Manufacturing and its Different Realities

High operating costs and the contraction of internal consumption are some of the reasons why in Costa Rica manufacturing companies under definitive regime report a decrease in their production, a situation that contrasts with the dynamism of companies in free trade zones.

Monday, July 8, 2019

The latest report on economic activity in the country, compiled by the Central Bank of Costa Rica explains that manufacturing grew 2.3% mainly because the free zone companies maintained a high growth (10.8%), which more than compensated for the decrease in production of the definitive regime (-2.5%).

The document specifies that the greater external demand for medical supplies and food products boosted the production of free zone companies, while the negative growth in the final regime was affected by the lower production of paper, iron and plastic packaging products, which is consistent with lower banana exports and the fall in construction.

You may be interested in "Changes in Costa Rican Exports

Pedro Morales, economic and policy advisor to the Chamber of Industries of Costa Rica, explained to that "... local manufacturing faces severe problems of loss of competitiveness because of high production costs. Factors such as the price of electricity, additional security costs and higher input prices impact the cost structure."

Morales added that "... For the industrial sector, mainly medium and small enterprises, it is increasingly difficult to invest in innovation and production processes because the country has structural problems that it cannot correct."

The different realities experienced by companies are being recorded since time ago, since in January it was reported that the rise in Costa Rican exports during 2018 was mainly explained by the performance of 187 companies in the free trade zone, contrasting with the almost zero growth reported by companies that export under the traditional scheme.

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More on this topic

The Two Sides of the Industrial Sector

October 2019

While a group of manufacturing companies decided to reduce their operations in Costa Rica, arguing that local production costs are high, another group of companies in the sector decided to increase their investments.

According to the most recent official data, during August 2019 the growth of economic activity in the manufacturing sector was 2.5%, explained by increased external demand for products from special regimes companies, particularly medical implements and steel products such as bars and sheets. This contrasts with the decline in manufacturing activities for the domestic market. See report of the Central Bank of Costa Rica.

Costa Rica: Exports Stagnating

April 2019

During the first three months of the year, sales of Costa Rican goods abroad totaled $2.757 million, just 0.5% above the $2.744 million reported as of March 2018.

The most updated data of the Foreign Trade Promoter (Procomer) specify that from January to March of this year the exports of companies in free trade zones registered a 12% year-on-year increase, and in the case of foreign sales of products in final regime fell 9%.

Exporters: Two Sides of One Coin

January 2019

The increase in Costa Rican exports during 2018 was mainly due to the performance of the 187 companies in the free zone, in contrast to the almost zero growth reported by companies exporting under the traditional scheme.

Figures from the Foreign Trade Promoter of Costa Rica (Procomer) detail that last year Costa Rica's exports totaled $11.312 million, 6% more than that recorded in 2017.

Costa Rica: Industrial and Export Figures

May 2016

Industry says that the 7% increase in industrial exports in the first quarter of the year corresponds to free zones, while foreign sales by companies outside of the regime fell by 0.3%.

The industrial association is still blaming the poor results on the loss of competitiveness caused by the exchange rate differential and high production costs.