THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 2/11/2019 GAIN Report Number:CS18013 Costa Rica Exporter Guide Costa Rica 2018 Exporter Guide Approved By: Anita Katial, Agricultural Counselor Prepared By: Laura Calzada, Marketing Specialist Report Highlights: Tourism, services and high technology continue to drive Costa Rica’s economy. In 2018, the leading prospects for consumer-oriented products include U.S. prime beef cuts, pork, dairy, processed fruit, chocolate products, snack foods, prepared foods, pet food, bakery ingredients, pre- cooked frozen products, condiments, sauces and other high value products. Costa Rican consumers recognize U.S. quality and innovative characteristics. According to data from the Central Bank of Costa Rica, per capita GDP reached $11,635 in 2017. However, inflation is expected to increase to 3 percent by the end of 2018, up from 2.6 percent in 2017, and unemployment remains high at 10.3 percent. To top it off, Costa Rica recently approved a fiscal reform package that will include higher taxes, which could negatively affect its GDP in the near term. Its growing debt and high deficit may weaken the local currency (the Colon) against the U.S. dollar, which may stagnate U.S. agricultural exports to Costa Rica in the short term. In contrast, U.S. exports of U.S. agricultural products to Costa Rica are expected to increase by nearly 10 percent to $775 million in 2018. 1 | P a g e Market Fact Sheet: COSTA RICA same time, many consumers buy bulk products. In addition, consumers are price sensitive. $ 737 million U.S. Agricultural Exports 2018 Export Growth ( 69%) Food Service Industry 2007-2018 # 33 $737 million According to the Chamber of Restaurants, the Costa Rican food Among U.S. service industry is made up of an estimated 4,325 food service Agricultural Export businesses (consisting of hotel restaurants, restaurant chains and Markets, 2018 franchises). QUICK FACTS CY 2017 Source: FAS Global Agricultural Trade System (GATS) Bico HS-10 U.S. Food and Beverage (F&B) Exports to Costa Rica $694 million Executive Summary The United Sates is Costa Rica’s largest trading partner and Costa List of Top 10 Growth Products in Costa Rica Rica’s largest foreign direct investor. Market prospects for U.S. 1) Beef, pork, poultry 6) Ingredients for consumer-oriented products such as beef, pork, poultry, dairy, wine food/beverage mfg. and beer, snack foods, ready-to-eat meals, frozen food products, 2) Wine and beer 8) Dairy condiments, and pet food continue to increase with impressive 3) Prepared/frozen Foods 9) Juices growth, reaching $291.4 million in exports to Costa Rica 2018. 4) Pet Food 10) Tree Nuts and Snack products Costa Rican consumers trust and enjoy the excellent reputation of 5) Chocolate and cocoa 11) Processed fruit and vegetable U.S. food, beverage and ingredients products, and demand has products increased since the implementation of the Dominican Republic - Central America Free Trade Agreement (CAFTA-DR) in 2009. Food Industry by Channels in 2017 Proximity with the United States is a major advantage for shipping U.S. F&B Exports to Costa Rica $ 720 million time and for U.S. exporters who wish to visit or communicate with Costa Rican F&B Imports from the US $ 1.7 billion potential customers. In 2018, U.S. agricultural exports to Costa Rica reached a $737 million and Costa Rican agricultural exports to the Top Costa Rican Retailers: United States were valued at US$1.7 billion. Costa Rican 1. Walmart 4. Saretto 7. PriceSmart agricultural exports are made up of tropical products (bananas, 2. AutoMercado 5. Mayca 8. Muñoz y Nane pineapple, cassava, ornamental plants, coffee, and sugar) typically 3. Fresh Market 6. Gessa 9. MegaSuper not produced in the United States. GDP/Population* Agricultural Imports by Country (percentage share) Population of Costa Rica 5 million GDP (billions USD) 57.5* (preliminary data) Per capita GDP $11,635 Exchange rate 610 colones per 1 US$ *Sources: Central Bank of Costa Rica Opportunities Challenges Local processors are slowly Countries such as Mexico, increasing their production capacity Argentina and Colombia can and level of food quality to export offer competitively priced food to the United States. ingredients. Costa Rican consumers are Costa Rica’s strategy is to becoming sophisticated in their continue negotiating free trade food preferences. agreements with other countries. The United States is Costa Rica’s Business culture in Costa Rica Source: Ministerio de Hacienda de Costa Rica main trading partner. U.S. food can be slow paced than in the ingredients are well-known and United States and those wishing Food Processing Industry considered of high quality and to do business in the country reliable. should be prepared for this Most of Costa Rican food processors import their food ingredient possible difference. needs directly from exporters and a few rely on importers and Since 2013, Costa Rica initiated a U.S. exporters must be patient distributors. They have their own distribution channels to new on-line product registration with export procedures and wholesalers, distributors and retailers, as well as hotels, restaurants system, which eventually will processes. Costa Rica has many and institutional industries nationwide. Distribution channels can be reduce registration times for new levels of bureaucracy that can at different between local and imported products and are constantly imported products. times slow the importation of changing. food products. Contact: FAS San Jose, Costa Rica [email protected] Food Retail Industry Website: http://sanjose.usembassy.gov/fas.htm Costa Rica’s retail sector is made up of supermarkets, hypermarkets, mini-marts, and mom-and-pop shops. Many consumers prefer to buy their groceries in smaller quantities from independent grocers. At the 2 | P a g e Post: San Jose Executive Summary: Post San Jose Executive Summary: SECTION I. MARKET OVERVIEW The current population of Costa Rica is 5 million people. The population density in Costa Rica is 251 people per square mile. The total land area is 19,714 sq. miles, and is nearly the size of West Virginia. As of 2018, 82.9 % of the population live in urban areas. The median age in Costa Rica is 31.8 years. When the new government took office on May 8, 2018, it inherited a large and growing national debt and high fiscal deficit estimated at 7.1 percent of GDP. As result, the new government has signaled its intent to address the fiscal problems through economic reforms, including higher taxes, which will ultimately lead to lower disposable income. If implemented, GDP growth may decline in the near term. The growing debt and high deficit may weaken the local currency (the colon) against the U.S. dollar. These factors may undercut demand for U.S. products in Costa Rica. The United States remains Costa Rica’s largest trading partner and Costa Rica’s largest foreign direct investor with $10.8 billion in bilateral goods trade in 2017. With such a high degree of trade with the United States, Costa Rican importers are well accustomed to working with foreign partners in this market. Trade surplus with Costa Rica grew nearly 9% in 2017 to $1.7 billion. U.S. exports by major product category reached: bulk, $349.6 million; intermediate, $91.4 million; consumer-oriented, $278.6 million; agricultural related products $11.2 million. Costa Rica’s most important exports of agricultural products to the United States include pineapple, banana, coffee, fruit juice, ornamental plants, cacao and sugar. Costa Rica has achieved a high level of economic development, the highest in Central America, in part because it abolished its military in 1948 and invested in health, education and infrastructure. The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR, or the Agreement) entered into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; the Dominican Republic in 2007; and Costa Rica in 2009. The CAFTA-DR significantly liberalized trade in goods and services, and includes important disciplines relating to customs administration and trade facilitation, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, transparency, labor, and environment. Under the CAFTA-DR, Costa Rica may not adopt new duty waivers or expand existing duty waivers that are conditioned on the fulfillment of a performance requirement (e.g., the export of a given level or percentage of goods). Costa Rica has modified its free trade zone regime in order to conform to this requirement. Tax holidays are available for investors in free trade zones. Costa Rica’s tax incentives and benefits are standardized. They apply to all companies equally, so that there is no need for individual negotiations. 3 | P a g e Table 1. U.S. Exports of Consumer Oriented Products Data Source: U.S. Census Bureau Trade Data www.fas.usda.gov/GATS Costa Rica also seeks to improve market access for tropical products and a Special Safeguard Mechanism (SSM) that would be used only in qualified exceptional occasions, an argument supportive of the U.S. position on the controversial modality. Credit is available to producers primarily from commercial banks both public and private. Costa Rica does not produce bulk commodities, with the exception of rice and black beans. It relies upon imports to satisfy 100 percent of the consumption of wheat, yellow corn, and soybeans for milling and crushing, chicken, pork, and dairy industries. Significant imports of rice and dried beans are necessary to meet local demand as well. Table 2. Costa Rica: Advantages and Challenges for U.S.