Production Costs and the Future of Investments

The high energy tariffs paid in Costa Rica compared to other countries in the region and the effects of the monopoly that exists in electricity generation are threats to the local economy and future investments.

Tuesday, November 12, 2019

The alarms about production costs in the country went off weeks ago, after Vicesa, a company dedicated to the manufacture of glass products, announced in mid-October the dismissal of 254 employees working at the Cartago plant. The company reported that it made the decision because of the fall in sales and the slowdown of the local economy.

The most compelling reason for Vicesa, a company that also has industrial operations in Guatemala, was that in Costa Rica it pays 47% more for electricity, compared to what it pays for electricity at its Guatemalan plant.

You may be interested in "Costa Rica: Electric Rate Reduction Announced"

Some businessmen believe that the monopoly of electricity generation, maintained by the Instituto Costarricense de Electricidad, is an obstacle to improving the prices currently paid.

Rolando Charpantier, manager of Vicesa, told Elobservadorcr.com that "... There comes a time when you can't stand up to state monopolies. According to my calculations, operating in the country meant paying 47% more expensive electricity. The situation is repeated in the case of the bunker, whose cost is 16% higher."

The article adds that "... The loss of competitiveness was ratified by the director of the Coalition of Initiatives for Development (Cinde), Jorge Sequeira, and the person in charge of the Special Economic Zone of Cartago, Silvia Hidalgo. Both agreed that the country offers bonuses such as the quality of human resources. But the cost of energy discourages the arrival of new companies and more investment from organizations already installed."

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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.

The Worries That Keep Businessmen Awake At Night

February 2018

The high cost of energy and the fiscal deficit are two of the problems that worry companies in Costa Rica, who also face an uncertain political scenario, a few weeks to go before a second round of elections.

With a month and a half to go before a second round of elections, Costa Rican businessmen highlighted a difficult year in terms of job creation and attraction of new investments.

More Costa Rican Investment in Nicaragua

September 2014

Investments by Costa Rican companies in their neighboring country went from $2.43 million in 2010 to $67.7 million in 2013.

Installation of production facilities, maquila subcontracts or transfer of part of the production process are part of the investment models that Costa Rican businessmen are utilizing in order to minimize the negative effects of the high production costs prevalent in Costa Rica and to stay competitive at the level international.

Reduced Electricity Bills for Large Consumers

October 2013

Overwhelmed by the growing impact of energy costs, large electricity consumers in Costa Rica are asking for a reduction in their electricity rates of between 10.7% and 38.6%.

From a press release by the Regulatory Authority for Public Services (Aresep):

The Costa Rican Association of Large Energy Consumers (ACOGRACE) has requested a rebate for electricity rates in the business sector.

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