Common business sense in Costa Rica
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 (see the section entitled “Taxes” in
the last chapter).
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. Do a feasibility study. Spend at least
a few months thoroughly analyzing its potential. Do not assume that what
works in the United States will work in Costa Rica.
Check out restrictions and the tax situation. And, most importantly,
choose a business in which you have 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
between success and failure. Make sure you choose a partner with local
experience. Do not trust anyone until you know him or her and have seen
them perform in the workplace.
You will be doomed to failure if you intend to be an absentee owner.
I know of someone who founded an English-language book distribution
business that initially did very well. However, the owner moved back to the
United States and put a couple of employees in charge, everything eventually
fell apart: sales began to lag, money went uncollected, checks began to
bounce, expenses were unaccounted for and incompetent salespeople were
hired. The potentially successful business just could not 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 that the more employees you have, the more
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.
Newcomers should not count on obtaining financing in Costa Rica for
a new business. If you become a resident, you may be able to obtain some
type of financing. Neophytes should learn not only the language but also
the rules of the game.
One option is to buy an existing business from someone else.
In theory, this can save you lots of time and trouble, which means you can
bypass most of the cumbersome start-up procedures and usually save a lot
of time and energy.
While this is a definite advantage over starting a business from scratch,
there is a downside. You can be taken advantage of by an unscrupulous seller
trying to dump his problems on you. These problems may include unpaid
back wages to employees, loss of a license or lease, or other legal problems
that may not be apparent at first.
The best thing to do is to have a good lawyer check into the legal
status of the proposed purchase and investigate potential problem areas. He
can then tell you whether he thinks the business is feasible and if there is
any unwanted baggage. You will also need to have a good accountant do a
complete inspection of the books and records, and perhaps even conduct a
complete audit to make sure all taxes, wages and Social Security payments
Any one of these items could cause untold headaches if not detected
before you buy the business. Taking care of these matters is the best investment
you could possibly make.
Talk to people, especially the “old-timers,” who have been successful in
business, and learn from them. Profit from their mistakes, experiences and
wisdom. Do not rush into anything that seems too good to be true. Trust
your intuition and gut feeling at all times. However, the best strategy and
rule of thumb is, “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 too 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. Only about three in 10 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,
and bed-and- 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 easily here. Initially, starting any business usually takes
more time and more money than originally thought. Also, many unforeseen
problems are sure to arise.
If you decide to purchase an existing business, make sure it is not overpriced.
Try to find out the owner’s real motives for selling it. Make sure you
are not buying a “white 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 his business. Check the newspapers and ask everyone you know if they
know of someone selling a business. Finally, make sure there are no lawsuits,
debts, unpaid creditors or liens against the business.
There are some benefits to investing in certain businesses in Costa
Rica. As mention in Chapter 7, 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.
Business tip: Dealing with people is always the best way to develop a
business relationship here. All business in Costa Rica is based on friendship
and mutually respectful behavior. In fact, when dealing with all government
officials it is a good idea to treat them to a snack, a drink and chat. You will
be amazed at the difference in their attitudes.
After reading the above information, if you still have questions or are
confused, I 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.
How I Came to Open a Language School
By David Hansen
The year was 1978 and I had just returned to the U.S. from an incredible
junior year abroad in Madrid, Spain. I was looking for someone who
spoke Spanish and wore high-heeled shoes. One particular morning in late
September my roommate and I drove to American University and when
we arrived for our 11am classes we looked at our watches and saw it was
only 10am. We had no idea why we were there one hour early. We just
couldn’t figure it out. You never arrive an hour early for anything much
less a morning class at the university. Since we had some time to kill we
decided to go to the cafeteria for a cup of coffee. As soon as we walked
in my roommate spotted, Zaida, his Costa Rican roommate from the
previous year. We got talking and as they say, the rest is history. (She did
wear high-heeled shoes back then.)
After coming to Costa Rica a couple of times on extended vacations
in the early 80’s I wanted to move down here. Zaida, my wife by then,
didn’t really want to go back home, been there done that. Also, living in
DC was very exciting back then for a couple of 23-year-olds. However,
the president of Costa Rica at that time threw out the IMF and the World
Bank and the international credits dried up very quickly and the local
economy went into a tail spin. Zaida’s dad, who was one of the most
exceptional people I have ever met, was a pilot and had a small, two plane
air-taxi service that went down along with everything else in the economy.
So at that point she was ready to come down and help out her parents
for a couple of years in 1983 Well, we are still here.
I love it. We run the IPED language school in Heredia where we
teach English to the Costa Ricans and Spanish to people from all over
the world. It is the best of both worlds. I live in a great town where
I know many of the locals and spend my days with really interesting
people from Asia, Africa, Europe, North America and the Caribbean.
They live with lovely Costa Rican families, study Spanish, go to some
amazing nearby attractions like the Coffee Tour, the Waterfall Gardens,
InBio Park, ZooAve or the Poas or Irazú Volcanoes during the week. In
the afternoons their senses are delighted by the great dance classes and
delicious cooking classes. At night they have dinner with their family and
talk and practice Spanish with them and then study a little. If they still feel
like it we go out to the great places around Heredia to meet the locals
and go dancing or listen to music. On the weekends they go to all of
the wonderful, beaches, volcanoes and rain forests around the country.
It is Pura Vida (Pure Life) in Costa Rica.