Costa Rica: Obstacles to Value Added and Innovation

The food industry reports monopolies in commodities like liquefied gas, high tariffs on imports and over-regulation.

Thursday, February 24, 2011

The Costa Rican Chamber of Food Industry maintains strong opposition to the coming into effect of the Free Trade Agreement with China and asked the members of the Legislature to reject the signing of this and other trade agreements, until the country has solved a large number of structural weaknesses which hinder the development of competitiveness and innovation of Costa Rican companies.

Marco Cercone, President of CACI, says it is outrageous to talk about opening the market to the Asian giant when there are so many obstacles to value-added products and innovation.

"We currently have monopoly suppliers of raw materials, guarded by special laws and tariff protection above 45%. Recently, the Liga Agrícola Industrial del Azúcar (LAICA) applied a price increase of more than 22% to a significant group of industries using this commodity, which makes competitiveness impossible, especially for the small and medium industries. Under this type of internal realities, it is impossible to be competitive across the world, since the imported product will be more attractive to consumers," stated Cercone.

Also, the Chamber has requested the removal of a number of import taxes or tariffs on a list of important materials, of which the vast majority are not even produced in the region, not allowing the food industry to innovate and improve their formulas, as restrictive tariffs do not allow improvement in the quality and cost of inventories, an important factor for international competitiveness.

Another problem relates to the monopoly of liquefied gas, which despite being a major source of energy, monopolistic practices create serious supply problems, due to limited storage capacity.

According to Cercone, the Executive Branch has shown willingness to move forward on these issues; however, decisions should be made faster because competition from Chinese products will arrive soon.

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