High social charges, excessive regulations for businesses and the high price of labor are factors that prevent Costa Rica's economy from reaching its growth potential.
In Costa Rica, establishing a personally owned company without employees is up to three times more expensive than what it can cost in a country that belongs to the Organization for Economic Cooperation and Development (OECD).
Scheduling medical checkups for the staff, preparing the housing modules to maintain social distance and adapting the logistics of transporting people are challenges that the sugar mills will face during the 2020-2021 harvest.
The sugar cane harvest that is about to begin represents a source of employment for thousands of people in the region and in this context of the propagation of covid-19, the companies will have to face multiple challenges to get the harvest going.
Discounts and offers, increase in the price level generally and the rise in operating costs due to new health and safety protocols are the main threats to the profitability of companies in this new commercial reality.
Given this context of economic and health crisis, which derives from the outbreak of covid-19 at the global level, Ariel Baños, a specialist in price management and founder of Fijaciondeprecios.com, explains what are the main threats that could affect the profitability levels of companies, and details some strategies that could be applied to mitigate the adverse effects.
Costa Rican businessmen are opposed to the bill that gives Icafé the authority to impose requirements and controls on the processes of supplying the raw material necessary for grain production.
In the current period, the Legislative Assembly plans to discuss bill 21.163, which aims to transform the powers of the Costa Rican Coffee Institute (Icafé), but the business sector anticipates that the proposed modifications will lead to a rise in the prices of the product.
The Mexican Volaris announced that so far, they do not plan to execute any growth plan in Costa Rica, because operating costs in the country will rise considerably in 2020.
Managers of the low-cost airline said that the increase in fares to Juan Santamaria airport scheduled for next year will represent a 59% increase in the operation cost of the company in the country.
Through the implementation of data mining and machine learning techniques, companies can improve their efficiency and optimize their production processes.
EDITORIAL
Analyzing large volumes of data to make decisions that result in better results for a company applies not only to the commercial and sales field, but also to other areas of the same or even more sensitive companies: the production process.
In a competitive scenario for lower costs and higher productivity, devaluation against the Lempira Dollar in Honduras and the Cordoba Dollar in Nicaragua is a factor that could help these economies stay competitive.
In the last five years, the exchange rate in Honduras increased by 17%, from 21.06 Lempiras per U.S. dollar in June 2014 to 24.67 in the same month in 2019.
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.
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%).
In recent years, the sector in Guatemala has lost nearly 30,000 jobs, because the high costs resulting from having one of the highest minimum wages in the region, makes it more profitable only to export raw materials, rather than making them in the country.
Vestex figures show that in recent years several jobs have been lost in the sector, given that between 2006 and 2018 the industry lost a considerable number of jobs, going from 82,109 to 53,636 places, equivalent to a 35% decrease.
The rise in fuel prices in recent years, together with the depreciation of the local currency has caused production costs to rise for domestic industry.
Between September 2015 and the same month in 2018, the average price of a barrel of imported fuel in the country went up from $54.9 to $83.7, which is equivalent to an increase of 52% in the last three years.
In Costa Rica, the private sector is recommending that the Alvarado administration implement effective measures to reactivate the national economy and a plan to recover the country's competitiveness.
Entrepreneurs are not very optimistic about the development of their businesses in the coming months, since when comparing the business confidence indicator of today (6.2) with that of a year ago (6.4) it can be seen that it is at the same level as twelve months ago.
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.
In Costa Rica, twelve farms are now using experimental technology to reduce the cost of weed control from approximately $250 per hectare to $50.
Through the use of small tractors or modified motorcycles which have arms attached to them to perform fumigation, atomization, weed control and fertilization tasks at an early stage, Costa Rica is managing to reduce labor costs in coffee plantations.For example, "... it is estimated that the time it takes to atomize one hectare, for example, can be reduced from the current day and a half to barely an hour."
The Supreme Court has ordered the cost of giving bonuses to employees of the state run monopolistic distributor to be incorporated into fuel prices.
EDITORIAL
The resulting increase in fuel prices forces the country's economy to directly pay for the privileges enjoyed by some public officials, aggravating a situation in the private productive sector which must find new ways of staying competitive in a local context which is becoming increasingly adverse, with an unfavorable exchange rate for the export sector and rising production costs.
While in Nicaragua and El Salvador the minimum monthly cost of farm labor is just over $100, in Guatemala it is $345 and in Costa Rica it is over $460.
In a region where agricultural production is relatively the same in most countries, production costs are very different, resulting in very different levels of productivity that ultimately benefit some more than others.
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