Five Business Opportunities for Expats in Costa Rica
The hospitality industry, online shopping, new tourism trends and an ever-expanding agricultural sector are some of the fields that present investment opportunities in Costa Rica
If you’re thinking about coming to Costa Rica and starting a new life, or if you are already here, and want to explore some business opportunities in the country, here’s a list of five trends of the local economy that might interest you.
The Institute for Research in Economic Sciences (IICE) of the University of Costa Rica detected that the country’s economy was improving at the end of 2021 after many months staggered because of the Covid-19 pandemic. “Private consumption was the main driver of the drop in economic activity during the pandemic, but it is also the main driver of growth identified in the second quarter of 2021,” said M.Sc. Rudolf Lucke Bolaños, one of the authors of the study.
In this sense, the restaurant sector recorded an unexpected growth during the last months of 2021. This could mean, according to the IICE, that a change in the trend has begun that could lead to an improvement of the activity of said sector in the next months. The recovery of the restaurant sector has been slower than that of the commercial sector, the study says, but its performance has been overall good compared to the first months of the pandemic.
Both the cities and the coastal tourist areas of the country have seen a resurgence of restaurants, bars, coffee shops and other food and drinks establishments, taking advantage of more relaxed restrictions and of the growth in consumption that the end of most Covid-19 measures have brought. But some changes caused by the pandemic in the sector seem to be here to stay, like the delivery boom, which has opened the door for new ways to conduct business in the hospitality industry.
One of the fast-growing trends in this context is that of so-called ghost kitchens. These are restaurants that only work for delivery orders or take-out, and that offer no tables or chairs for customers to eat in. From an operational point-of-view, dark kitchens are attractive for entrepreneurs because they save money on waiters, maintenance and rent, focusing only on the preparation of dishes and coordinating with delivery platforms. There are many ghost kitchens in Costa Rican cities and some of them are starting to appear in rural areas.
A recently approved law that allows for the sale of food and drinks in outdoor public spaces could also help boost the restaurant sector in the country.
The way the wholesale and retail sector of the Costa Rican economy has bounced back from the first year of pandemic is impressive. According to the cited IICE study about the evolution of the country’s economy on the last quarter of 2021, while the commerce sector had a -14% drop of added value to the economic activity in 2020, that figure grew to +11,3% in 2021. That means that the sector has almost recovered its pre-pandemic activity levels, according to the latest data available. This also has to do with the trend in growing consumption because of less Covid-19 restrictions.
The Costa Rican commerce sector projects that there’s going to be a stabilization towards the second half of 2022, when it may reach pre-pandemic level activity in most of its different sectors. Acquisition of essential goods was already near those levels at the end of 2021, the Costa Rican Chamber of Commerce said then. And the number of companies of the retail and wholesale sector recovered what it lost during the first year of the pandemic, leading to a 2,4% growth in commercial activity between February 2020 (pre-pandemic) and September 2021.
A thriving sector is e-commerce. Data from the Digital Market Outlook report developed by Statista shows that internet sales rose 48% in Costa Rica between 2017 and 2020, and the country is expected to have a user penetration of almost 50% by the end of 2022. That same study signals that the number of e-commerce users in Costa Rica could reach 2.8 million by 2025, with revenue expected to reach $1,8 billion in 2022 and to show an average annual growth rate of 16% for the next three years. The projected market value of online shopping in 2025 is $2,8 billion.
Be it online or in physical stores, the country is experimenting some consumption trends. Specialty grocery stores that sell products that are not often common in traditional supermarkets are opening way in cities and coastal towns. The same happens with organic food shops and gourmet coffee stores, of which there are more and more each year, serving the tastes of both locals and residents that are rapidly changing their consumption habits. A product that is also on the rise is CBD oil, be it in pharmacies or in specialized stores that also sell vaping products. (Some CBD products are legal in Costa Rica, and the country is about to approve a more comprehensive regulation on medicinal cannabis.)
Before the Covid-19 pandemic, tourism was always on every list of the most powerful economic sectors of Costa Rica. The recovery has been slow: the country only regained 50% of its pre-pandemic tourists in 2021 and it is uncertain if it will reach pre-pandemic levels in 2022. Its borders have been open for tourists since late 2020 and it has relaxed its entry requisites in order to attract more visitors in moments when there were travel restrictions in many parts of the world. The strategy has worked, because it received 1,3 million tourists in 2021, but as we said before total recovery hasn’t happened yet.
Nevertheless, the tourism sector of the Costa Rican economy is experiencing important changes related to the transformations of the global industry because of the pandemic. The country offers the nature and convenience that millions of tourists are craving for, so its green tourism approach is very well suited for when everyone can say for sure that the Covid-19 nightmare is over. Investing in anything related to tourism in Costa Rica will likely have a reward not long after the uncertainty ends.
Ecotourism was already a big thing in Costa Rica before the pandemic, with more than $1 billion annual revenue in 2019. It was also the most visited country in Central America, with an annual average of over 3,3 million tourists. Before the pandemic, the tourism sector represented 8,3% of Costa Rica’s GDP, with the United States, Canada and Europe being its main tourist issuers. So, when everything goes back to “normal”, its hard to imagine that the Costa Rican tourism sector won’t reach those levels again, or even exceed them.
The digital nomads trend has also benefited Costa Rica, since a lot of foreigners come to remotely work as well as to other countries of the region. Costa Rica has even approved a law to give privileges to digital nomads looking to live in Costa Rica temporarily or permanently, but it has not been implemented yet. With or without the law in force, plenty of hotels have transformed their offers and their spaces to adapt to those who come to the country to work remotely surrounded by beautiful beaches, mountains and wildlife, but with the same commodities as at home.
Agriculture has long been one of the strongest sectors of the Costa Rican economy and the last years have seen an important diversification for a country known mainly for its coffee, pineapple and banana exports. Those products continue to be relevant in Costa Rican agriculture and their contribution to GDP is remarkable. But other products, like flowers, are on the rise, mainly because of international demand.
Because of its unique geographical position, Costa Rica is a great place for agriculture with a wide array of plants. The country’s agriculture sector is so strong that, even though 2020 saw its activity levels biggest decrease in decades, its exports grew 2,7% that year compared to 2019. During the first year of the pandemic more than four out of every ten products exported from Costa Rica were agricultural. Palm oil, banana and gold coffee were the most exported products. Corn, rice, cassava and melon are also some of the most produced in the country.
There’s also potential in Costa Rica for medicinal cannabis and industrial hemp. The country is on the verge of passing a law that will regulate this sector, which could mean a boost for agriculture in its territory. This law will allow producers to grow marijuana plants for medicinal and industrial purposes, and it may open the door for recreational production regulations in the future. When it passes, lots of new business opportunities will be possible both for locals and expats.
Greenfield projects are those that build from scratch in markets that have not yet explored the sector said projects are aimed at. Investopedia defines these sort of foreign direct investments as ones in which “a parent company creates a subsidiary in a different country, building its operations from the ground up. In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices, and living quarters.”
Turns out Costa Rica is “the world’s best performing location relative to its size” when it comes to greenfield performance, according to FDI Intelligence, a publication from the Financial Times that focuses on foreign direct investment. “Costa Rica climbed to the top of this year’s annual Greenfield Performance Index with a score of 11.4. This puts it significantly ahead of the runners-up, Lithuania with 8.3 and the UAE with 7.1,” the publication proclaimed in August 2021.
“The country has come a long way since being an exporter of agriculture commodities decades ago; in 2020, medical devices, software and IT and business service sectors accounting for 60% of its inward FDI projects. Among others, the country managed to secure a $600m investment commitment by Intel to reestablish assembly and testing operations in the country after a hiatus of seven years — the US company had terminated its local manufacturing functions in 2014 — to address the global shortage of microchips,” FDI Intelligence added.
When foreign direct investment fell by a third globally, in 2020, Costa Rica broke its own record for new investment projects, hence the Minister of Foreign Trade, Andrés Valenciano. “Many of these companies see the country’s development vision. This is characterized by Costa Rica’s commitment over many years to a development model that has political stability and environmental responsibility as its pillars. These priorities regarding investment in Costa Rica make us very aligned with issues that companies are concerned about,” he said.