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Here’s what two industry leaders have stated:
Ramon Garcia, General Manager for Central America for Canadian telecom giant Nortel; “In Costa Rica, there are factors like tourism, a market opening and the presence of foreign firms that have avoided the direct hit from the economic crisis. There has been a tendency to be more careful in making investments.”
Anatol von Hahn, executive vice president for Latin America for Canada-based Scotiabank which operates the leading private bank in the country; “CAFTA will be good for Costa Rica, The financial system is well positioned to accompany that growth.”
Costa Rica’s economy has slowed down somewhat, but free trade pacts with the United States and China will fuel future growth. The slowdown coincides with Costa Rica implementing the CAFTA free trade agreement with the United States, Central America and the Dominican Republic. Costa Rica’s economy is the richest per capita in Central America and its economy will fall this year, but CAFTA and a future China FTA will help boost sectors ranging from finance to technology.
Costa Rica has, and will continue, to avoid a good part of the economic carnage we’re witnessing in many parts of the world. The mentally of runaway consumption never really took hold here, nor did the banks feel the need to fuel the fantasy of dreamers. The economy of CR is positioned to ride out this storm with it’s diverse markets and industrious people. There will be pain and the tourism sector will be hurt because of the fallout in other parts of the world… but CR will go on pretty much like it has for many years.
For many years, Costa Rica depended primarily on North American investment. Given the current state of the North American economy, Costa Rica’s decision to promote its natural and sustainable resources worldwide, is now paying off big time. Costa Rica is less dependent on the U.S.A. for exporting its products than in the past. This is because of the increase in sales to Asian, Central American and Caribbean markets. Exports to the U.S.A. went from 47% in 2003 to 35% in 2007, according to data released in August 2008 from the Promoter of Foreign Trade (PROCOMER).
Recently, the survey of Latin American Security conducted by FTI Consulting on behalf of the Latin American Business Journal, indicates Costa Rica is the safest place in Central and South America for multi-national companies to conduct business. Last year, Chile was first, which shows Costa Rica has recently improved.
Another study found Costa Rica to be the least corrupt country in Latin America.In addition, U.S. business magazine, Fortune ranked San José, Latin Americas fifth best city to do business and placed it within the 25 best cities in the world. According to the report, Fortune considered the San Jose’s ability to create opportunity for its residents, its business climate and how well it can satisfy the business needs of companies that invest there.
San José ranked tops in the quality of its labor force, its business environment and the lifestyle it offers resident executives and investors.Additionally, Costa Rica’s strategic location, political stability and business incentives, have all contributed to millions of dollars in investment from multinational companies off-shoring here. The International Monetary Fund (IMF), found that Costa Rica is in a significantly better position to respond to global economic shocks now than in the past, thanks to a marked improvement in public finances, sizable foreign exchange reserves, steps taken toward a more flexible exchange rate regime in the context of the transition to inflation targeting, and measures already adopted to strengthen the financial system. Furthermore, the Costa Rican stock exchange has not experienced any major changes as a result of the turbulence affecting world financial markets. The chief executive of Costa Rica’s stock exchange, Jose Brenes, asserted that no major effect has been felt locally because the local exchange concentrates on fixed-yield, debt securities, and not shares of public companies that have been degraded in most global markets. Costa Rica’s filling the USA trade gap in Asia and Regionally
As a net exporter (the majority to the world’s largest consumer, the US) I would guess it will not be business as usual…although they will fare better than most.
Posted in the wrong thread and reposted here by Scott
Posted Apr 23,2009 7:45 AM grb1063
Looks like the world’s largest concrete producer has slashed its central valley work force, which is a definitive sign that there is a major slow down in the commercial construction sector.
CEMEX Fires 50% of Employees, Shuts Down 5 Plants In Costa Rica
The economic crisis that has hit the construction industry in Costa Rica is the main reason behind the firing of 125 employees by the cement company, CEMEX. The firing represents 50% of the total staff.
In addition it shut down 5 plants across the country.
Carlos González, general manager of the CEMEX, gave the bad news yesterday, adding that the company is also reducing its investment in Costa Rica.
“The next three to six months will be very complicated, as projects come to an end and nothing new is on the horizon”, said González.
CEMEX, according to González, has invested some us$160 million dollars in Costa Rica over the last 10 years. The general manager said that the company will continue to invest, but only about us$2 million dollars for this year.
CEMEX has seen the demand for cement drop 20% and concrete 30%, as the construction of large projects like hotels, commercial centres, especially in the Pacific northm, has dropped.
The company has tried to reduce mass firings by insituting some 70 initiatives that range from energy savings to optimizing the company’s resources, said González, who feels the government has to move to attract more investments in new markets, outside of the US.
CEMEX, founded in Mexico in 1906, that has grown to one of the top global companies, is a leading producer of cement and ready-mix concrete in Costa Rica.
Cemex is a global conglomerate based in Mexico that over expanded and borrowed heavily. Holcim is another global cement conglomerate based in Switzerland and at their production facility in San Rafael, Alajuela, they run two shifts a day, seven days a week and just added 15 new employees. Pedregal, is a local concrete block and agregate supplier based in Belen, Heredia and their production and delivery are running seven days a week.
Some of Costa Rica’s major employers are planning on maintaining and or increasing their payrolls in 2009. In the shadow of a decelerating economy and a downturn in new job growth, some companies are preparing to add employees. Major employers have been revising their strategies,based on payroll information provided by the Social Security System (CCSS).
Those organizations with the best performance are talking about keeping up their pace and searching for new opportunities. HP (Hewlett-Packard) is the company with the greatest employment growth (161% during the past three years), and is planning to employ as many as 8,000 people in Costa Rica in 2009. According to María Luisa González, human resource manager of HP in Costa Rica, “Hewlett Packardis expanding its printing solution portfolio with the intention of capitalizing on the market now evolving from analog to digital.” In the private sector, Sergio Gallardo, human resource manager of United Supermarket Corporation owned by Wal-Mart Central America, indicated that their staff will grow based on local expansion plans. Additionally, Grupo Empresarial de Supermercados (GESSA), #2 in the top ten ranking, is also predicting growth. Alejandro Oreamuno, GESSA human resource manager, indicated that in 2009 they will proceed with their strategy to increase their presence in different regions, which allowed them to grow 20% in 2007 and 34% in 2008. “Our group has experienced significant personnel growth because we have opened stores in different markets.”
The size of the payroll isn’t the problem; obtaining new business in the current economic environment is the challenge. This conclusion is supported by the Manpower survey about employment expectations during the first quarter this year. Although the indicator dropped ten points compared to last quarter (from 29% to 19%), employers are still planning to add not subtract employees: 61% of those asked said they would maintain their payroll, 28% said it would increase whereas only 9% expect layoffs. Eric Quesada, regional director of Manpower, pointed out that despite the current economy,
Costa Rica remains one of the few countries in Latin America where employment loss hasn’t been as dramatic as in other regions. However, a genuine challenge lies ahead. Quesada stated that the international financial crisis could have aftershocks in the country because the reduction in the foreign demand of goods will effect employment. According to Procomer, exporters employ 409,439 people in Costa Rica (21% of the workforce). The generation of new jobs slid from 96,000 new jobs in 2007 to only 32,000 in 2008: a 66% decline.
This is why the National Employment Rescue Plan promoted by President Arias is a needed. The plan’s purpose is to prevent additional unemployment. And the government’s role as an employer needs to be carefully balanced because of the countries top ten employers, six belong to government entities, three to production unions and only one to the private sector. The Ministry of Public Education (MEP) maintained its high ranking while the Public Works and Transport Ministry (MOPT) slid in the ranking (dropping 8%). Banco de Costa Rica (BCR) is the entity with the greatest public sector employment increase (28%).
In 2008, associations experienced fluctuations: from a solid 20% growth in three of the top ten leaders, to standstills or losses in three others. The Union of Small and Medium Agriculture Producers rose to first place, followed by the Union of Independent Producers and Various Activities (UPIAV). The agricultural industry is restoring its potential to be one of the main employers in Costa Rica.
Costa Rica’s major employers have changed in recent years: 60% are in private sector, 23% in the public sector and 17% are associations. In this new environment the private sector companies are strongly emerging. According to María Luisa González, human resource manager of HP in Costa Rica, “Despite the downturn in the economy, Hewlett Packard is moderately optimistic about 2009.” She’s projecting approximately 250 new employees will be hired each month, in a continuous search based on prospects that speak English in the information technology, customer service and accounting areas.
Alejandro Oreamuno, of GESSA added, “It`s an old adage; only with business growth can the payroll increase and only with good workers can the business stay afloat.”The global financial crisis is being felt in Costa Rica, but not as dramatically as in the United States, Europe and elsewhere. Costa Rica is one of the major destinations of direct foreign investment (DFI) and is #1 in Central America according to the 2008 report of the United Nations Conference on Trade and Development. The chief executive of Costa Rica’s central bank, Francisco Gutierrez stated that the country should not experience major economic impact from the global financial crisis that is presently affecting most world markets. Costa Rica has minimum involvement in international securities markets and the state banks maintain substantial reserves and tangible investments. The International Monetary Fund (IMF), found that Costa Rica is in a significantly better position to respond to global economic shocks now than in the past, thanks to a marked improvement in public finances, sizable foreign exchange reserves, steps taken toward a more flexible exchange rate regime in the context of the transition to inflation targeting, and measures already adopted to strengthen the financial system. Furthermore, the Costa Rican stock exchange has not experienced any major changes as a result of the turbulence affecting world financial markets. The Costa Rican stock exchange has not experienced any major changes as a result of the turbulence affecting world financial markets. The chief executive of Costa Rica’s stock exchange, Jose Brenes, asserted that no major effect has been felt locally because the local exchange concentrates on fixed-yield, debt securities, and not shares of public companies that have been degraded in most global markets.
Globalization is a double edged sword; it propagates the flow of economic prosperity and yet causes tremendous strife when prosperity is exposed as greed. The entire world allowed its greed to exceed its need.
Unfortunately, the cause, greed, is what politics is all about. The need to create and covet power. Now the politicians control many of the private financial institutions that create and maintain the monetary guidelines for the global economies. I for one am frightened with politicians at the helm of the institutions that control our world’s destiny.
From what I’ve read, this is how the world got caught up in the global financial crisis and how the subprime loan crisis in the US caused it.
Initial Problems:
1. Underestimation of risk contained in newly issued assets
2. Buried derived securities on the balance sheets of financial institutions
3. Connectedness between financial institutions, both within and across countries
4. High leverage of the financial system as a wholeOnce the failed assets were exposed, financial institutions needed to cover their tracks by:
1. Selling assets to satisfy liquidity runs by investors
2. Selling assets to reestablish capital ratiosTogether with the initial problems, the exposure of the failed assets greatly impacted global economic activity. Then the amplification of the initial problems moved from subprime to other assets and with the world’s increasingly interwoven economies and financial systems, the problem moved from the US to industrialized countries in Europe and then globally.
For a moment I thought Scott had eliminated my post!
Very well put crhome and am aware of the world’s financial markets incestual state, but the best line I have seen….
The entire world allowed its greed to exceed its need.
I am hanging this on my office wall in bold letters.
You left out one. Belief of individuals that home prices would go up for ever even if no one could afford the load to buy one, without lying about their income.
Its not all big institutions, a core issue is individuals who bought more home than they could afford or used rising home price of the home they originally could afford to borrow more than they could afford for that home.
Good point…. and how about all the folks that refinanced over and over as prices went up… using the “paper profit” of their home as a revolving charge account! Taking money “equity” out to buy OTHER things… toys, cars, vacations, bling, cosmetic surgery, and all the other things that really were NOT important!
Anyone that thinks that this economic “downturn” is going to be short lived is a fool… the party and fantasy of the last few years is going to extract a real cost from the world’s future. You ain’t seen nothing yet! Entire lives, businesses and families have been based on the pretend economy we’ve seen over the past decade… now it’s time to wake up.
Those of us who were smart enough not to get caught up in the frenzy will be ok… but with the politics of today’s world it seems that our “leaders” want those of us that avoided the party and did the right thing to pay for the misdeeds and outright CRIMINAL acts of others… and that’s where you and I have to be concerned!
The great depression will look like a camping trip that had a little rain mixed in… compared to the next few years.
We’re planning on moving our family out of the USA to CR by next Jan. Do you people already living down there feel sure that you will be in a better place when the economy tanks around the world? Is anybody worried about being in CR when it happens?
No…why would anyone be concerned about being in a third world country during economic collapse…just less distance to fall.
There are two schools of thought on the whole issue…one being CR has performed better than most nations…the other that views CR as a net exporter…in a world where imports have fallen off a cliff.
If you are moving to CR with a stable income stream from a source outside CR, why worry. In an a economic downturn your foreign money will go much further in CR. I own a real estate brokerage firm in NYC, been in the biz almost 20 years. I know a number of bankers that have lost their jobs here in NYC that are heading to places like CR, Buenos Aires where their severance, savings can last for years. Grif seems focused on short term investing in CR or flipping. Not a good idea unless you are well capitalized and very educated about the market and macro trends. Buying a second home is much more personal, be sensible. There are many opportunities in CR at many price points, do your homework. look at the great house Scott is building at a damn could price point.
We bought at the beach near Jaco 3 years ago, We don’t plan to sell, we bought what we could easily afford, no mortgage etc..Buy in CR because you love the country and the life you can live there! Go down, rent give it a test drive, life is short…live your dream or at least try. Best of luck!
Don’t fall for the ads promising big returns, wire money now etc..buy because you love it, if it turns out to be a profitable investment; that’s just icing on the cake!
Lotus, you forgot to address a couple items…what was the inflation rate in CR last year? What is the indexed value of the USD today? Do you not feel that this may pose a potential problem for people using foreign (USD) income?
Lastly, when it comes to allocating investment capital, in times of distress, historically stable markets will more often than not remain the default destination…
grif: You are like a broken record. I don’t think that the average Joe should be “investing” in Costa Rica at all. But buying a vacation home within your financial means, for pure pura vida pleasure is altogether a different proposition.
No. The dollar will always go much further in Costa Rica than in the US. And you don’t need an economics degree to know that.
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