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Should I Invest in Costa Rica?

Perhaps you are aware of it because of Sandra Cauffman’s crucial role at NASA as an specialist in Electrical Engineering and Physics; or because of the recent recognition by the World Health Organization for its initiative aimed towards collecting licenses for both current and future technologies that detect, prevent and treat COVID-19; or simply because it has been deemed “the happiest country in the world” by the Happy Planet Index several times in recent years, but there is no denying that Costa Rica has special attributes.

Costa Rica has always shown a systematic difference when compared to other countries in its area. That difference is rooted in the widespread success of certain reforms carried out during the 20th century, when the government started investing a considerable and ever increasing portion of the public expenditure in sectors such as health and education. This has yielded a relatively stable economy, a robust health system, a clearly defined and steady democratic government system, a highly capable and qualified workforce and a legislation that upholds the fundamental rights of its habitants, among other aspects that create contrast with nearby countries.

One of the questions that may arise now is whether or not it’s worth investing in a country like this. Today, and for the purposes of this article in particular, we have deemed it convenient to briefly address such matters.

A peek at Costa Rica’s recent economy

In recent years, the government has been implementing a series of reforms and measures that have been mainly aimed at reducing tax evasion and increasing public expenditure in order to put a stop to the expanding debt. Truth be told, the debt in question had been growing during the past fifteen years or so, and the approval of such measures in 2019 (commonly known simply as “Tax Reform”) became absolutely necessary not only to avoid an assured worst-case scenario, but also to abide by the country’s firm commitment to solve the situation in a timely manner and, most importantly, to create an environment of trust for potential investors, both local and foreign. So, even though certain sectors of society believe that the country must undergo further efforts, this has been generally considered a firm first step in the right direction.

Of course, the country has not been impervious to the (already well-known) situation provoked by the COVID-19 pandemic. Nevertheless, the government has been making a conscious effort to safeguard and protect its economy through the issuance of new laws, such as the “Ley de alivio fiscal ante el COVID-19” (“Tax relief against COVID-19”) and other measures that have been addressed on this site recently by the business team.

The benefits of investing in Costa Rica

Having reached this point, what are some of the most relevant advantages when making an investment in the country?

Real Estate constitutes a solid option since, as it is well known, it tends to offer a stable market and flexibility, since the potential investor can choose between different markets such as housing, industrial, offices and so on. Foreigners attain the same rights as locals in this particular situation.

Generally speaking, Real Estate constitutes a safe investment because of the capital gains and because of the tangible possibility of obtaining yield above what might be originally expected. According to a recent article by “El Financiero”, the Real Estate market offers a profitability that fluctuates between 6% and 12% (depending on the area and the type of Real Estate under consideration).

However, certain factors should be considered beforehand, such as area, value and liquidity. For instance, houses aimed for leasing are amongst the least profitable options because of excess offer, higher maintenance costs and the taxes that are linked to that particular use. This is why it is common advice to not only research the options that the market offers, but also to divide or distribute the investment in more than one property or building and undergo the required due diligence.

As a summary, some of the main aspects to consider when deciding to invest here are:

  • Government stability
  • Robust, consolidated health system
  • Highly qualified workforce
  • Security regarding ownership of real estate.

If you eventually invest in this country, you could also opt to apply for a temporary residence permit under the “investor” category. A basic requirement to be considered for such category is to prove that your Real Estate investment is of (at least) $200.000. Eventually, you could also opt for a permanent residence permit once you have enjoyed the benefits of a temporary residence permit for a time span of three consecutive years.

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Diego Aguilar

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