterioration of basic infrastructure, and underperformance in some key areas of government service provision, notably security, health care, and education. Costa Rica is operating under a stabilizing agreement with the International Monetary Fund (IMF) and generally managed the Covid-19 crisis well. Moreover, Costa Rica’s accession in 2021 to the Organization for Co-operation and Development (OECD) has exerted a positive influence by pushing the country to address its economic weaknesses through executive decrees and legislative reforms in a process that began in 2015. The Ministry of Foreign Trade (COMEX) has protected the Free Trade Zones (FTZs) from new taxes by highlighting the benefits of the regime, promoting local supply chains, and using the FTZs as examples for other sectors of the economy. President Rodrigo Chaves, an economist and former Minister of Finance, took office in May 2022. His administration has continued to prioritize the attraction of foreign direct investment and pursued a free trade posture, signing a new trade agreement with Ecuador and launching other negotiations.

Nevertheless, Costa Rica’s political and economic leadership faces a difficult balancing act over the coming years as the country must simultaneously exercise budget discipline and respond to demands for improved government-provided infrastructure and services.

							1. Openness To, and Restrictions Upon, Foreign Investment					

### Policies Towards Foreign Direct Investment

Costa Rica actively courts FDI, placing a high priority on attracting and retaining high-quality foreign investment. The Ministry of Foreign Trade (COMEX) leads Costa Rica’s investment promotion efforts, which are executed through PROCOMER. Costa Rica has had great success over the last several decades in attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing, and the food industry. In addition, the Tourism Institute (ICT) attends to potential investors in the tourism sector. Costa Rican institutions are strong and effective guides and advocates for their client companies, prioritizing investment retention and maintaining an ongoing dialogue with investors.

### Limits on Foreign Control and Right to Private Ownership and Establishment

Costa Rica recognizes and encourages the right of foreign and domestic private entities to establish and own business enterprises and engage in most forms of remunerative activity. The exceptions are in sectors that are reserved for the state (legal monopolies – see #7 below “State Owned Enterprises, first paragraph) or that require participation of at least a certain percentage of Costa Rican citizens or residents (electrical power generation, transport services, public accounting, private security services). Costa Rica’s general prohibition of open-cast mining in contrast to the legal operation of artisanal mining cooperatives of Costa Rican citizens is a de-facto restriction against foreign-owned large-scale mining operations. Properties in the Maritime Zone (from 50 to 200 meters above the mean high-tide mark) may only be leased from the state and with residency requirements. In the areas of medical services, telecommunications, finance and insurance, state-owned entities dominate, but that does not preclude private sector competition. Costa Rica does not have an investment screening mechanism for inbound foreign investment, beyond those applied under anti-money laundering procedures. U.S. investors are not disadvantaged or singled out by any control mechanism or sector restrictions; to the contrary, U.S. investors figure prominently among the various major categories of FDI.

### Other Investment Policy Reviews

On May 25, 2021, Costa Rica officially became the 38th OECD member, which entails regular economic reporting including most recently the “OECD Economic Surveys – Costa Rica 2023” published February 2023:  https://read.oecd-ilibrary.org/economics/oecd-economic-surveys-costa-rica-2023_8e8171b0-en#page1. See also the “OECD Review of International Investment Policies in Costa Rica” published March 2020 https://www.oecd.org/investment/OECD-Review-of-international-investment-in-Costa-Rica.pdf. For the full index of OECD reports on Costa Rica, go to https://www.oecd.org/costarica/

The World Trade Organization (WTO) conducted its 2019 “Trade Policy Review” of Costa Rica in September of that year. Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals: https://www.wto.org/english/tratop_e/tpr_e/tp492_e.htm.

The United Nations Conference on Trade and Development (UNCTAD) produced in 2019 the report Overview of Economic and Trade Aspects of Fisheries and Seafood Sectors in Costa Rica:https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2583 , followed by a2020 study focused on the tuna, mahi-mahi, swordfish and coastal fish sectors.The Environmental Justice Atlas – https://ejatlas.org/country/costa-rica – highlights a number of environmental disputes involving foreign investors, some moribund and some ongoing.

### Business Facilitation

The single window website for business registration and establishment, “Ventanilla Unica de Inversion” sponsored by the trade promotion agency PROCOMER, is clear and complete for basic processes although it does not encompass all municipalities. A new company in Costa Rica must typically register with the National Registry (company and capital registry), Internal Revenue Directorate of the Finance Ministry (taxpayer registration), National Insurance Institute (INS) (basic workers’ comp), Ministry of Health (sanitary permit), Social Security Administration (CCSS) (registry as employer), and the local Municipality (business permit). Other permits may include those associated with specific business activities such as Free-Trade-Zone operation, development and build-out of properties, and marine boat operation. Legal fees may be the biggest single business start-up cost, as all firms registered to individuals must hire a lawyer for a portion of the necessary paperwork.

### Outward Investment

The Costa Rican government does not promote or incentivize outward investment, nor does it discourage or restrict domestic investors from investing abroad.

							2. Bilateral Investment and Taxation Treaties					

Costa Rica’s bilateral investment treaties (BITs) are listed in the “bilateral” tab of the Foreign Trade Ministry’s (COMEX) website (http://www.comex.go.cr/Tratados). The investment chapter of the Central America Free Trade Agreement (CAFTA-DR) includes all aspects of a BIT, thereby making a separate BIT with the United States unnecessary. United Nations Conference on Trade and Development (UNCTAD) (http://investmentpolicyhub.unctad.org/IIA/IiasByCountry#iiaInnerMenu) features a parallel list of both signed investment treaties and those entered into force.

Also, as listed on the COMEX website, Costa Rica has in-force free trade agreements (FTA) with a number of individual countries plus six groupings of countries. The multilateral free trade agreements are CAFTA-DR (United States, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua), the European Union Association Agreement with Central America, the European Free Trade Association (EFTA) free trade agreement, the free trade agreement with the Caribbean nations of CARICOM, the South Korea Central American Free Trade Agreement and the United Kingdom Association agreement. The current administration has signaled its intention to broaden trade links through additional agreements, formally requesting membership in the Pacific Alliance (with Chile, Colombia, Peru, and Mexico), and negotiating an agreement with Ecuador.

Costa Rican and U.S. tax authorities coordinate under the terms of two agreements, a U.S.-Costa Rica intergovernmental agreement titled “Agreement between the Government of the United States of America and the Government of the Republic of Costa Rica to Improve International Tax Compliance and to Implement FATCA” signed in December 2013 and entered into force (EIF) July 2019, and a Taxation Information Exchange Agreement (TIEA) entered into force September 18, 2020. Costa Rica has double-tax agreements with several jurisdictions (Spain, Germany, Mexico, UAE) and active bilateral or multilateral tax information exchange agreements with many more. Costa Rica is also a party to the OECD “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting”, with entry into force January 1, 2021 (https://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf). Likewise, Costa Rica is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting and party to that Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

Costa Rica has shown some signs of moving towards taxation of overseas passive income. As of February 14, 2023, Costa Rica is listed as a non-compliant tax jurisdiction (“grey list”) by the European Union for failure to tax passive income outside the country, raising the prospect that the Chaves administration may propose corresponding legislative reforms. In addition, the tax authority in the past several years has been pursuing collection of some categories of overseas passive income earned by Costa Rican entities, winning a recent court decision in October 2022 that several banks domiciled in Costa Rica owe income tax on overseas yields.

In accordance with Costa Rica’s international commitments to address the use of corporate tax havens, large transnational companies must declare and justify the transfer-pricing methods they are using in a manner consistent with international norms.

							3. Legal Regime					

### Transparency of the Regulatory System

Costa Rican laws, regulations, and practices are generally transparent and meant to foster competition in a manner consistent with international norms, except in the sectors controlled by a state monopoly, where competition is explicitly excluded. Rule-making and regulatory authority is housed in agencies specialized by function (telecom, financial, personal data, health, environmental) or location (municipalities, port authorities). Tax, labor, health, and safety laws, though highly bureaucratic, are not seen as unfairly interfering with foreign investment. It is common for professional associations that play a role in policing or guiding their members.

The Ministry of Economy compiled the procedures needed to do business in Costa Rica: https://tramitescr.meic.go.cr/. Accounting, legal, and regulatory procedures are transparent and consistent with international norms. The stock and bond market regulator, SUGEVAL, requires International Accounting Standards Board for public companies, while the Costa Rican College of Public Accountants (Colegio de Contadores Publicos de Costa Rica -CCPA) has adopted full International Financial Reporting Standards for non-regulated companies in Costa Rica; for more information, see the international federation of accountants IFAC: Homepage | IFAC

The government does not require companies’ environmental, social, and governance (ESG) disclosure, but to facilitate transparency and better inform investors, government entities do regularly encourage commitments to environmental and social standards (e.g., within the coffee and tourism industries) beyond or complementary to purely legal requirements.  Certifications with Responsible Business Conduct (RBC) components used by the Costa Rican private sector include an array of agricultural certifications, the B Corporation Certificate, the LEED Certification from the Green Building Council, and the ISO 26000 Social Responsibility standard.  In the banking sector, entities under the supervision of the *Superintendencia**General de**Entidades****Financieras* (Financial Regulator) must comply with corporate governance regulations such as transparency and accountability to shareholders.

Regulations must go through a public hearing process when the authorities are drafting them. Draft bills and regulations are made available for public comment through public consultation processes that vary in their details according to the public entity and procedure in question, generally giving interested parties sufficient time to respond. The standard period for public comment on technical regulations is 10 days. As appropriate, this process is underpinned by scientific or data-driven assessments. A similarly transparent process applies to proposed laws. The Legislative Assembly generally provides sufficient opportunity for supporters and opponents of a law to understand and comment on proposals. To become law, a proposal must be approved by the Assembly by two plenary votes. The signature of 10 legislators (out of 57) is sufficient after the first vote to send the bill to the Supreme Court for constitutional review within one month, although the court may take longer.

Regulations and laws, both proposed and final, for all branches of government are published digitally in the government registry, “La Gaceta”: https://www.imprentanacional.go.cr/gaceta/. The Costa Rican American Chamber of Commerce (AmCham – https://www.amcham.cr/en/ ) and other business chambers closely monitor these processes and often coordinate responses.

The government has mechanisms to ensure stakeholders follow laws and regulations. The Comptroller General’s Office conducts operational as well as financial audits and as such provides the primary oversight and enforcement mechanism within the Costa Rican government to ensure that government bodies follow administrative processes. Each government body’s internal audit office and, in many cases, the customer-service comptroller (*Contraloria**de**Servicios*) provide additional support.

Several independent avenues exist for appealing regulatory decisions, and these are frequently pursued by persons or organizations opposed to a public sector contract or regulatory decision. The avenues include the Comptroller General (*Contraloria**General de la**Republica*), the Ombudsman (*Defensor de**los****Habitantes*), the public services regulatory agency (ARESEP), and the constitutional review chamber of the Supreme Court. The State Litigator’s office (*Procuraduria**General*) is frequently a participant in its role as the government’s attorney.

Costa Rica is transparent in reporting its public finances and debt obligations, including explicit and contingent liabilities. Debt obligations are transparent; the Ministry of Finance provides updates on Central Government public debt. https://www.hacienda.go.cr/docs/PresentacionMinisterioHaciendaRevPlanFinanciamiento2022.pdf

The following chart covers contingent debt as of January 31, 2023:https://www.hacienda.go.cr/docs/DeudaContingente.pdf

The review and enforcement mechanisms described above have kept Costa Rica’s regulatory system relatively transparent and free of abuse but have also rendered the system for public sector contract approval exceptionally slow and litigious. There have been several cases in which these review bodies have overturned already-executed contracts, thereby interjecting uncertainty into the process. Bureaucratic procedures are frequently long, involved and can be discouraging to new investors.

Furthermore, Costa Rica’s product market regulations are more stringent than in any other OECD country, according to the OECD’s 2020 Product Market Regulations Indicator, leading to market inefficiencies. Find this explanation as well as a detailed review of the regulatory challenges Costa Rica faces in the September 2020 OECD report on regulatory reform:https://www.oecd.org/countries/costarica/enhancing-business-dynamism-and-consumer-welfare-in-costa-rica-with-regulatory-reform-53250d35-en.htm

### International Regulatory Considerations

While Costa Rica does consult with its neighbors on some regulations through participation in the Central American Integration System (SICA) (https://www.sica.int/breve), Costa Rica’s lawmakers and regulatory bodies habitually refer to sample regulations or legislation from OECD members and others. Costa Rica’s commitment to OECD standards as an OECD member has accentuated this traditional use of best-practices and model legislation. Costa Rica regularly notifies all draft technical regulations to the WTO Committee on Technical Barriers in Trade (TBT).

### Legal System and Judicial Independence

Costa Rica uses the civil law system. The fundamental law is the country’s political constitution of 1949, which grants the unicameral legislature a particularly strong role. Jurisprudence or case law does not constitute legal precedent but can be persuasive if used in legal proceedings, as they constitute authoritative interpretation of obscure parts of the law. For example, the lower courts and Chambers of the Supreme Court regularly cite Supreme Court precedents and such decisions are widely used in Law schools and legal texts. The civil and commercial codes govern commercial transactions. The courts are independent, and their authority is respected. The roles of public prosecutor and government attorney are distinct: the Chief Prosecuting Attorney or Attorney General (*Fiscal General*) operates a semi-autonomous department within the judicial branch while the government attorney or State Litigator (*Procuraduria**General*) works within the Ministry of Justice and Peace in the Executive branch. The primary criminal investigative body “*Organismo**de**Investigacion**Judicial*” OIJ, is a semi-autonomous department within the Judicial Branch. Judgments and awards of foreign courts and arbitration panels may be accepted and enforced in Costa Rica through the exequatur process. The Constitution specifically prohibits discriminatory treatment of foreign nationals. The Costa Rican Judicial System addresses the full range of civil, administrative, and criminal cases with a number of specialized courts. The judicial system generally upholds contracts, but caution should be exercised when making investments in sectors reserved or protected by the Constitution or by laws for public operation. Regulations and enforcement actions may be, and often are, appealed to the courts.

Costa Rica’s commercial code details all business requirements necessary to operate in Costa Rica. The laws of public administration and public finance contain most requirements for contracting with the state.

The legal process to resolve cases involving squatting on land can be especially cumbersome. Land registries are at times incomplete or even contradictory, mainly in rural and coastal areas. Buyers should retain experienced legal counsel to help them determine the necessary due diligence regarding the purchase of property.

### Laws and Regulations on Foreign Direct Investment

Costa Rican websites are useful to help navigate laws, rules, and procedures including that of the Ministry of Foreign Trade (https://www.comex.go.cr/), the export and investment promotion authority PROCOMER, http://www.procomer.com, the private non-profit investment promotion entity CINDE (http://www.cinde.org/en) and the Health Ministry, https://www.ministeriodesalud.go.cr/(product registration and import/export). In addition, the State Litigator’s office (www.pgr.go.cr,the “SCIJ” tab) compiles relevant laws.product registration and import/export). In addition, the State Litigator’s office (www.pgr.go.cr,the “SCIJ” tab) compiles relevant laws.

### Competition and Antitrust Laws

Two public institutions are responsible for consumer protection as it relates to monopolistic and anti-competitive practices. The “Commission for the Promotion of Competition” (COPROCOM), an autonomous agency housed in the Ministry of Economy, Industry and Commerce, is charged with investigating and correcting anti-competitive behavior across the economy. The Telecommunications Superintendence (SUTEL) shares that responsibility with COPROCOM in the telecommunications sector. Both agencies are charged with defense of competition, deregulation of economic activity, and consumer protection. Parties may appeal the decisions judicially. For the OECD assessment of competition law and policy in Costa Rica, see this July 2020 report: https://www.oecd.org/costarica/costarica-competition.htm

### Expropriation and Compensation

The three principal expropriating government agencies in recent years have been the Ministry of Public Works – MOPT (highway rights-of-way), the state-owned Costa Rican Electrical Institute – ICE (energy infrastructure), and the Ministry of Environment and Energy – MINAE (National Parks and protected areas). Expropriations generally conform to Costa Rica’s laws and treaty obligations.

Article 45 of Costa Rica’s constitution stipulates that private property can be expropriated without proof that it is done for public interest. The 1995 Law 7495 on expropriations further stipulates that expropriations require full and prior payment, and upon full deposit of the calculated amount the government may take possession of land despite the former owner’s dispute of the price. The law makes no distinction between foreigners and nationals. The expropriations law was subsequently amended most recently in 2015 to clarify and expedite some procedures, including those necessary to expropriate land for the construction of new roads. (For full detail go to https://PGRweb.go.cr/SCIJ. When reviewing the articles of the law go to the most recent version of each article.)

Judicial rulings in recent years have highlighted the public policy issues that must be tackled by the government to protect the status of private properties registered in the national registry, yet also located within one of Costa Rica’s 24 indigenous territories.  By law, non-indigenous individuals cannot own properties within an indigenous territory.  Over 1,000 properties have been identified to be in these circumstances, including properties belonging to a number of U.S. citizens. The Chaves administration has stated it is currently addressing the problem.

There is no discernible bias against U.S. investments, companies, or representatives during the expropriations process. Costa Rican public institutions follow the law as outlined above and generally act in a way acceptable to the affected landowners. However, when landowners and government differ significantly in their appraisal of the expropriated lands’ value, the resultant judicial processes generally take years to resolve. In addition, landowners have, on occasion, been prevented from developing land not yet formally expropriated for parks, protected areas, or indigenous reserves; the courts will eventually order the government to proceed with the expropriations, but the process can take time.

### Dispute Settlement

#### ICSID Convention and New York Convention

**Costa Rica became in 1993 a member state to the convention on International Center for Settlement of Investment Disputes (ICSID Convention). Costa Rica paid the awards resulting from unfavorable ICSID rulings, most recently in 2012 regarding private property belonging to a German national within National Park boundaries.

Costa Rica is part of the convention on the Recognition and Enforcement of Arbitral Awards (1958 New York Convention), since 1987. Consequently, within the Costa Rican legal hierarchy the Convention ranks higher than local laws although still subordinate to the constitution. Costa Rican courts recognize and enforce foreign arbitral awards, including arbitral awards issued against the government. Judgments of foreign courts are likewise recognized and enforceable under the local courts and the Supreme Court. Section 99 of the Civil Procedural Code (Law 9342) regulates the procedure to enforce foreign awards and court decisions.

#### Investor-State Dispute Settlement

**Parties to disputes between foreign investors and the government grounded in the government’s alleged actions or failure to act – termed investment disputes ‒ may resolve them administratively or through the legal system. Costa Rica is also party to several bilateral and multilateral investment treaties with binding arbitration (https://www–comex–go–cr.insuit.net/tratados/).

Under Chapter 10 of the CAFTA-DR agreement, Costa Rica is legally obligated to answer investor arbitration claims submitted under ICSID or the United Nations Commission on International Trade Law (UNCITRAL) and to accept the arbitration verdict. To date two U.S. citizen investors have made claims under the provisions of CAFTA-DR. Extensive documentation for both cases is filed on the Foreign Trade Ministry (COMEX) website: http://www.comex.go.cr/tratados/cafta-dr/, under “documentos relevantes.”

In some coastal areas of Costa Rica, there is a history of invasion and occupation of private property by squatters who are often organized and sometimes violent. Squatters have returned to the parcels of land from which they were evicted, requiring expensive and potentially dangerous security. Nevertheless, in recent years the Supreme Court has refused title to squatters on land already titled, thus removing some incentive for persistent squatters.

#### International Commercial Arbitration and Foreign Courts

**The right to solve disputes through arbitration is guaranteed in the Costa Rican Constitution. For years, the practical application was regulated by the Civil Procedural Code, which made it ineffective with no arbitration cases until 1998, the year the local arbitration law #7727 was enacted. A 2011 law on International Commercial Arbitration (Law 8937), drafted from the UNCITRAL model law (version 2006), brought Costa Rica to a dual arbitration system, with two valid laws, one law for local arbitration and one for international arbitration. Under the local act, arbitration must proceed in Spanish and only attorneys admitted to the local Bar Association may serve as arbitrators.  All cases brought before an arbitration panel, under the rules of local arbitration centers, normally reach resolution within two months of the closing arguments hearing.  Parties can withdraw their case or reach an out-of-court settlement before the arbitral tribunal delivers an award.  If the award meets the review criteria, the losing party has the option to request that the Costa Rican Supreme Court examine the award, but only on procedural matters and never on the merits. Under the local Law for International Arbitration, proceedings may take place in English and foreign attorneys can serve as arbitrators. The following arbitration centers are in operation in Costa Rica:

- Centro de Conciliacion y Arbitraje
- Costa Rican Chamber of Commerce (CCA)
- Centro de Resolución de Controversias
- Costa Rican Association of Engineers and Architects (CFIA)
- Centro Internacional de Conciliacion y Arbitraje (CICA)
- Costa Rican American Chamber of Commerce (AMCHAM)
- Centro de Arbitraje y Mediacion/Centro Iberoamericano de Arbitraje (CAM-CIAR)
- Costa Rican Bar Association.

Beyond such arbitration options, law #7727 also facilitates courts’ enforcement of conciliation agreements reached under the law. Some universities and municipalities operate “Casas de Justicia” (Justice Houses) open to the public and offering mediation and conciliation at no cost. Law #8937 empowered local arbitration centers, beginning with that pertaining to the Engineers and Architects’ Association, to implement Dispute Board regulations, as a method to address construction disputes. Dispute Boards have acquired importance lately in construction contracts; with CFIA implementing new by-laws favoring the use of Dispute Boards in such contracts.

Outcomes in local courts do not appear to favor state-owned enterprises (SOEs).  SOEs can sign arbitral agreements but must follow strict public laws to obtain the permissions necessary and follow correct procedures, otherwise the agreement could be voided. Once SOEs find themselves in arbitration, they are subject to the same standards and treatment as any other actor.

U.S. companies cite the unpredictability of outcomes as a source of rising judicial insecurity in Costa Rica. The legal system faces significant backlogs, and civil suits may take several years from start to finish. The delays are particularly acute in the collection courts which bear about 60% of the overall case load of the court system. In the tax arena, several U.S. businesses have objected to the Ministry of Finance’s aggressive stance in interpreting transfer pricing principles, compounded by what the businesses perceive as a lack of specialized judges to competently address such cases. Some U.S. firms and citizens satisfactorily resolved their cases through the courts, while others see proceedings drawn out over a decade without a final resolution. Commercial arbitration has become an increasingly common dispute resolution mechanism.

### Bankruptcy Regulations

The Costa Rican bankruptcy law, addressed in both the commercial code and the civil procedures code, is similar to corresponding U.S. law. In February 2021, Costa Rica’s National Assembly approved a comprehensive bankruptcy law #9957 “*Ley**Concursal*”, in effect since December 1, 2021. The new law eases bankruptcy processes and help companies in financial distress to move through the “administrative intervention” intended to save the companies. The previous law too often ended with otherwise viable companies ceasing operations, rather than allowing them to recover, due to a bias towards dissolution of companies in distress. As in the United States, penal law will also apply to criminal malfeasance in some bankruptcy cases.

							4. Industrial Policies					

### Investment Incentives

Four investment incentive programs operate in Costa Rica: the free trade zone system, an inward-processing regime, a duty drawback procedure, and the tourism development incentives regime. These incentives are available equally to foreign and domestic investors, and include tax holidays, training of specialized labor force, and facilitation of bureaucratic procedures. PROCOMER manages the first three programs, and companies may choose only one of the three. As of early 2023, 630 companies are in the free trade zone regime, 90 in the inward processing regime, and 10 in duty drawback.

ICT administers the tourism incentives; through early 2023, 1,141 tourism firms are declared as such with access to incentives of various types depending on the firm’s operations (e.g., hotels, rent-a-car, travel agencies, airlines, and aquatic transport). Sustainable adventure parks may opt for the free trade regime dedicated to recreational activities, conservation activities, and/or scientific research. The free trade zone regime is based on the 1990 law #7210, updated in 2010 by law #8794 and attendant regulations, and now most recently through the 2022 legislation #10234 “Law for the Strengthening of Territorial Competitiveness to Promote the Attraction of Investments Outside the Greater Metropolitan Area (GAM).” Inward processing and duty drawback derive from the General Customs Law #7557. Tourism incentives are based on the 1985 law #6990, most recently amended in 2001.

The inward-processing regime suspends duties on imported raw materials of qualifying companies and then exempts the inputs from those taxes when the finished goods are exported. The goods must be re-exported within a non-renewable period of one year. Companies within this regime may sell to the domestic market if they have registered to do so and pay applicable local taxes. The drawback procedure provides for rebates of duties or other taxes that were paid by an importer for goods subsequently incorporated into an exported good. Finally, the tourism development incentives regime provides a set of advantages, including duty exemption – local and customs taxes – for construction and equipment to tourism companies, especially hotels and marinas, which sign a tourism agreement with ICT.

Costa Rica has not established distinct incentives for under-represented investors, for example, women. Incentives for environmentally “green” investment tend towards structural or institutional facilitation rather than subsidy. Electricity tariffs, including net-metering and access tariffs for rooftop solar installation, are designed to encourage renewable energy generation and use without creating a clear subsidy of those activities. Green hydrogen production is encouraged through several executive decrees that provide import tariff exemptions for equipment and seek to establish a flexible and enabling regulatory framework for the use of national grid surpluses in the development of a green hydrogen economy in Costa Rica.

### Foreign Trade Zones/Free Ports/Trade Facilitation

Individual companies can create industrial parks that qualify for free trade zone (FTZ) status by meeting specific criteria and applying for such status with PROCOMER. Companies in FTZs receive exemption from virtually all taxes for eight years and at a reduced rate for some years to follow. Established companies may be able to renew this exemption through additional investment. In addition to the tax benefits, companies operating in FTZs enjoy simplified investment, trade, and customs procedures, which provide a convenient way to avoid Costa Rica’s burdensome business licensing process. Call centers, logistics providers, and software developers are among the companies that may benefit from FTZ status but do not physically export goods. Such service providers have become increasingly important participants in the free trade zone regime. Costa Rican authorities aretraditionally proactive in working with FTZ companies to streamline and improve law, regulation and procedures touching upon the FTZ regime. A study of the benefits of FTZ regime for the broader economy is available on PROCOMER’s website https://www.procomer.com/.

### Performance and Data Localization Requirements

Costa Rica does not impose requirements that foreign investors transfer technology or proprietary business information or purchase a certain percentage of inputs from local sources. However, the Costa Rican agencies involved in investment and export promotion do explicitly focus on categories of foreign investor who are likely to encourage technology transfer, local supply chain development, employment of local residents, and cooperation with local universities. The export promotion agency PROCOMER operates an export linkages department focused on increasing the percentage of local content inputs used by large multinational enterprises.

Costa Rica does not have excessively onerous visa, residence, work permit, or similar requirements designed to inhibit the mobility of foreign investors and their employees, although the procedures necessary to obtain residency in Costa Rica are often perceived to be long and bureaucratic. Existing immigration measures do not appear to have inhibited foreign investors’ and their employees’ mobility to the extent that they affect foreign direct investment in the country. The government is responsible for monitoring so that foreign nationals do not displace local employees in employment, and the Immigration Law and Labor Ministry regulations establish a mechanism to determine in which cases the national labor force would need protection. However, investors in the country do not generally perceive Costa Rica as unfairly mandating local employment. The Labor Ministry prepares a list of recommended and not recommended jobs to be filled by foreign nationals. Costa Rica does not have government/authority-imposed conditions on any permission to invest.

Costa Rica does not require Costa Rican data to be stored on Costa Rican soil. Under law #8968 ‒ Personal Data Protection Law ‒ and its corresponding regulation, companies must notify the Data Protection Agency (PRODHAB) of all existing databases from which personal information is sold or traded. Costa Rica does not impose measures that unduly impede companies from securing and freely transmitting customer or other business-related data. While Costa Rica in the next several years is looking to modernize its law pertaining to data privacy and cross border data transfer, Costa Rica’s vibrant digital services industry will likely ensure that the new regulations do not interfere unduly with legitimate digital services business.

							5. Protection of Property Rights					

### Real Property

The laws governing investments in land, buildings, and mortgages are generally transparent. Secured interests in both chattel and real property are recognized and enforced. Mortgage and title recording are mandatory and the vast majority of land in Costa Rica has clear title. However, the National Registry, the government entity that records property titles, has been successfully targeted on occasion with fraudulent filing, which has led in some cases to overlapping title to real property. Costa Rican law allows long-time occupants of a property belonging to someone else (i.e., squatters) to eventually take legal possession of that property if unopposed by the property owner. Potential investors in Costa Rican real estate should also be aware that the right to use traditional paths is enshrined in law and can be used to obtain court-ordered easements on land bearing private title; disputes over easements are particularly common when access to a beach is an issue.

Foreigners are subject to the same land lease and acquisition laws and regulations as Costa Ricans with the exception of concessions within the Maritime Zone (Zona Maritima Terrestre – ZMT). Almost all beachfront is public property for a distance of 200 meters from the mean high tide line, with an exception for long-established port cities and a few beaches such as Jaco. The first 50 meters from the mean high tide line is severely restricted. The next 150 meters, also owned by the state, is the Maritime Zone and can only be leased from the local municipalities or the Costa Rican Tourism Institute (ICT) for specified periods and particular uses, such as tourism installation or vacation homes. Concessions in this zone cannot be given to foreigners or foreign-owned companies.

### Intellectual Property Rights

Costa Rica’s legal structure for protecting intellectual property rights (IPR) is quite strong, but enforcement is sporadic and does not always get the attention and resources required to be effective. In the 2019 United States Trade Representative (USTR) Special 301 Report, USTR noted the substantial progress made by Costa Rica in protecting IPR. As a result, USTR has not included Costa Rica in Special 301 reports since 2019. Costa Rica was not listed in USTR’s 2022 Review of Notorious Markets for Counterfeiting and Piracy.

Costa Rica is a signatory of many major international agreements and conventions regarding intellectual property.  Building on the existent regulatory and legal framework, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) required Costa Rica to strengthen and clarify its IPR regime further, with several new IPR laws added in 2008.  Prior to that, the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) took effect in Costa Rica on January 1, 2000.  In 2002, Costa Rica ratified the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty and the WIPO Copyright Treaty.

The Intellectual Property (IP) Registry has been working to streamline the registration process, reducing backlogs, and issuing resolutions in a more efficient manner. In June 2022, the IP Registry launched the WIPO Publish platform, which allows free online consultation for trademarks and other distinctive signs, patents, utility models and industrial designs. On August 30, 2021, the U.S. Patent and Trademark Office (USPTO) and the National Registry signed a Memorandum of Understanding to encourage information sharing and capacity building.The Costa Rican government does not release official statistics on the seizure of counterfeit goods. In 2022, Costa Rica’s Economic Crimes Prosecutor investigated 50 IPR cases, up from the total of 26 cases in 2021. As in prior years, prosecutors ultimately dismissed several cases due to lack of interest, collaboration, and follow-up by the representatives of trademark rights holders.  Government authorities complained that the lack of response by trademark representatives is a recurring behavior dating back to at least 2016 and may explain the drop in IPR cases.  In 2020, the Prosecutor’s Office established a specialized cybercrime unit with the purpose of improving the country’s response toward computer-oriented crimes, including copyrights infringements.

On September 4, 2019, Costa Rican Customs issued an executive decree titled “Contact of the Representatives of Intellectual Property Rights for Enforcement Issues” establishing a formal customs recordation system for trademarks that allows customs officers to make full use of their ex officio authority to inspect and detain goods. Under the decree, customs offices have the power to include new trademark rights holders in a formal database for use by customs officials in the field. As of 2022, 182 trademarks are included in this database.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights HoldersContact at the U.S. Embassy in Costa Rica:Attention: Investment Climate StatementEconomic SectionEmbassy San Jose, Costa Rica+506 2519-2000SanJoseEcon@state.gov

							6. Financial Sector					

### Capital Markets and Portfolio Investment

The Costa Rican government’s general attitude towards foreign portfolio investment is prudently welcoming, seeking to facilitate the free flow of financial resources into the economy while minimizing the instability that might be caused by the sudden entry or exit of funds. The securities exchange (*Bolsa Nacional de**Valores*) is small and is dominated by trading in bonds. Stock trading is of limited significance and involves less than 10 of the country’s larger companies, resulting in an illiquid secondary market. There is a small secondary market in commercial paper and repurchase agreements. The Costa Rican government has in recent years explicitly welcomed foreign institutional investors purchasing significant volumes of Costa Rican dollar-denominated government debt in the local market. The securities exchange regulator (SUGEVAL) is generally perceived to be effective.

Costa Rica accepted the obligations of IMF Article VIII, agreeing not to impose restrictions on payments and transfers for current international transactions or engage in discriminatory currency arrangements, except with IMF approval. There are no controls on capital flows in or out of Costa Rica or on portfolio investment in publicly traded companies. Some capital flows are subject to a withholding tax (see section on Foreign Exchange and Remittances). Within Costa Rica, credit is largely allocated on market terms, although long-term capital is scarce. Favorable lending terms for USD-denominated loans compared to colon-denominated loans have made USD-denominated mortgage financing popular and common. Foreign investors can borrow in the local market; they are also free to borrow from abroad, although a 15% withholding tax on interest paid applies when the creditor is a non-tax resident in the country, under the reasoning that the interest payment constitutes income from a Costa Rican source. Potential overseas borrowers must also consider Costa Rica’s limitation on the deductibility of financial expenses by the debtor when the creditor is not an entity regulated in its country of origin by a body like the Costa Rican financial supervisory authority (SUGEF). In such cases, deductible interest for the current fiscal year is around 30% of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).

### Money and Banking System

Costa Rica’s financial system boasts a relatively high financial inclusion rate, (the percentage of adults over the age of 15 holding a bank account), calculated by the Central Bank through December 2022 at over 80 percent. Non-resident foreigners may open what are termed “simplified accounts” in Costa Rican financial institutions, while resident foreigners have full access to all banking services.

The banking sector is healthy and well-regulated, with a non-performing loan ratio of 2.4 percent of active loans as of December 2022 (2.7 percent in state-owned banks). The country hosts many smaller private banks, credit unions, and factoring houses, although the four state-owned banks (two commercial, one mortgage, and one workers’) are still dominant, accounting for 46 percent of banks’ total assets. Consolidated total assets of those state-owned banks were USD 30.3 billion, while combined assets of the regulated financial sector (public banks, private banks, savings-and-loans, and others) were over USD 66 billion as of December 2022.

Costa Rica’s central bank performs the functions of a central bank while also providing support to the four autonomous financial superintendencies (banking, securities, pensions and insurance) under the supervision of the national council for the supervision of the financial system (CONASSIF). The central bank developed and operates the financial system’s transaction settlement and direct transfer mechanism “SINPE” and “SINPEMobil,” through which clients transfer money to and from accounts with any other account in the financial system. The central bank’s governance structure is strong, with a significant degree of autonomy from the executive branch.

Foreign banks may establish both full operations and branch operations in the country under the supervision of the banking regulator SUGEF. The central bank has a good reputation and has had no problem maintaining sufficient correspondent relationships. Costa Rica is steadily improving its ability to ensure the efficacy of anti-money laundering and anti-terrorism finance. The Costa Rican financial sector in broad terms appears to be satisfied to date with the available correspondent banking services.

The OECD 2020 report “review of the financial system” for Costa Rica is a resource for those seeking more detail on the current state of Costa Rica’s financial system: https://www.oecd.org/countries/costarica/Costa-Rica-Review-of-Financial-System-2020.pdf .

### Foreign Exchange and Remittances

#### Foreign Exchange

**Costa Rica does not impose restrictions on expatriation of royalties or capital, except when these rights are otherwise stipulated in contractual agreements with the government of Costa Rica. However, Costa Rican sourced rents and benefits remitted overseas, including royalties, are subject to a withholding tax (see below). When such remittances are paid to a parent company or related legal entity, transfer pricing rules and certain limitations apply.

Costa Rica imposes no restrictions on receiving, holding, or transferring foreign exchange. Traders face no delays for foreign exchange, which is readily available at market clearing rates and readily transferable through the banking system. Investors can legally trade dollar bonds and other dollar instruments. Euros are increasingly available in the market. Costa Rica has a floating exchange rate regime in which the central bank is ready to intervene, if necessary, to smooth exchange rate volatility.

#### Remittance Policies

**Costa Rica does not have restrictions on remittances of funds to any foreign country; however, when the remittance constitutes a payment of income from a Costa Rican source to the non-resident, the funds remitted are subject to applicable withholding taxes that are paid to the country’s tax administration.  The default level of withholding tax is 30 percent with royalties capped at 25 percent, dividends at 15 percent, professional services at 25 percent, transportation and communication services at 8.5 percent, and reinsurance at 5.5 percent. Different withholding taxes also apply for other types of services.  By Costa Rican law, to pay dividends, firms must follow procedures that include being in business in the corresponding fiscal year and paying all applicable local taxes.  Those procedures for declaring dividends in effect put a timing restriction on them.  As exceptions to the above, withholding tax does not apply to payment of interest to multilateral and bilateral banks that promote economic and social growth, and companies located in free trade zones pay no dividend withholding tax.  Double-taxation tax treaties with Costa Rica, (see Bilateral Investment and Taxation Treaties above). lower the withholding tax on dividends and a few other income items paid by companies from those countries.

### Sovereign Wealth Funds

Costa Rica does not have a Sovereign Wealth Fund.

							7. State-Owned Enterprises					

Costa Rica’s 28 state-owned enterprises (SOEs) are commonly known by their abbreviated names. They include monopolies in petroleum-derived fuels (RECOPE), lottery (JPS), railroads (INCOFER), local production of ethanol (CNP/FANAL), water distribution (AyA), and electrical distribution (ICE, CNFL, JASEC, ESPH). SOEs have market dominance in insurance (INS), telecommunications (ICE, RACSA, JASEC, ESPH) and finance (BNCR, BCR, Banco Popular, BANHVI, INVU, INFOCOOP). They have significant market participation in parcel and mail delivery (Correos) and ports operation (INCOP and JAPDEVA). Five of those SOEs hold significant economic power, with 2022 budgeted revenues exceeding 1 percent of GDP: ICE, RECOPE, INS, BNCR, and BCR. The 2020 OECD report “Corporate Governance in Costa Rica” reports that Costa Rican SOE employment is 1.9% of total employment, somewhat below the OECD average of 2.5%. SOEs publish audited returns on their respective websites, while basic revenue and costs for each SOE are available on the General Controller’s Office (CGR) “Sistema de Planes y Presupuestos” https://www.cgr.go.cr/02-consultas/consulta-pp.html. The Costa Rican government does not hold minority stakes in private-sector commercial enterprises.

Costa Rican SOEs have not in recent decades required continuous and substantial state subsidy to survive. One of the minor SOEs, the Atlantic ports authority JAPDEVA, has received several bailouts in recent years; JAPDEVA most recently received roughly USD 10 million in the eighth extraordinary 2021 budget. Financial allocations to and earnings from SOEs may be found in the CGR “*Sistema de**Informaci**ó**n**de Planes y**Presupuestos* (SIPP)”.

U.S. investors and their advocates cite some of the following ways in which Costa Rican SOEs competing in the domestic market receive non-market-based advantages because of their status as state-owned entities.

Costa Rica is not a party to the WTO Government Procurement Agreement (GPA), although it is registered as an observer. Costa Rica is working to adhere to the OECD Guidelines on Corporate Governance for SOEs (www.oecd.org/daf/ca/oecdguidelinesoncorporategovernanceofstate-ownedenterprises.htm). For more information on Costa Rica’s SOE’s, see the OECD Accession report “Corporate Governance in Costa Rica”, dated October 2020: https://www.oecd.org/countries/costarica/corporate-governance-in-costa-rica-b313ec37-en.htm .

### Privatization Program

Costa Rica does not have a privatization program, and the markets it has opened to competition in recent decades – banking, telecommunications, insurance and Atlantic Coast container port operations – continue to have their corresponding SOEs. The Costa Rican government has proposed privatization of state bank BCR, the International Bank of Costa Rica (Bicsa), and a minority portion of the stated-owned insurance provider INS. These actions would require legislative approval. Analysts expect any such privatization efforts to occur through a transparent public bidding process, but Costa Rica has no recent precedent for such a process.

							8. Responsible Business Conduct					

Corporations in Costa Rica, particularly those in the export and tourism sectors, generally enjoy a positive reputation within the country as engines of growth and practitioners of responsible business conduct (RBC).  The Costa Rica government highlights its role in attracting high-tech companies to Costa Rica; the strong RBC culture that many of those companies cultivate has become part of their brand.  Large multinational companies commonly pursue RBC goals in line with their corporate goals and have found it beneficial to publicize RBC orientation and activities in Costa Rica.  Many smaller companies, particularly in the tourism sector, have integrated community outreach activities into their business. Both producers and consumers in Costa Rica have a general awareness of RBC.

Multinational enterprises in Costa Rica have not been associated in recent decades with widespread alleged human or labor rights violations.  The Costa Rican government maintains and enforces laws with respect to labor and employment rights, consumer protection, and environmental protection.  Costa Rica has no legal large-scale mineral extraction industry, but illegal small scale gold mining, particularly in the north of the country, is a focal point of serious environmental damage, organized crime, and social disruption.  Large scale industrial agriculture, notably the pineapple and banana industries, is also occasionally the focus of health or environmental complaints, which the government is equipped to investigate. Indigenous communities in specific areas of the country have longstanding grievances against non-indigenous encroachment on their reserves, (see the “expropriation” section above), which has led to incidents of violence.

Costa Rica encourages foreign and local enterprises to follow generally accepted RBC principles, such as the OECD Guidelines for Multinational Enterprises (MNE), and maintains a national contact point for OECD MNE guidelines within the Ministry of Foreign Trade (see https://www.comex.go.cr/punto-nacional-de-contacto/ or  http://www.oecd.org/investment/mne/ncps.htm).  *Costa Rica has been a participant since 2011 in the Montreux Document reaffirming the obligations of states regarding private military and security companies during armed conflict.*

							Additional Resources					

Department of State
                    - Country Reports on Human Rights Practices ;
                    - Trafficking in Persons Report ;
                    - Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ;
                    - U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ; and;
                    - Xinjiang Supply Chain Business Advisory 

Department of the Treasury
                    - OFAC Recent Actions

Department of Labor
                    - Findings on the Worst Forms of Child Labor Report ;
                    - List of Goods Produced by Child Labor or Forced Labor ;
                    - Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
                    - Comply Chain .

### Climate Issues

Costa Rica has a national climate strategy and a sophisticated system for monitoring natural capital, biodiversity, and ecosystem services. While the central bank compiles environmental accounts (https://www.bccr.fi.cr/en/Economic-Indicators/environmental-accounts), the ministry of environment and energy oversees policies on environmental impact assessments and emissions. As part of Costa Rica’s nationally determined contribution under the United Nations Framework Convention on Climate Change, Costa Rica targets maximum national net emissions in 2030 of 9.11 million tons of CO2. This number is consistent with the targeted trajectory of their national decarbonization plan, which seeks to achieve net-zero emissions by 2050. Within the transportation sector Costa Rica aims to adopt standards to migrate towards a zero-emission motorcycle fleet by 2025, have 8% of their fleet of small vehicles be electric, and by 2030 have 8% of the public transportation fleet fully electric. There are currently no regulatory incentives or rebates for private sector contributions to achieve these goals. Costa Rican government efforts to reach net-zero emissions are largely limited to encouraging purchase and use of electric vehicles through tax reduction. In the absence of any significant budget for climate change response, the Costa Rican government relies on the private sector and international donors to implement its ambitions to be net zero by 2050. Costa Rica supports labels or designations meant to encourage good behavior with some considerable success: the blue flag program at beaches and the Costa Rican country brand “Essential Costa Rica.” Official procurement policies do not include environmental or green growth considerations beyond those otherwise mandated by law.

							9. Corruption					

Costa Rica has laws, regulations, and penalties to combat corruption. Though the resources available to enforce those laws are limited, Costa Rica’s institutional framework is strong, such that observes generally perceive prosecuted cases as legitimate. Anti-corruption laws extend to family members of officials, contemplate conflict-of-interest in both procurement and contract award, and penalize bribery by local business executives of both local and foreign government officials. Public officials convicted of receiving bribes are subject to prison sentences up to ten years, according to the Costa Rican Criminal Code (Articles 347-360). Entrepreneurs may not deduct the costs of bribes or any other criminal activity as business expenses. In recent decades, Costa Rica saw several publicized cases of firms prosecuted under the terms of the U.S. Foreign Corrupt Practices Act.

Costa Rica ratified the Inter-American Convention against Corruption in 1997. This initiative of the OECD and the Organization of American States (OAS) obligates subscribing nations to implement criminal sanctions for corruption and implies a series of follow up actions: http://www.oas.org/juridico/english/cri.htm. Costa Rica also ratified the UN Anti-Corruption Convention in March 2007, has been a member of the Open Government Partnership (OGP) since 2012, and as of July 2017 is a party to the OECD Convention on Combatting Bribery of Foreign Public Officials.

The Costa Rican government has encouraged civil society interest in good governance, open government, and fiscal transparency, with several NGOs operating unimpeded in this space. While U.S. firms do not identify corruption as a major obstacle to doing business in Costa Rica, some have alleged corruption in the administration of public tenders and in approvals or timely processing of permits. Developers of tourism facilities periodically cite municipal-level corruption as a problem when attempting to gain a concession to build and operate in the restricted maritime zone.

For further material on anti-bribery and corruption in Costa Rica, see the 2020 OECD study: https://www.oecd.org/countries/costarica/costa-rica-has-improved-its-foreign-bribery-legislation-but-must-strengthen-enforcement-and-close-legal-loopholes.htm

Also on the OECD website, information relating to Costa Rica’s membership in the OECD anti-bribery convention: https://www.oecd.org/countries/costarica/costarica-oecdanti-briberyconvention.htm

### Resources to Report Corruption

Name:  José Armando López BaltodanoTitle:  Procurador Director, Procuraduría de la Ética Pública.Organization:  Procuraduría General de la República (PGR)Address: Avenida 2 y 6, Calle 13.  San José, Costa Rica.Telephone Number:  2243-8330, 2243-8321Email Address: armandolb@pgr.go.cr, evelynhk@pgr.go.cr

Contact at “watchdog” organization:Evelyn Villarreal F.Asociación Costa Rica ÍntegraTel:. (506) 8355 3762Email: evelyn.villarreal@cr.transparency.org

							10. Political and Security Environment					

Since 1948, Costa Rica has not experienced significant domestic political violence. There are no domestic or foreign movements likely to produce political or social instability. However, Costa Ricans occasionally follow a long tradition of blocking public roads for a few hours as a way of pressuring the government to address grievances; the traditional government response has been to react slowly, thus giving the grievances time to air. This practice on the part of peaceful protesters can cause logistical problems.

Crime increased in Costa Rica in recent years, and U.S. citizen visitors and residents are frequent victims.  While petty theft is the main problem, criminals show an increased tendency to use violence. Increased violent crime in Costa Rica is associated with the illegal drug trade.  Costa Rica experienced a record homicide rate in 2022, reaching 12.6 per 100,000 inhabitants. Please see the State Department’s Travel Advisory page for Costa Rica for the latest information: https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/costa-rica-travel-advisory.html

							11. Labor Policies and Practices					

Although the unemployment rate fell in 2022, unemployment remained a major issue for Costa Rica’s economy. Unemployment affected women and youth at higher rates. According to the National Statistics Institute (INEC), as of December 2022 the unemployment rate was 11.7 percent, or 287,000 unemployed workers. The unemployment rate among the male population was estimated at 8.7 percent and the female population at 16 percent. The unemployment rate among youth (from 15 to 24 years old) was 28.6%. Some 43.9 percent of the labor force worked in the informal sector (43.4 percent among males and 44.5 percent among females), while 89.9 percent of individuals with informal employment were self-employed and 28.5 percent received a salary. The underemployment rate decreased to 9.7 percent, down 3.3 percent compared to the previous reporting year. INEC reported that from October to December 2022, 355.000 persons in the labor force (employed and unemployed), representing 14.4 percent of the total workforce, were negatively affected by COVID-19. Roughly 97,000 workers had a reduction in salary or income associated with suspension or reduction in working hours or had to suspend their own activity or business due to the pandemic. This represented 4.5 percent of the employed population, of which 59 percent were male and 41 percent were female. Some 258,000 unemployed persons, 6 percent of the workforce, were negatively affected by the pandemic. Of those, 45 percent were men and 55 percent were women. Some 74.7 percent of unemployed persons who indicated they were affected by the pandemic, said they could not find a job due to COVID-19; 25.3 percent stated they were fired, suspended, or closed their business or activity due to the pandemic.

When analyzing occupation by economic activity, INEC reported some activities continue to suffer at higher rates from pandemic-related effects. From October to December 2022, the negative effects were higher than average for employed persons working in hotels and restaurants (10.9 percent negatively affected), communications and other services (10.1 percent negatively affected), and manufacturing (5.7 percent negatively affected).

According to the central bank of Costa Rica, strong economic performance in 2022 supported increased job creation and increased business and consumer confidence. While the creation of around 80,000 new jobs in 2022 supported a reduction in the unemployment rate, it remained above its historical level (9.9% between 2010 and 2019). Additional labor market indicators, such as underemployment and informality, also improved compared to the previous reporting year. Workers in the informal sector were not covered by wage, hour, and occupational health and safety laws and inspections, nor were they enrolled in the public health system.

The Costa Rican labor force has high educational standards. The country boasts an extensive network of publicly funded schools and universities, while Costa Rica’s national vocational training institute (INA) and private sector groups provide technical and vocational training.

The growth of Costa Rica’s service, tourism, and technology sectors has stimulated demand for English-language speakers. The limited pool of workers with English and technical skills constrains the ability of foreign and local businesses to expand operations. The University of Costa Rica noted in 2021 a gap between English language proficiency between public and private schools following an analysis of language proficiency assessment results. In 2022, the Comptroller General of the Republic conducted an audit at the Ministry of Public Education on the efficiency and effectiveness of the secondary technical education that confirmed the language proficiency deficiencies.

The government implemented a controlled entry of foreign migrant workers (Migration Traceability System, SITLAM) through the northern and southern borders. In a joint effort, the Costa Rican Social Security System (CCSS), Ministry of Labor and Social Security (MTSS), and the Costa Rican Coffee Institute implemented a program to enroll coffee workers in the health insurance system, while considering turnover, migratory conditions, and harvest seasons and protecting workers’ families. Each coffee producer must send a list of its coffee workers to the nearest Costa Rican Coffee Institute office to implement the benefit.

The government does not track shortages or surpluses of specialized labor skills. Foreign nationals have the same rights, duties, and benefits as local employees. The government is responsible for ensuring that foreign nationals do not displace local employees. Labor law provisions apply equally across the nation, both within and outside free trade zones. The Immigration Law and the Labor Ministry’s regulations establish a mechanism to determine in which cases the national labor force would need protection. The Labor Ministry prepares a list of recommended and not-recommended jobs to be filled by foreign nationals.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions. The law does not differentiate between layoffs and dismissal without cause. There are concepts established in the law related to unemployment and dismissals such as the mandatory savings plan (Labor Capitalization Fund or**Fondo de Capitalizacion Laboral, FCL), the notice of termination of employment (preaviso), and severance pay (cesantia). The FCL, which employers fund with contributions, functions as an unemployment insurance; the employee can withdraw the savings every five years if the employee has worked without interruption for the same employer. Costa Rican labor law requires that employees released without cause receive full severance pay, which can amount to close to a full year’s pay in some cases. Although there is no insurance for workers laid off for economic reasons, employers may voluntarily establish an unemployment fund.

In response to government-ordered temporary business closures due to the Covid-19 pandemic, in 2020 the Labor Ministry implemented the temporary suspension of employment contracts, a procedure established in the Labor Code, which grants employers the option of stopping the payment of wages temporarily during an emergency. Executive orders (Nos. 42522-MTSS and 42248-MTSS) established the procedures for employers to request the temporary suspension of labor contracts with their employees. Employers requested the suspension of contracts through the Labor Inspectorate of the Labor Ministry. In 2022, the Labor Ministry continued implementing the temporary suspension of employment contracts but only in sectors most adversely affected by the COVID-19 pandemic due to the restrictions and closures imposed by authorities.

The National Assembly approved a law (Law 9832) in 2020 to reduce working hours during the pandemic. Under the law, if income in a company decreases by 20 percent, compared to the income during the same month in 2019 or compared to the income of the previous three months, the employer can reduce the employees’ hours and salary up to 50 percent. If the decrease in income is greater than 60 percent, the reduction in salary can reach 75 percent. Legislators initially authorized this reduction for three months, and employers could request extensions for two equal terms (9 months) and then to five terms (15 months) as the emergency continued. In May 2021, the National Assembly approved an extension (Legislative Order No. 9982) in the tourism sector that authorized a reduction for four equal terms with previous approval from the Labor Ministry.

In 2020, the National Assembly authorized employees whose labor contracts were terminated or suspended or whose salaries were reduced during the state of emergency declaration to withdraw their contributions to the FCL plan (Law 9839).

Costa Rican labor law and practice allows some flexibility in alternate schedules; nevertheless, it is based on a 48-hour week made up of eight-hour days. Workers are entitled to one day of rest after six consecutive days of work. The labor code stipulates that the workday may not exceed 12 hours. Use of temporary or contract workers for jobs that are not temporary in nature to lower labor costs and avoid payroll taxes does occur, particularly in construction and in agricultural activities dedicated to domestic (rather than export) markets. No labor laws are waived to attract or retain investment. All labor laws apply in all Costa Rican territory, including free trade zones. The government has been exploring ways to introduce more flexibility into the labor code to facilitate flexible work schedules.

Since 2019, Costa Rica has a teleworking law that promotes, regulates, and implements virtual work both in the private and public sectors (Law 9738). The law allows a voluntary agreement between employer and employee to carry out teleworking. This agreement can be signed at the beginning of the employment relationship or later.

Costa Rican law guarantees the right of workers to join labor unions of their choosing without prior authorization. Unions operate independently of government control and may form federations and confederations and affiliate internationally. Most unions are in the public sector, including in state-run enterprises. Collective bargaining agreements are common in the public sector. “Permanent committees of employees” informally represent employees in some private sector enterprises and directly negotiate with employers; the outcomes of these negotiations are expressed in “direct agreements,” which have a legal status. Based on 2021 statistics, 15 percent of formal sector employees were union members. The Labor Ministry reported that during 2022 there were 118 collective bargaining agreements, including 32 in the private sector. In 2022, the Ministry reported that collective bargaining agreements covered 10.1 percent of the working population, 53.4 percent within public sector entities and 0.9 percent within the private sector. The Ministry reported a total of 41 “direct agreements” mainly in the agriculture sector during 2022, as compared to 49 in 2021.

In the private sector, many Costa Rican workers join “solidarity associations,” through which employers provide easy access to saving plans, low-interest loans, health clinics, recreation centers, and other benefits. A 2011 law solidified that status by giving solidarity associations constitutional recognition comparable to that afforded labor unions. Solidarity associations and labor unions coexist at some workplaces, primarily in the public sector. Business groups claim that worker participation in permanent committees and/or solidarity associations provides for better labor relations compared to firms with workers represented only by unions. However, some labor unions allege private businesses use permanent committees and solidarity associations to hinder union organization while permanent workers’ committees displace labor unions on collective bargaining issues in contravention of internationally recognized labor rights.

The Ministry of Labor has a formal dispute-resolution body and engages in dispute-resolution when necessary; labor disputes may also be resolved through the judicial process. The Ministry of Labor’s regulations establish that conciliation is the mechanism to solve individual labor disputes, as defined in the Alternative Dispute Resolution (ADR) Law (No. 7727, dated 9 December 1997). The Labor Code and ADR Law establish the following mechanisms: dialogue, negotiation, mediation, conciliation, and arbitration. The Labor Law promotes alternative dispute resolution in judicial, administrative, and private proceedings. The law establishes three specific mechanisms: arbitration to resolve individual or collective labor disputes (including a Labor Ministry’s arbitrator roster list); conciliation in socio-economic collective disputes (introducing private conciliation processes); and arbitration in socio-economic collective disputes (with a neutral arbitrator or a panel of arbitrators issuing a decision). The Labor Ministry must authorize all labor conciliation and arbitration centers. The Labor Ministry also participates as mediator in collective conflicts related to strikes, facilitating and promoting dialogue among interested parties. The law provides for protection from dismissal for union organizers and members and requires employers found guilty of anti-union discrimination to reinstate workers fired for union activities.

The law provides for the right of workers to conduct strikes, but it prohibits strikes in public services considered essential (police, hospitals, and ports). Strikes affecting the private sector are rare and do not pose a risk for investment.

Child and adolescent labor is uncommon in Costa Rica, and it occurs mainly in the informal agricultural sector.  In 2020, the government published the results of a child labor risk identification model and a strategy to design preventive measures at local level. In 2022, the government implemented a project for the prevention of child labor in the province of Limón. The government also implemented the Houses of Joy (“Casas de la Alegría”) during the coffee harvest season 2022-2023. These are daycare centers for children of workers in different coffee regions of the country, mainly in the Brunca, Los Santos, and Western Valley regions. These centers operate under the supervision of the National Administration of Education, Nutrition, and Comprehensive Care Centers (CEN-CINAI).

Chapter 16 of the U.S.-Central American Free Trade Agreement obliges Costa Rica to enforce laws that defend core international labor standards. The government, organized labor, employer organizations, and the International Labor Organization signed a memorandum of understanding to launch a Decent Work Program for the period 2019-2023, which aims to improve labor conditions and facilitate employability for vulnerable groups through government-labor-business tripartite dialogue.

On March 8, 2022, the government enacted a public employment law (Law 10.159) to standardize wages and benefits for positions with equal responsibilities in the public sector. The law entered into force on March 10, 2023.

Employee and employer contributions to Costa Rica’s social security system (CCSS) are mandatory. Employees and employers who have failed to pay into the CCSS pension and health insurance system must make back-payments covering up to 10 years of missed payments before they can enroll in the system. In May 2022 the government signed a law authorizing a one-time forgiveness of CCSS debts (Law 10.232) for independent employees and employers to encourage their enrollment. Independent employees and employers who had previously been dissuaded by high back payment requirements from enrolling in the CCSS pension and health insurance system can now contribute, giving additional sustainability to the CCSS pension and healthcare system. At the close of the reporting period a parallel bill was under consideration in the National Assembly, which would reduce from 10 to four years the term for which independent workers would be responsible for making back payments to the CCSS.

On June 3, 2022, the Law to combat employment discrimination against pregnant women (Law N° 10211) entered into force. This law reforms Articles 94, 94 bis, 95, 96, 97 and 100 of the Labor Code.

Bill No. 21.182, which proposes allowing a compressed workweek with extended shifts of 12 hours per day for four days per week, with three days off, was under consideration in the National Assembly at the end of the reporting period.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

The U.S. International Development Finance Corporation (DFC) offers financing (equity investments, loans and guarantees) as well as political risk insurance and technical assistance.  DFC financial tools in Costa Rica are covered under the bilateral “Investment Guarantees Agreement” signed in 1968 and entered into force in 1969.In Costa Rica, DFC’s portfolio exposure in early 2023 totaled approximately $296 million across 6 projects, mostly in the energy and financial services sectors. Costa Rica is a member of the Multilateral Investment Guarantee Agency, a member of the World Bank group.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics