VZCZCXYZ0001
RR RUEHWEB

DE RUEHSJ #0758/01 2451514
ZNR UUUUU ZZH
R 021514Z SEP 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 1180
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS SAN JOSE 000758 
 
SENSITIVE 
 
SIPDIS 
 
FOR WHA/CEN DESK OFFICER JENNIFER VANTRUMP 
 
E.O. 12958: N/A 
TAGS: ASEC ECON ETRD OTRA XL EFIN CS
SUBJECT: U.S. BIENNIAL CARIBBEAN BASIN INVESTMENT SURVEY 
 
REF: (A) SECSTATE 060543, (B) 07 SAN JOSE 1248 
 
¶1. (U) SUMMARY: With Entry Into Force (EIF) of the Dominican 
Republic - Central American Free Trade Agreement (DR-CAFTA) on 
January 1st 2009, the reporting period 2007-2008 is the last in 
which the Caribbean Basin trade programs (CBI/CBERA/CBTPA) figure 
among Costa Rica's trade benefits.  Textile and non-traditional 
agricultural exports have been the principal direct beneficiary 
sectors.  More broadly, the Caribbean Basin trade programs have 
played a key role in the growth of the wider Costa Rican economy 
over the last 25 years through encouragement of an outward-looking 
export orientation and as a springboard for CAFTA ratification and 
implementation. 
 
---------------------------------- 
FOREIGN DIRECT INVESTMENT OVERVIEW 
---------------------------------- 
 
¶2. (SBU) Costa Rican foreign direct investment (FDI) has increased 
yearly, reaching a peak of USD 2.016 billion in 2008. The U.S. 
continues to make up the dominant share of FDI in Costa Rica, 
accounting for 50 percent in 2007 and 60.4 percent in 2008. Industry 
has been the leading FDI sector in recent years, with 26.6 percent 
in 2008.  The real estate sector followed with 24.3 percent, 
agriculture with 21 percent, tourism with 14 percent and the service 
sector with 6.3 percent.  These relative percentages are accurate 
reflections of historic trends, with the exception of agriculture's 
21 percent, which is largely a single USD 403 million purchase of a 
Costa Rican banana and pineapple producer by the US-based fruit 
exporter Del Monte. 
 
¶3. (U) TABLE ONE 
FOREIGN DIRECT INVESTMENT BY SECTOR 
----------------------------------- 
(in millions of dollars, current) 
Sector        2004   2005   2006   2007   2008 
Agriculture    50.6   37.1   66.1  -10.4  426.5 
Agroindustry   -0.3   29.6   -3.2   35.1   16.6 
Commerce       23.9   47.6   57.0   77.0   64.6 
Industry      456.0  344.9  435.5  687.0  536.1 
Services       17.3   73.3   60.9   63.7  126.1 
Finance        22.6   40.9  343.4   73.9   34.6 
Tourism        41.4   53.5  131.9  321.3  285.7 
Real Estate   178.4  234.6  373.5  644.7  489.9 
Others          3.9   -0.5    4.1    3.8   36.0 
 
TOTAL          794    861  1,469  1,896  2,016 
(Source: Banco Central de Costa Rica (BCCR)) 
 
¶4. (U) U.S. individuals and companies have accounted for 56 percent 
of Costa Rica's FDI over the past five years, with a low of 47 
percent in 2006 and a high of 70 percent in 2004.  U.S. investors 
registered a relatively high 60 percent in 2008, followed by Mexico 
(6 percent), Spain (4 percent), El Salvador (3 percent) and 
Switzerland (2 percent).  Canada, Panama, Venezuela, Holland and 
Italy have also been significant contributors to FDI in past years. 
Despite Costa Rica's continued efforts to attract Asian investment, 
which include current Free Trade Agreement (FTA) negotiations with 
China, Costa Rica receives very little FDI from the Asian 
countries. 
 
¶5. (U) TABLE TWO 
FOREIGN DIRECT INVESTMENT 
BY COUNTRY OF ORIGIN 
------------------------- 
(Selected countries, not comprehensive, in millions of dollars, 
current)                                          Cumulative 
Country          2004   2005   2006   2007   2008 Percent Rank 
USA               557    532    695    940  1,218    56 
Canada             11     55    336     96     25   7.4 
Holland            15      0     26    266     25   4.7 
Mexico             29     37     31     64    112   3.9 
Colombia           11     22     73     30     41   2.5 
Germany            16      7     25     59     60   2.4 
El Salvador        14     21     33     41     54   2.3 
Spain               6     14     11     54     76   2.3 
Switzerland        31    -11     10     49     49   1.8 
Panama             20     42     29      5      6   1.5 
Italy              12     24     16     19     18   1.3 
Venezuela           8      8     14     21     18   1.0 
Relevant Asian      5     -1     17      3      9    .5 
Other                                              12.5 
 
¶6. (U) The investment promotion agency CINDE predicts a roughly 30 
percent drop in FDI in 2009.  The real estate sector and 
manufacturing industry will be the hardest hit.  The service sector, 
on the other hand, continues to attract new companies, growing from 
one company in 1995 to a total of 80 companies and 23,800 employees 
in 2008.  CINDE states that in its three target sectors of 
investment attraction -- Medical Devices, Advanced Manufacturing, 
and Services -- the number of successful investment deals in 2009 
will be the same as in 2008 but the average value per deal will be 
lower.  However, it should be noted that these three very dynamic 
sectors did not directly benefit from the Caribbean Basin trade 
programs. 
 
--------------------------------- 
LARGEST EXPORT CATEGORIES TO U.S. 
--------------------------------- 
¶7. (U) United States International Trade Commission (USITC) 
statistics reveal textiles, tuna and non-traditional agriculture to 
be the major direct beneficiaries of Caribbean Basin trade programs. 
 Non-traditional agriculture has been the stellar performer with a 
plethora of smaller firms and distinct new products.  The tuna 
industry is represented by Sardimar, an innovative exporter based in 
the port town of Puntarenas.  The Costa Rican textile industry has 
been shrinking as many companies relocate to countries with lower 
cost structures. 
 
¶8. (U) TABLE THREE 
US IMPORTS FROM COSTA RICA 
TOP FIVE PRODUCT LINES 
------------------------- 
Rank HTS#    Description        Program      2008 Value 
1  90189080 Medical Instruments None Claimed 470,918,961 
2  08043040 Pineapple           CBI          447,868,546 
3  84733011 Printed Circuit Ass None Claimed 413,759,425 
4  08030020 Banana              None Claimed 313,220,752 
5  85423100 Processors & Contr. None Claimed 205,485,923 
Source: USITC website 
 
¶9. (U) The following table is a continuation of Table Three above. 
While in the above table we list the first five export product lines 
in order of 2008 value, in the table below we continue down the list 
of product lines listing only those that benefit from the Caribbean 
Basin trade programs.  The first column expresses the item's rank 
within all export item lines from Costa Rica to the United States. 
 
¶10. (U) TABLE FOUR 
US IMPORTS FROM COSTA RICA 
RANK IN 2008 OF CARIBBEAN BASIN 
BENEFICIARY CATEGORIES 
------------------------------- 
Rank HTS#    Description        Program      2008 Value 
8  40111010 Pneumatic Rad Tires CBI           96,240,569 
9  22071060 Ethyl Alcohol       CBI           94,351,195 
11 61159590 Stockings and Socks CBTPA         65,577,935 
14 20091100 Frozen Orange Juice CBI           40,906,839 
16 08071920 Fresh Cantaloupe    CBI           31,469,114 
17 07141020 Fresh Cassava       CBI           30,774,090 
18 85363080 Electrical Breakers CBI           29,463,809 
21 06031900 Fresh Cut Flowers   CBI           25,253,938 
23 06021000 Live Plant Cuttings CBI           24,711,216 
24 20089913 Banana Pulp         CBI           22,420,332 
Source: USITC website 
 
¶11. (U) The Ministry of Foreign Trade (COMEX) recently compiled a 
list at the request of the US Embassy of companies exporting more 
than twelve thousand dollars per year in the major Caribbean Basin 
trade program categories from Costa Rica to the United States. 
Contact Econ Specialist Kevin Ludeke ludekekj@state.gov for a 
digital copy of this list with company names and contact 
information.  In the following chart we provide a sample. 
 
¶12. (U) TABLE FIVE 
NUMBER OF EXPORTERS TO USA 
SELECTED PRODUCT LINES 
(Caribbean Basin trade 
program beneficiaries) 
------------------------- 
(Export more than USD 12,000 in 2008) 
Fresh Pineapple     86 export firms 
Cassava             79 export firms 
Chayote             60 export firms 
Fresh Cut Flowers   38 export firms 
Live Plant Cutting  11 export firms 
Banana Pulp         9  export firms 
 
---------------------------------------- 
IMPACT OF CARIBBEAN BASIN TRADE PROGRAMS 
---------------------------------------- 
 
¶13. (U) The Caribbean Basin trade programs and their beneficiaries 
have played a broad role in persuading Costa Rica of the wisdom of 
full engagement with the global economy.  During the prolonged 
public debate leading up to CAFTA Entry Into Force (EIF) on January 
1 2009, the non-traditional export companies with Caribbean Basin 
trade program benefits were living examples of the promise of free 
trade and as such served as effective counterarguments to the 
opposition line that CAFTA's benefits were more theoretical than 
practical.  This same philosophy that global trade creates 
opportunities has led Costa Rica to develop a set of institutions 
and national characteristics that have deepened and broadened Costa 
Rica's export diversification and expansion.  These institutions and 
characteristics include the investment promotion agency (CINDE), a 
very competent and aggressive Ministry of Foreign Trade, aggressive 
business chambers, individual export "clusters" that have become 
self-reinforcing, communications and transport infrastructure and an 
education sector eager to prepare workers for market opportunities. 
This diverse collection of internal advocates for global trade 
demonstrates the lasting impact of Costa Rica's graduation from the 
Caribbean Basin trade programs. 
 
BIRDSALL