In 2015 331 active companies were registered, of which 52% are devoted to services, 45% to manufacturing and the remaining 2% to the food industry.
From the executive summary of the study by PROCOMER"Balance of Free Zones: Net profit regime for Costa Rica 2011-2015":
1. Net National Product (NNP) for the operation of the Free Trade Zone System (FTZ) in 2015 reached a value of $3.179 billion, reflecting a growth of 5% compared with 2014.The NNP grew faster than the economy, which last year showed dynamism of 3.7%.Firms in the service sector were the largest contributor to this NNP, with an average share of 47%.
The formal closure of 15 companies in free zones has been reported from October 2015 to date and sixty other users have already suspended their operations.
The problems facing the free zone regime have not stopped increasing since the Emergent Law for the Conservation of Employment came into force, which eliminates tax exemptions which used to benefit companies operating under the free zone regime.
The business sector is demanding that the government take action to minimize the impact of the expiry at the end of the year of tax incentives granted to foreign firms in free zones.
About 1,300 companies enjoy the benefits granted by the World Trade Organization, which expire on December 31 this year. Two companies have already moved their operations to other countries, according to the Ministry of Economy of Guatemala.
An initiative from the panamanian private sector seeks to simplify the law, providing investment incentives for a period of not less than 10 years and expediting the approval of operating licenses.
Other proposals covered in this law reform include the creation of the National Council of Free Zones, the aim of which is to be the sole supervisor of the sector.
New investments in the sector are pending the approval of El Salvador's new tax-free zone law.
According to the Salvadoran chamber of textile manufacturers (CAMTEX in Spanish), the reforms being considered by the government comply with all the demands made by the World Trade Organization (WTO).
"However, CAMTEX director, Patricia Figueroa, comments that until the reforms are finally approved by congress the investments will not get the green light," reports Laprensagrafica.com.
In Costa Rica, pressure from employers to maintain tax exemptions in free zones is increasing.
According to an article in Elfinancierocr.com at a meeting of a group of businessmen which included the main force behind the increase in taxes in the free zones, the former presidential candidate Otton Solis, there were no positive results, and the same outcome was seen at a meeting held with the full bench of the Citizen Action Party, of which Solis is the leader.
If a reform of the law is approved, tax exemptions enjoyed by members of the scheme would be limited.
Although the purpose of the law reform is to modernize the free zones scheme and meet the requirements established by the World Trade Organization, companies currently operating under the scheme would be affected.
One of the proposed changes is the elimination of unlimited tax exemptions based on export performance, which up until now has applied to all companies in free zones.
The Foreign Trade Promoter has revealed in a study the benefits that free trade zones contribute to the country, including the 58 thousand jobs that pay 60% above the average private sector salary.
From a press release by PROCOMER:
A study by PROCOMER reveals the benefits of free zones in Costa Rica:
- Companies under this regime have become a source of employment for 58,000 Costa Ricans whose wages are 60% higher (1.6 times) than the average national wage in the private sector.
Modifications to the Costa Rica Free Zone and Active Improvement Regime include 52 procedures that can be performed online.
Among the steps that can be done online is the facility for businesses to apply for entry into the free zone regime, and changing the level of investment as well as the minimum level of employment.
Procomer General Manager, Jorge Sequeira, said the procedure simplifications are aimed at attracting more foreign investment into the country.
There is a growing demand for textiles and clothes manufacturing, but a new Law on Free Zones is needed in order to bring fresh investments to this sector.
The World Trade Organization (WTO) has determined, after two extensions, the country should, in 2015, replace the law that has been in force since 1998, which grants tax benefits such as a total and permanent exemption from taxes, among others.
A change in the incentives for foreign investment is needed in order to remain competitive in respect to other countries in the region.
The modernization of the law on free zones, which countries like Costa Rica reshaped in 2005, for the purpose of improving incentives to attract foreign companies is still in process in El Salvador.
The discussion to reform the law goes back to earlier this year, when the private sector, represented mainly by the textile sector, which accounts for 75% of companies operating under the free zone regime, began reviewing the law with the government .
Government and private company representatives have achieved an 80% consensus on the new draft law on Free Zones.
So says the executive director of the Chamber of the Textiles, Clothing and Free Zones (CAMTEX), Patricia Figueroa, without providing specific details on the proposals.
An article in Laprensagrafica.com quotes the executive as saying "However, both the government and the private sector have agreed that the new incentives to the sector are linked to the investment that companies make in social responsibility projects (CSR),"
If proposed reforms are approved, the country should find it easier to attract foreign investment.
The reform to the Free Trade Zone law is expected to be approved by the end of the year, stated congressman Mariano Rayo.
"This initiative seeks to create conditions favorable to encouraging investment. 'The export sector has been participating alongside other organizations in dialogue sessions with congress to develop this innovative and future looking proposal,' commented the director of the Guatemalan Exporters Association (AGEXPORT), Fanny D. Estrada", reports Sigloxxi.com.
Three points exist that could complicate the approval of the Free Port law in the Costa Rican Congress.
Politicization of the benefited companies, creation of a fiscal paradise and transferring the favorable impact of investment to less developed areas are points doubted by several congressmen.
Journalist Rodolfo González writes in El Financiero's website: