I. COMMERCIAL OVERVIEW Overview of Import Market Costa Rica, a country the size of West Virginia with some 3.1 million people, depends heavily on both agricultural and industrial imports. While Costa Rica's industrial base is changing, it is, by large, still an agriculturally-based economy. Over 47% of its economic base is food related (imports and exports). However, as an indication of the changing nature of the Costa Rican market, "tourism" surpassed bananas as the nation's largest income producer in 1993. Over 675,000 tourist visited Costa Rica in 1993. In addition, over 50% of Costa Rican exports consist of manufactured products and non-traditional agricultural products. The nation's chief source of imports is, and has been, the United States. However, Germany, Japan, Brazil and Mexico are among the other important Costa Rican trading partners. U.S. exports to Costa Rica were $1.5 billion in 1993, constituting 44% of all imports into Costa Rica. The top ten imports to Costa Rica, from the U.S., included: kraft paper and paper board, cars and, vehicles (for transporting persons), petroleum oil, corn, soybeans, mens and boys suits, women's and girls slips and suits, bras, wheat, and polymers of ethylene. Brief Synopis of Commercial Environment/Host Country Business Attititude Toward the U.S. In general terms, the Costa Rican commercial environment is extremely positive, "user friendly" with wide-scale "national receptivity" to U.S. products and services. Due to its proximity to the U.S. (less than 3 hours from Miami or Houston) and its highly educated population -- who not only travels frequently to the U.S., but who also speak English, the Costa Rican consumer (said to be one of the most sophisticated and demanding in the region) is unabashedly pro-U.S. products and services. As well, bilateral relations on almost all other fronts has been, in global terms, extremely positive. Commercial activity, in all sectors, is supported by numerous, organized chambers and associations. The Costa Rican-American Chamber of Commerce is an important friend of the American business community in Costa Rica. There are approximately 75 U.S. Fortune 100 and Fortune 500 companies operating in Costa Rica. Most have been active in this market for 10-25 years. Major Business Opportunities Though a small country, with some of Central America's best infrastructure, there exists approximately 10 large major infrastructure projects (energy, hotels, highways, ports, airports and canals) in various stages of planning and implementation which American companies should seriously consider. Despite the need for and commitment to some of these major infrastructure projects, the new Figueres administration will make numerous social programs its main focus as well. Numerous commercial opportunities also exist for American companies in the areas of health, education and waste management. In an effort to reverse its somewhat tarnished "environmental pioneer" image, the Costa Rican General Assembly in 1993 passed a wide-sweeping environmental law which goes into effect in January 1995. Beginning in 1995 the Costa Rican government will charge/fine car owners and industry for polluting Costa Rica's air and water. Countless opportunities exist for American companies in these fields. Other areas of opportunities for U.S. exporters exist in the areas of security products and services, new and used cars, trucks and machinery and hospital and medical equipment. A new law granting concessions for private operators will assist U.S. companies in putting together financial packages especially for major projects. In the agricultural area, bulk products such as yellow corn, soy beans, wheat and rice, as well a some consumer ready products such as fresh fruits, canned fruits and vegetables, snack foods and fruit juices present good U.S. export opportunities. Major Roadblocks to Doing Business Costa Rica, like other emerging economies, is holding steadfast to some of its most potentially lucrative utilities/industries. While there are signs of breakthroughs (piecemeal), the American business community must understand the institutional fortitude of Costa Rica's four state monopolies: telecommunications/energy, petroleum refinery and distribution (except at the retail level), insurance and banking. One U.S. telecommunications company is presently testing the fortitude of the Costa Rican tele- communications state industry in the cellular phone area. After the U.S. firm invested over $USD 7 million in the local economy the Costa Rican Constitutional Court ruled that the U.S. investor violated the state telecomunications monopoly provided by the Costa Rican constitution. An acceptable resolution to this investment dispute is being sought. Intellectual property rights (IRP) violations should be of concern to U.S. companies interested in this market. Software and video pirating is widespread, and patent terms on pharma- ceuticals and agricultural chemicals is limited to one year. Legal counsel is strongly encouraged not only to assist with IPR protection but also as a preventive mechanism to the numerous scams and landownership problems (expropriations and problems with scatters exist) which face investors. Nature of Local and Third Country Competition Costa Rica's universal fame has its origins in its long democratic history, non-existent armed forces, pleasant climate and paradise-like beaches and mountains -- all which have made it a haven for the settlement of large numbers of immigrants (expatriats). The U.S. expat community, for example, numbers over 20,000. Other large communities include the Spanish, Germans, Israelis and Chinese. These and other communities, including the Japanese, have a large commercial presence in Costa Rica as well. Other Central American countries (mainly Guatemala and El Salvador) also provide competition (in the areas of pharmaceuticals for example) for both U.S. and Costa Rican manufacturers or exporters. The April 1994 signing of the Costa Rican-Mexican trade agreement (still awaiting passage by the Legislative Assembly) will provide major competition for many U.S. exports. If passed, some 12,000 Mexican products will have tariff-free access to the Costa Rican market beginning January 1, 1995.