(qCOSTARICA) – The Free Trade Zone Regime (Zona Francas in Spanish) are a definite benefit the country, generating some US$5.7 billion dollars in tax dollars, according to the latest study by Procomer, the foreign trade promoter.
The model is “socially profitable” according to the Procomer analysis, highlighting the benefits to the country of the ZF (Zona Francas), business areas or parks that offer companies a wide range of financial incentives and benefits, including a 100% exemption for import and export duties and excise taxes, among others.
For example, manufacturing companies that export more than 75% of their production are granted 100% exemption on corporate income tax for a period of 8 years, and 50% exemption during the following 4 years. Other incentives for free trade zone companies include employee training assistance in conjunction with the Instituto Nacional de Apredizaje (National Learning Institute, or INA).
According to CINDE, the Costa Rican Development Agency, the ZF is the mainstay of Costa Rica‘s export and investment promotion strategy. Companies that may apply for the Free Trade Zone System Regime are: Export services companies (50% of services must be exported); Scientific research firms (Either companies or organizations); Strategic sectors or companies (Outside the Geater Metropolitan Area); and, Significant suppliers (40% of sales to FTZ companies).
In the last four years the number of jobs and companies in ZFs has grown. Overall, employment grew 38% between 2010 and 2014, going from 56.473 to 77.919 jobs. The number of companies increased 25% during that period, going from 249 to 311.
In addition, such firms contributed 35% of national exports of services ($ 2,253 million) in 2014 and 51% ($ 5,791 million) of goods.
However, their influence is concentrated in the central part of the country, the greater metropolitan area of San Jose, that takes in the urban areas of San Jose, Heredia and Alajuela.
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The Free Trade Zones are truly the “goose that laid the golden egg” for Costa Rica. It makes sense that any expansion of these Zones would be in the Central Valley, where a better educated and technically trained work-force is readily available.
What a biased puff piece.
Bottom line is that over 2 million tax-paying workers and tens of thousands of tax-paying businesses are supporting fewer than 80,000 employees and 311 companies in the tax free zones.
Meanwhile, not only do the foreign-owned businesses in the tax-free zones take their profits home with them, they also pull up stakes and leave after their tax-free status expires. Can anyone say Intel?
I also find it humorous that the one-sided data in support of this fawning over the multinationals was itself assembled by government bureaucrats drinking at the public trough. Who is paying the taxes to support these bureaucrats to champion tax-free zones? Methinks it’s not the businesses in the tax-free zones.