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Costa Rica Business Guide

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Costa Rica Business
& Guide to VIP Business Services

Welcome to the new business section of 1 Costa Rica Link. We wish to bring to the professional businessman the information necessary to contact and locate business services in Costa Rica, primarily in San Jose. In a short time, we will be addressing these common business questions and needs, and adding to the list:

Business Opportunities
Business Directory - Commercial, Industrial, Retail
Costa Rican Currency
Processes
Business Travel Information
business hotels
Business conference centers
     Large Facilities - Hotel Herradura Golf Resort and Conference Center
Professional, Certified Translation / Interpretation Services
Business taxes
Business consultation
General Banking Information
Local & International Banks
Receiving Money / Bank Transfers from Abroad
Business Internet Services
Legal Services
Business Attorneys in Costa Rica
Costa Rica Legal Advisor
Business Real Estate - Commercial, Industrial, Development Property / Land, Retail



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.



Starting a Business in Costa Rica

Of a total 115 countries, Costa Rica came in first in Latin America and ninth in the world with respect to nations offering greatest commercial freedom and protection for private business, according to “Freedom and Development,” a Chilean research institute.

As a foreigner, you can invest in Costa Rica and even start your own business with only some restrictions. If you plan to go into business here it is very important to be aware of the local consumer market in order to succeed. Most of the country’s purchasing power is located in the Central Valley. A total of 75% of the country’s population reside in the central provinces of San José, Alajuela, Heredia and Cartago. Around 60% of the population is less than 30 years old. Intelligent business people will try to meet the needs of this group. You may also think about targeting tourists and upper-class Costa Ricans. There is a wealth of opportunites available in tourist-related businesses. Upper-class ticos have a large disposable income and the greatest purchasing power. They don’t mind spending a little more on good quality products. Just look at their expensive designer clothing like Tommy Hilfiger, their expensive imported automobiles and many palatial homes.

The majority of the country’s middle-class consumer’s values are now more akin to their U.S. counterparts. You can see this starting to take hold with a number of shopping malls being built around the Central Valley and the popularity of stores like Radio Shack and megawarehouses, like PriceSmart and Hipermás. Middle and upper lower class Costa Ricans seem to want all of the goodies so much that sales of cellular telephones have temporarily exceeded the availability of available phone lines.

One group to target is the lucrative foreign residents market. There are around 50,000 full-time foreigners living in Costa Rica. All you have to do is look for a product to fill their needs. Most yearn for some hard -to-find-products from home and would rather buy them in Costa Rica than go to the U.S. to shop.

Costa Rica is ripe for innovative foreigners willing to take a risk and start businesses that have not previously existed. Start-up costs for small businesses are less than in the U.S. or Canada. Many of the same types of businesses which have been successful in the U.S. and Canada will work if researched correctly. There is definitely a need for these types of businesses. You just have to do your homework and explore the market. Be aware that not everything that works in the U.S. will work here. Also you may have to adapt your idea because of the vagaries of the local market and different purchasing power. Don’t get any grandiose ideas since the country has only around 4 million people. You cannot expect to market products on a large scale as in the States.

Costa Rica’s local artisans make scores of beautiful handcrafted products such as furniture, pottery and cloth. With so many choices a smart person can find something to sell back home.

These are some of the potential business opportunities worth exploring: building and selling of small homes for middle class Costa Ricans or foreigners; an import-export business; desktop publishing; computer services and support; U.S. franchises; importing new foods; specialty bookstores; restaurants and bars; an auto body and paint shop; consulting; or specialty shops catering to North Americans and upper-class Costa Ricans.

Costa Ricans love anything novel from America. There are many stores selling both new and used trendy U.S.-style clothing. Costa Rican teenagers dress like their counterparts in the States and even watch MTV. U.S. fast food restaurants like Taco Bell, Burger King, Pizza Hut and McDonald’s are extremely popular. Real estate speculation can be lucrative if you have the know-how and capital.

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