A recently approved law opens the possibility of including new tourism and conservation projects under the figure of “sustainable adventure park” in the special free zone regime.
It will be a completely new sector for the regime, whose investments must be regulated after the now former President of the Republic, Carlos Alvarado, sanctioned Law 22,607 on May 4 (“Strengthening territorial competitiveness to promote the attraction of foreign investments”). of the Greater Metropolitan Area [GAM]”).
According to the initiative, which aims to promote qualified employment in areas outside the GAM, a sustainable adventure park will be an establishment dedicated to the sustainable development of outdoor recreation and entertainment activities, or commercial conservation activities or scientific research.
Those new investments with an initial amount in fixed assets of at least $5 million may be added to the regime and, in addition, they must have at least 50 permanent jobs during their operation. The complex could have other types of infrastructure, such as lodging facilities, for example, but the hotel operation itself would not be subject to the free zone regime.
“This new sector has to be closely related to the potential of Costa Rica. If we review statistics from 2019, 80% of tourists who visited the country did so (to) vacation; this, linked to our sustainability trajectory”, commented Margarita Umaña, manager of Planning and Strategy of the Costa Rican Coalition of Development Initiatives (Cinde), a team that led the technical advice of the law.
An example of a project of this type was the INBioparque, which was located in Santo Domingo de Heredia a few years ago. This complex had a research and conservation area, while receiving tourists of all ages to learn about the country’s flora and fauna.
In addition to sustainable adventure parks, the law will allow the inclusion of two large sectors in the special regime: human health service centers and companies that develop supplies for other companies that benefit from the free zone regime.
Diversification of investments
For Carlos Wong, president of the Association of Free Zone Companies (Azofras), the law stimulates a front that has been requested for some years, such as the expansion of sectors under the free zone regime, which will allow the diversification of investments.”The law also allows strengthening the capacities of governments and free zones outside the GAM to attract new projects,” added Wong.
Of course, both the companies in the three new areas that can be incorporated into the regime and the other types that are already allowed, must be completely new investments.
In this sense, projects corresponding to investments that have already been made outside the free zone will not be able to enter –even when they intend to settle outside the GAM; neither those that only move location, nor investments resulting from corporate restructuring operations, among others.
Next generation incentives
The law also provides new generation incentives, related to the reduction of operating costs and the development of human talent and not only with tax benefits.
An example of this is the opportunity for companies managing parks in free zones located outside the GAM to generate renewable electricity for self-consumption, in order to partially or totally meet their own electricity consumption, as well as that of the common areas that belong to them. This would lower operating costs, one of the main competitiveness challenges for the country.
Likewise, Margarita Umaña, from Cinde, explained that another of the advantages offered by the law is the 6.91% reduction in social charges, which applies only to completely new companies.”Essential contributions are not being touched at any time, such as the Disability, Old Age and Death Regime (IVM)”, he stressed.
Although for Carlos Wong the new legislation is a step in the right direction to strengthen investment in the country, there are still pending tasks, such as the development of a country strategy that promotes investment segments in accordance with the advantages that the law provides to these areas .
“Each region outside the GAM has a different competitiveness; then, there will be more effective areas for services or more effective areas for agribusiness”, Wong exemplified.Umaña, for his part, clarified that the new law does not make distinctions in terms of incentives between cantons outside the GAM.
“As for which cantons are emerging as the ones that could have the most opportunities or could be the most benefited, any response is going to be risky, because (the regulations) are technically designed to open up opportunities throughout the country,” he commented.
The difference could thus lie in the subsequent work carried out in areas such as the simplification of procedures and infrastructure, as well as the work of actors such as the municipalities and the Executive Power.
On the same matter, the economist of the Council for the Promotion of Competitiveness, Andrés Fernández, said that it should be based on the fact that the law and its regulations will be executed on a field that is already uneven in terms of competitiveness between cantons outside the GAM.
“Although the incentives are correct and have a high impact, the project does not take into account the diversity of economic activities that take place outside the GAM (…); by itself, it will not produce the expected results if it is not accompanied by improvements in competitiveness in each of the territories”, Fernández commented.
According to the National Competitiveness Index (ICN), cantons outside the Metropolitan Area, such as Pérez Zeledón, San Carlos and Esparza, are classified as “competent” municipalities, with scores above 58.8, but below 66.
In contrast, other cantons, such as Matina, Talamanca and Los Chiles, have a “poor” performance in competitiveness, with scores lower than 40. According to the Index, most of the territories with limited or poor performance are part of the coastal and border cantons .
“The difference with respect to competitiveness between the cantons that are outside the GAM would suggest that the best located in the Index would be the ones that would have the greatest probability of attracting this type of investment, in contrast to Matina, Talamanca, Los Chiles, Guatuso and Upala, more lagging behind in the matter”, Fernández pointed out in an article written for La Nación.
Within the cantons outside the GAM that the new law takes into account, those from the West are not included, because since 2018 these municipalities have incentives to improve the attraction of investments.
Both Fernández and Wong agreed that, hand in hand with the application of Law 22,607, the country urgently needs to modernize its port and road infrastructure, aspects that currently make the country less competitive compared to its competitors.
Sustainable adventure parks outside the GAM may be included within the free zone regime (if they are new investments). This figure includes outdoor recreational and entertainment activities, or commercial conservation or research activities.