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Costa Rica – New Hi-Tech Free Zone

NEW FREE ZONE FOCUSES ON SERVICES. The Zeta Group has inaugurated construction of a free zone in Cartago, reports The Tico Times (June 1-7, 2007). It joins two large free zones announced in the past two months by Free Zone & Business Park Developer (FZBP). The projects highlight the continuing move away from manufacturing in favor of service, vending, and administrative businesses. Some 57{d9af91d10cbbffe076d8ad234b2e08eef4ad6e717c0eb3b77e0c57618be15d67} of businesses in Costa Rica’s 23 free zones are dedicated to manufacturing, but Timothy Scott, Exec. Dir. of the Costa Rican Association of Free-Zone Businesses (AZOFRAS), says that is changing, partly due to a World Trade Organization (WTO) decision in 2001 against government incentives granted to export manufacturers:

Zeta Group’s new free zone, an expansion of its Cartago free zone, sits alongside garment manufacturers such as Hanes and Levi Strauss. The new free zone will be called Techno Park, and it seeks to attract call centers, technical support centers, and other computer and communications businesses that focus on high-tech service, said Zeta Group VP Cesar Zingone;

Techno Park has already attracted US$4 million in investment. Zeta expects the 15-hectare plot to host 25 companies within its total floor space of 100,000 square meters. It is expected to generate 5,000 jobs in the short term, and Zingone said the free zone could employ 8,000 to 9,000 workers within five years, depending on the performance of the economy and the result of September’s referendum on the Central American Free Trade Agreement with the US (CAFTA);

Zeta Group’s free zones in Cartago, Alajuela and Heredia employ 14,000 workers. In May, FZBP announced plans for another free zone, in San José between Calle Blancos de Coicoechea and Barrio Tournón. The East Free Zone will be located in the old Durman Esquivel factory, which FZBP is remodeling. TeleTech ? an all-purpose office outsourcing company ? is set to start operations there in 30 days, while TechData ? a Fortune 500 information technology company ? will begin work in August with 25 employees;

According to the Foreign Trade Promotion Office (PROCOMER), in 2006 free zones accounted for US$4.31 billion in product exports, 52.6{d9af91d10cbbffe076d8ad234b2e08eef4ad6e717c0eb3b77e0c57618be15d67} of all Costa Rica’s exports. That was up almost 17{d9af91d10cbbffe076d8ad234b2e08eef4ad6e717c0eb3b77e0c57618be15d67} from 2005. Most of the growth was from tech products related to Intel. Textile and leather manufacturing was down, and many other manufacturing sectors operating from free zones grew by less that 10{d9af91d10cbbffe076d8ad234b2e08eef4ad6e717c0eb3b77e0c57618be15d67}. The export of business and information services from free zones was up 21.46{d9af91d10cbbffe076d8ad234b2e08eef4ad6e717c0eb3b77e0c57618be15d67} in 2006, to US$532 million from US$438 million, according to the Central Bank.

The WTO in 2001 stated that member countries must stop giving favorable tax treatment to export manufacturers. Costa Rica obtained an extension of the compliance deadline until 2010, and legislators are preparing to announce a law that will address the WTO’s concerns, said Foreign Trade Minister Marco Vinicio Ruíz. The WTO’s decision, however, does not apply to agricultural free zones, or to service and administration businesses operating in free zones.