Costa Rica Business
Costa Rica Business Sense |
It is important to keep in mind that running a business in Costa Rica is not like managing a business in the United States because of unusual labor laws, the Costa Rican work ethic and the Costa Rican way of doing business. In order for a foreigner to own a business, a Costa Rican corporation or Sociedad Anónima must be formed.
If you do choose to establish your own business, keep in mind that you can be limited to managerial or supervisory duties and will have to hire Costa Ricans to do the bulk of everyday work. We also recommend that you do a thorough feasibility study. Spend at least a few months thoroughly analyzing its potential. Don’t assume that what works in the U.S. will work in Costa Rica.
Check out restrictions and the tax situation. And most important, choose a business in which you have a vast prior experience. It’s much more difficult to familiarize yourself with a new type of business in a foreign country. Remember a trustworthy partner or manager can mean the difference in success and failure. Make sure you choose a partner with local experience. Don’t trust anyone until you know him or her and have seen them perform in the work place.
You will be doomed to failure if you intend to be an absentee owner. We know of someone who founded an English book distribution business which initially did very well.
However, they moved back to the States and put a couple of employees in charge and everything eventually fell apart: sales began to lag, money went uncollected, checks began to bounce, expenses were unaccounted for and incompetent salesmen were hired. Their potentially successful business just couldn’t be run from abroad. You have to stay on top of your business affairs. At times it is hard to find reliable labor and the bureaucracy can be stifling. If you have a business with employees, be aware of your duties and responsibilities as an employer. To avoid problems, know what benefits you need to pay in addition to salary to avoid problems. Remember the more employees you have, the more headaches.
In case things get rough, be sure you have enough money in reserve in case of an emergency. You should have an ample reserve of capital to fall back on during the initial stage of your business.
Don’t count on obtaining financing in Costa Rica. The interest rates are exorbitant. Newcomers should learn not just the language but also the rules of the game.
Talk to people, especially the “oldtimers,” who have been successful in business and learn from them. Profit from their mistakes, experiences and wisdom. Don’t rush into anything that seems too good to be true. Trust your intuition and gut feeling at times. However, the best strategy and rule of thumb is to, “Test before you invest.” Newcomers find themselves seduced by the country’s beauty and friendly people and are often lured into business and investment opportunities that seem to good to be true, and often are.
When it comes to making money in Costa Rica, it has been said, “The best way to leave Costa Rica with a million dollars is to bring two.” In the case of some foreigners this statement is true. During the time we have lived in Costa Rica, we have seen many foreigners succeed and fail in business ventures. About three in ten foreigners succeed in business in Costa Rica. There are few success stories and a lot of failures, in areas as diverse as bars, restaurants, car-painting shops, language schools, real estate, tourism, bed & breakfasts to name a few. People have impossible dreams about what business will be like in Costa Rica. It is a gigantic mistake to assume that success comes easy in Costa Rica. Initially starting any business usually takes more time and more money. Also many unforseen problems are surely to arise.
If you decide to purchase an existing business make sure that it is not over priced. Try to find out the owner’s real motives for selling it. Make sure you aren’t buying a “pink elephant.” Ask to see the books and talk to clients if you can. To ferret out a good deal, look for someone who is desperate to sell their business. Check the newspapers and ask everyone you know if they know of someone selling a business. Finally, make sure there aren’t law suits, debts, unpaid creditors or liens against the business.
There are some benefits to investing in certain businesses in Costa Rica. As we mention in Chapter 4, you can obtain Costa Rican Residency by investing in tourism or a reforestation project. Also, part of your profits can be sheltered in your corporation.
After reading the above, if you still have questions or are confused, we advise you to consult a knowledgeable Costa Rican attorney for further information. If you plan to invest or do business in a Spanish-speaking country you should definitely purchase Wiley’s English-Spanish Dictionary, Barron’s Talking Business in Spanish, or Passport Books Just Enough Business Spanish. All of these guides contain hundreds of useful business terms and phrases.
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