Was fantastic to be in Costa Rica and present at the Free Zone AZOFRAS conference. It has been many years since I was in Costa Rica and what a transformation. The country is still as stunning as ever with Costa Rica's strong preservation of its natural eco-system while expansion of infrastructure, free zones, and business supported by investment in education and skills have continued to drive inward investment and economic development. The big topic at the Free Zone conference was taxes and incentives. Costa Rica joined the OECD a couple of years ago and needs to consider how it will adapt its tax and incentives regime to the new minimum 15% global tax due to come into effect in 2024. The traditional model of low/zero tax Free Zones adopted by Costa Rica - and emerging markets worldwide - to help attract FDI has to be re-evaluated. Personally, I have never been a fan of MNEs paying zero tax in developing countries while they pay a ton of tax in developed countries leaving developing country governments short changed without the fiscal income to make critical investments to enable rapid economic growth and prosperity. But a key challenge for countries like Costa Rica is how the global minimum tax will impact non-OECD countries who Costa Rica is competing against and who may continue to offer more competitive tax rates. My two cents is firstly that a standard low tax rate has proven to be a fair, transparent, efficient and effective lever for business investment as examples like Hong Kong and Ireland have shown (UAE, a pioneer of free zones, also introduced a flat corporate tax rate this year) and secondly that while countries like Costa Rica must ensure their free zones remain globally competitive and offer the tax advantages important for export oriented manufacturing for other types of investment, like R&D, employment, training and other incentives can be more effective. I think there is an opportunity for countries like Costa Rica to aim for the best of both worlds - a low tax rate combined with an incentives program that encourages higher value added investments to fast-track economic transformation. It will be very interesting to see what happens but I am sure Costa Rica, with all its fundamental competitive strengths as a location, will continue to be highly attractive and successful in attracting FDI. Attached below is a short video clip of an interview I did at the Free Zone conference, covering how I see the prospects for Costa Rica.
👏On October 26, 2023, Dr. Henry Loewendahl, the CEO of Wavteq, took the stage at the AZOFRAS Costa Rica Free Zone Conference. Delving into the topic of "How Free Zones can attract Foreign Direct Investment in a Transforming FDI market," Henry delivered a compelling 45-minute presentation. Catch an interview with Henry in the video below, starting at the 0.55-second mark. Gratitude extends to AZOFRAS Jairo Sebastian Mena-Arce and CARLOS WONG for extending the invitation to Wavteq, allowing us to share insights at the conference in one of the world's premier hubs for high-value-added, export-oriented manufacturing, and services FDI.
We truly enjoyed our time in Costa Rica!🌎
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