QCOSTA RICA BLOG – I am a strong believer in the “entrepreneurial spirit” as being the most important and the best “motor” for generating economic activity and providing a sound basis for the over-all well-being of a nation’s economy. Many expats arrive in Costa Rica, primarily from the U.S. and Canada, with strong entrepreneurial ideas about starting businesses in Costa Rica.
As I look around, almost all new business in Costa Rica is based on foreign investment and ingenuity.
For the most part, Costa Rican business ingenuity has not progressed much past the agrarian principles that the nation was founded upon, with the unfortunate exception of the expansion of the Public Sector and the Trade Unions based on the Socialist principles required to “tap into” the profits of this foreign business ingenuity.
Yes, that is what I’m saying, except for the farmers, Costa Rican society has evolved, in a business sense, on basically parasitic principles.
I don’t want to discourage foreigners with a strong entrepreneurial spirit from following their dreams of starting and owning a business in Costa Rica, but I certainly encourage them study the demographics of Costa Rica before doing so.
Looking at Costa Rica as a whole, there is a population of about 4.5 million people. Of this population base, at least 3.5 million people would fit the description of “farmer”, or people living in rural areas of the Country. That leaves about a million people “in play” to participate in what I would call the business economy of the country, which is largely based in the Central Valley. It is that part of the economy where a foreign entrepreneur would most likely participate in some business activity.
I live on the west side of San Jose and I largely patronize businesses in Escazu and Santa Ana. In watching the businesses in those municipalities come and go, I believe that the restaurant/bar business best typifies the required demographic considerations that I am speaking about.
The majority of restaurant/bar businesses go broke within the first six months of operation. The combined base population for the Municipalities of Escazu and Santa Ana is under 100,000 persons, with a business-draw area of probably just over a 100,000 population base. This equates to the population of a small town, in either the U.S., or Canada.
This small population base on which a business enterprise an draw, coupled with the thrifty nature of Costa Ricans when dining-out and the number of restaurant/bar establishments in existence, means that the “pie” is just cut too thin to support the survival of but only a few. Many other types of businesses fall into this same trap.
Costa Rica is an exceedingly difficult country is which to do business. Business expenses are high and the chances of making a good profit are low.
However, the country requires foreign investment and foreign entrepreneurship in order to progress. I urge would-be foreign entrepreneurs in Costa Rica, to not allow a misconception of the applicable demographics to be a contributing factor in the difficulties of doing business.