Mr. Alexander Leon
San Jose, Costa Rica
Costa Rica’s ICT sector profile
This report provides an overview of ICT technologies in Costa Rica
Costa Rica has a land area of 51,100 square kilometres and a population of 4.97 million and 1.5 million households. The country´s gross domestic product (GDP) reaches income per capita averages $15175 for a total GDP of $75.4 billion in 2017. GDP grows at 3% per year and its public debt accounts for 44.94% of the GDP. The inflation rate in the last three years averaged less than 2%, while unemployment reached 12% in 2018 and the minimum wage remained at US$6.2 thousand a year. Costa Rica positions itself as 63rd in the Human Development Index, 67th in the ease to for Doing Business, 56th in terms of the Index of the Perception of Corruption in the public sector and 48th in the corruption perception ranking. It is also a popular tourist destination with over 3 million visitors a year. The currency exchange is Can 1 $ = 427.14 Colon (CRC).
Manufacturing accounts for 14.7% of GDP and provides employment for 11.0% of the workforce. Major industries include production of electronic components, food processing, medical devices, construction materials, cement and fertilizers. Investment in the last years has been heavily focused on free trade zones, which provide tax advantages to investors. Almost 400 companies have established, most of them in the medical devices, advanced manufacturing and shared services sectors. In ICT related sectors, Costa Rica clusters 142 highly specialized companies, which employ more than 46,400 people. These companies are linked to industries like shared services, software, entertainment and media, design and engineering, and contact centres.
In the last 30 years, Costa Rica followed a diversification process was initially led by high-tech computer and electronic industries, services, non-traditional agriculture and tourism. In the future, buoyant exports and free trade agreements (including agreements with the USA and China) should drive the diversification process.
The country has subscribed 42 trade agreements, which cover about 90% of its exports. The main ones include agreements with Canada, China, Singapore and the EU as well as the US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR). In the last years, Costa Rica has been working to gain access to the Organisation for Economic Co-Operation and Development (OECD) and a number of significant important reforms are being implemented as a result.
Improving the transport infrastructure, fighting insecurity and violence, managing public expenditure efficiency, as well as balancing fiscal deficits are the priorities for the current government and the coming ones.
1. Costa Rica: Business culture
- Entrepreneurs have a high sense of honour and social equality. In general, they have quite traditional principles and values, and they give great importance to honesty and trust. A loss of trust from your interlocutors can make business fail.
- The local business people, usually prepared, informed, open and accessible to business conversations, look for a long-lasting real commercial partner in the supplier, which allows them to advance together, based on honesty and transparency. The achievement of the objectives in the market should be a shared responsibility.
- The agreements with local companies can be of four forms: simple purchase, distribution, representation, and operations in Costa Rica. All agreement must be in writing in relation to term, arbitration, goals, payment and exclusivity. Exclusivity depends of the entrepreneur's strategy in the region. The usual forms of payment are cash in advance, credit, letters of credit, and bank guarantee.
2. Import process, taxes and duty for ICT products of Canadian origin
- There is no special law in Costa Rica in terms of foreign investment, although several laws and regulations seek to promote these activities, including Tax Exemption Regimes and faster Immigration Procedures. The most favoured nation treatment is guaranteed to foreign investors in sections set forth in bilateral investment treaties, free trade agreements, or under the General Trade Services Accord. Foreign investors are entitled to the same incentives and benefits granted to Costa Rican companies. The main investment systems proposed are the Free Trade Zone, Active Improvement, Tourism Incentives, etc.
- Income taxes are applicable to net income and the highest applicable rate is 30%. The following tariffs will apply: (Amounts stated in this document are expressed in US$ at an exchange rate of C.600 to US$1
- 10% ¢0 – US$88511 (Considered Small Businesses)
- 20% US$88511 to US$178058 (Considered Small Businesses)
- 30% above US$178058
- The Central American Import Tariff is constituted by the Central American Tariff System (S.A.C.) based on the nomenclature of the Harmonized System, and the corresponding Import Tariffs (D.A.I.) Taxation on imported products is made up of the Import Tariffs, the VAT, Law 6946, the Selective Consumption Tax and special taxes, which are explained as follows:
- Import Tariffs (D.A.I.): are applied at the time of the nationalization of the products and are between 1% for raw materials, 2% for capital goods, 8 to 13% for goods intermediate, and 18% for final goods. 95% products of Canadian origin enter duty free.
- VAT: 13% is applied to all products ICT products.
- Law 6946: 1% is applied to all products on the customs value of the imported goods. However, all countries that have FTA with Costa Rica (including Canada) are exempt from paying this tax.
- Selective Consumption Tax: is a tax that falls on the import of luxury goods. The rates are variable and selective, and do not generally apply for ICT products, raw materials nor services.
2a. Bilateral trade Canada - Costa Rica
Costa Rica is Canada's main trading partner in Central America. Bilateral trade of goods between both countries amounted CAD 683.95 million in 2018. Merchandise exports from Canada to Costa Rica totaled CAD 164.4 million, while exports from Costa Rica to Canada amounted to CAD 519.5 million dollars. Costa Rica imports from Canada consisted grain products, machinery, electrical machinery, and vegetables.
2b. ICTs Total Foreign Market
Source: Procomer 2017
3. ICT sector in Costa Rica
As per a study conducted by the Costa Rican government, the total sales of the sector comes from national customers (56.6%), while the remaining proportion is distributed almost equally in sales abroad (22,6%) and sales to transnational companies installed in the country (20,7%) in 2017.
According to the classification used in the strategy "Costa Rica: Green and Intelligent 2.0" of the Chamber of Technology of the Information and Communication (CAMTIC), the sector of digital technologies in the country is made up of nine subsectors:
Source: Mapeo 2014 www.camtic.org
- Manufacturing of digital components: 1%
- Services Enabled by digital technologies: 5%
- e-learning: 10%
- Digital Multimedia: 12%
- e-commerce: 20%
- Telecommunications and Networks: 22%
- Technology Commercialization: 22%
- Software development: 52%
- Information Technology: 55%
The largest TELCO carriers in Costa Rica:
- kölbi/ICE (The national TELCO carrier, run by Costa Rican government)
3a. Main ICT Subsectors
Telecommunications equipment, software and services
- The general evolution of the telecom market in terms of income has doubled in the last decade, from US$ 544 million in 2008 to US$1.34 billion during 2017. This represents an accumulated growth rate of 106 % and an increase in the proportion of income to GDP from 2.1 % in 2008 to 2.5 % in 2017. Between 2013 and 2017, the trend is growing at an average annual rate of 7%.
- 5% of local employment is in technology companies and the sales of technology services reached 5.8% of the country's GDP, a figure very similar to local agricultural production.
The number of operators increased from 2 operators in 2008 to 143 in 2017 offering services of fixed, mobile telephony, and Internet and subscription TV. While fixed telephony has decreased by 14% reaching 843 thousand lines, VoIP shows a constant growing of 17.7% from 2016 to 2017. The penetration in terms of mobile telephony exceeds 170% with a market share, according to official SUTEL data Footnote 1 52% of with ICE / kölbi, 26,3% with Movistar, 21.3% with Claro. Results showed that, although ICE / kölbi predominates in all regions, in the Central Pacific, Huetar Caribe and Huetar Norte, Movistar has an important market share.
Regarding mobile Internet, 86.6% of population accessed the Internet through a mobile device. Fewer than 8% of users are considering switching telephone service operators.
Fixed Internet service (residential and business) is provided through cable, ADSL, telephone dialing (Dial Up), fixed wireless connectivity (WIMAX), satellite or fibre optics. By 2017, the main providers are ICE-kölbi 28.6%, Tigo 26%, Telecable 15.6% and Cabletica 11.5%.
Regarding Internet speed, in 2017, still over 200 thousand users are connected with speed under 2Mbps and almost 0.5 million are connected with speeds between 2 Mbps and 10 Mbps. ICE is still developing and working on the expansion of optic fibre connections. The Institute has built by 2018 about 7 thousand kilometres of optic fibre all over the country with around 50.000 solutions.
In 2017, television by subscription shows a predominance for coaxial cable, with 68 %, followed by satellite television with 29%, and finally television over IP and multipoint that combine the remaining 3% Footnote 2.
Business opportunities in the telecom market
- Telecommunications companies are preparing the technological evolution in two concepts: convergence between fixed and mobile networks and the preparation of 5G technology. The Internet of things network is being prepared, which will be an extension of a multiplication of mobile Internet extensions. This will entail having fixed and mobile networks, as well as a greater capacity for investment in these sectors. Growth of the telecommunications sector of 7% in the last year.
- The change in the productive and export structure that gives greater importance to telecommunication, information and information services.
- SUTEL has arranged some actions tending to facilitate that, faced with the possible entry of a new operator.
- Government institutions as FONATEL are developing programs (Comunidades Conectadas) and projects in order to expand TELCO services to remote country areas, just like indigenous people communities.
Cyber security and electronic security
- Within the regulatory framework, Costa Rica has updated its national legislation creating a legal development of protection for the Costa Rican cyber society, allowing the possibility that people report violations suffered in the virtual world that previously had no legal response. Among them, stands out the Law of Protection of the Person in front of the treatment of his Personal Data and its Regulation, creating in this way the Agency of Protection of Data of the Inhabitants (PRODHAB). It also has the Computer Crime Law No. 9048. However, despite having the regulations that allow and promote the use of the signature and digital certificates, it does not have a national cryptographic approach policy; that is, of technical and legal standards that cover the whole of the State in a single instrument for document management and authentication.
- Costa Rica lacks a cybersecurity policy. By the end of 2017, the MICITT (Science, Technology and Telecommunications Ministry) presented what is called the National Cybersecurity Strategy (ENC), a normative foundation comprehensive but which, however, does not represent an effective legal instrument in terms of securing the cyber security of the ICT user population.
- ESET Security Report Latin America in a 2016 study considered the country a "warm zone" in terms of cyber-attacks in relation to other countries of Latin America. The results indicate that almost half of the Costa Rican companies were victims of cyber-crime during that year.
- In Costa Rica, particularly decree 40.862-MP-PLAN-MICITT lays the foundations for the creation of a Directorate of Digital Governance12 (DGD). This address would arrive to closely coordinate the Digital Signature and Information Security (CSIRT) addresses and expand their functions with a project management perspective to centralize decision-making in ICT matters for the Central Government.
- The Computer Security Incident Response Center (CSIRT) is in charge of ensuring cybersecurity in Costa Rica. It was open in 2015. This center is located in the facilities of the MICITT in Zapote, San José.
- According to a survey of companies in the telecommunications sector, 100% of the companies indicated that they had an internal policy or procedures to guarantee the security and privacy of internal information and its users. Companies consulted claim to have detected possible threats or have suffered an attack in the last year, 100% claim to identify their essential infrastructure and 83% have procedures to control and monitor the changes that are made on this. In addition, all of the Telecommunications service providers and operators surveyed indicate that they have engineers dedicated to tasks related to cybersecurity, and in 83% of cases, they have received some type of training.
- 29.0% of companies in the manufacturing subsector use cloud computing for various purposes. The main computer security processes applied by companies they are the protection of data, the protection of the network and the protection against computer attacks. The main mechanisms of computer security are antivirus, backup copies, data encryption and firewalls.
- Regarding electronic surveillance, the trend and technologies based from the concept of Smart Cities although is still inchoate, is rising in the country. Local governments have been adopting this new technology as ally to fight criminality. Moravia, Pococí, Grecia and Mora are a few of the cities that join and use this kind of technology solutions.
Business opportunities in the cybersecurity sub-sector
- IBM announced that it would invest $21 million in 2019 to expand the operations of its Global Security Services Center located in Costa Rica, from where security events are monitored for hundreds of clients in more than 130 countries. This represent an opportunity for investors related to product and service demanded by IBM in Costa Rica.
- New legislation and safety qualifications in Costa Rica have improved. It is also considered that, at the level of the Latin American region, this new legislation on cybercrime contains a great advance and innovation to the incorporate crimes such as identity theft (which is considered very ethereal but with visible effects in the victim’s people).
- At least four universities offer educational programs of cybersecurity (LEAD University, Universidad Cenfotec, Universidad Latina and Universidad Nacional) to educate and prepare human resources.
Enterprise software solutions
- According to the index of economic activity at the end of 2017, the sector of information and communications grew 4.1%, which highlighted the services related to computer programming and consulting.
- According to the Ministry of Science, Technology and Telecommunications, about 40.0% of companies invest in software or hardware with the aim of promoting innovations.
- Nowadays the adaptation of tools like ERP is no longer unreachable for the Costa Rican market. According to El Financiero, around 250 medium and 500 small enterprises use software as SAP Business One for management and internal process.
- Data from the Integrated Public Procurement System (SICOP) indicate that between 2016 and 2017, public and autonomous institutions with other government offices invest almost $5 million dollars in purchase, renovations, and maintenance of licensed software.
- Costa Rican government predominantly uses and invest in 3 licensed software providers:
|Enterprise/Licensed Software||Investment (US$ million)|
Source: SICOP between 2016 and 2017, taken from La República Media Group
Some Multinationals and National enterprises active in Costa Rica:
- ADN SOLUTIONS S.R.L.
- INTEL COSTA RICA
- CISCO SYSTEMS
- ISTHMUS DE COSTA RICA
- ÉXITO ERP
- SOFTWARE AND CONSULTING GROUP (S.C.G)
- GS1 (BAR CODES)
- GESTIÓN DE TECNOLOGÍA E INFORMACIÓN (GTI)
Business opportunities for Software solutions:
- Costa Rican human talent is extremely attractive and therefore consider the country as an attractive option to establish high value operations headquarters for operations to other LATAM countries.
- Availability of new technologies, such as artificial intelligence, data analytics, for the development of innovative services is only starting which sets opportunities for early arrivers.
- Costa Rica face the challenge of adapting to the fourth industrial revolution (revolution 4.0) as early and assertive as possible. This is why, supported by MICITT, the government has been starting to include on policy approaches and work strategies.
4. Market and sector challenges
- Doing business with Costa Rican government companies tends to be slow and bureaucratic due to excessive procedures and slow decision-making.
- The agreement for the promotion and protection of investments of Chinese companies in Costa Rica signed in 2016 could affect the investments of companies from other countries. This is supported by a Free trade agreement.
Canadian Government Contacts
Canadian Embassy in Costa Rica, Nicaragua and Honduras
T. +(506)2242-4467 M. +(506) 8811-7851
San Jose, Costa Rica
Costa Rican Government and Commercial Contacts
Embassy of Costa Rica in Canada
Consular Agent in Commercial Affairs in Canada
Telecom Superintendant /Superintendencia de Telecomunicaciones
Ministerio de Ciencia, Tecnologia y Telecomunicaciones (MICITT)
Foreign Trade Ministry /Ministerio de Comercio Exterior.
CRECEX – Foreign Companies Representatives Chamber
CAMTIC- Chamber of ICT technologies
Canada-Costa Rica Free Trade Agreement
The Embassy of Canada to Costa Rica
Latin America and the Caribbean. A Global Commerce Strategy Priority Market
CIA – The World Factbook – Costa Rica
Country Insights about Costa Rica
Import Regulations – Costa Rica
Prepared by: Alexander Leon (firstname.lastname@example.org), Trade Commissioner at Canadian Embassy in San Jose, Costa Rica
Date: August 1, 2019
Disclaimer: The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.
- Date Modified: