OECD investment Policy Reviews COsta RiCa Contents OECD investment Policy Reviews Executive summary Assessment and recommendations COsta RiCa Chapter 1. The role of FDI in Costa Rica’s economic development Chapter 2. Costa Rica’s investment regime and the OECD National Treatment Instrument Chapter 3. Costa Rica’s policy framework for investment Chapter 4. Costa Rica’s adherence to the OECD Guidelines for Multinational Enterprises Chapter 5. Costa Rica’s policy framework for green investment Annex. Costa Rica’s exceptions to the National Treatment Instrument also available in this series: Tunisia (2012), Colombia (2012), Kazakhstan (2012), Zambia (2012), Ukraine (2011), O Indonesia (2010), Morocco (2010), Viet Nam (2009), India (2009), China (2008), E Peru (2008), Russian Federation (2008), Egypt (2007) C D in v http://oecd.org/daf/inv/investment-policy/countryreviews.htm es t m e n t c P o r lic i y R e v ie w s C O s t a Consult this publication on line at http://dx.doi.org/10.1787/9789264203952-en. R iC This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and a statistical databases. Visit www.oecd-ilibrary.org for more information. isbn 978-92-64-20367-9 -:HSTCQE=WUX[\^: 20 2013 09 1 P OECD Investment Policy Reviews: Costa Rica 2013 ThisworkispublishedontheresponsibilityoftheSecretary-GeneraloftheOECD. 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FOREWORD Foreword O n 30September2013 CostaRica became the 45th adherent to the OECD DeclarationonInternationalInvestmentandMultinationalEnterprisesinrecognition of the country’s progress in fostering investment liberalisation, deepening its internationalintegrationandpromotingresponsiblebusinessconduct. As an adherent to the Declaration, CostaRica commits to providing national treatmenttoforeigninvestorsandpromotingresponsiblebusinessconduct.Inturn,it benefitsfromsimilarassurancefromotheradheringgovernmentstotreatCostaRican investorsabroadfairlyandtoencouragetheirmultinationalenterprisesoperatingin CostaRicatocontributetoeconomic,socialandenvironmentalprogress.Inaccordance with the OECD Guidelines for Multinational Enterprises, an integral part of the OECD Declaration, CostaRica has committed to establish a National Contact Point chargedwithpromotingprinciplesandpracticesembodiedintheGuidelines,handling related enquiries in the national context and supporting mediation and conciliation procedures. As an adherent, CostaRica will participate in the work of the OECD InvestmentCommitteerelatedtotheDeclaration. This Investment Policy Review is based on the report supporting the examinationbytheOECDInvestmentCommitteeinviewofCostaRica’sadherenceto the OECD Declaration. It includes a special chapter on CostaRica’s investment frameworkinsupportofgreengrowth,focusingonthecountry’spoliciesregulations and institutions to facilitate and promote green investment. Representatives of OECDcountries joined the OECD mission in San José in April2013 to finalise the report.TheexaminationofCostaRica’sinvestmentpoliciestookplaceinJune2013at the OECD headquarters in Paris in the presence of a CostaRican delegation led by ForeignTradeMinisterAnabelGonzález. ThereviewwaspreparedinclosecooperationwiththeCostaRicanauthoritiesby Marie-Estelle Rey, Alexandre de Crombrugghe, Fernando Mistura and Dambudzo Muzenda from the Investment Division, Nariné Nersesyan from the Centre forTax Policy andAdministration, and CristinaTébar Less, External Consultant, under the supervision of Pierre Poret, Counsellor in the OECD Directorate for Financial and Enterprises Affairs. The review received financial support from the government of CostaRicaandtheInter-AmericanDevelopmentBank. OECDINVESTMENTPOLICYREVIEWS:COSTARICA2013©OECD2013 3 TABLEOFCONTENTS Table of contents Acronymsandabbreviations...................................... 9 Executivesummary.............................................. 15 Assessmentandrecommendations................................ 19 TheroleofFDIinCostaRica’seconomicdevelopment ............ 19 CostaRica’sinvestmentregimeandtheOECDNationalTreatment instrument.................................................. 20 CostaRica’spolicyframeworkforinvestment.................... 22 CostaRica’sadherencetotheOECDGuidelinesforMultinational Enterprises................................................... 28 CostaRica’spolicyframeworkforgreeninvestment .............. 30 Chapter1.TheroleofFDIinCostaRica’seconomicdevelopment ...... 33 Introduction ................................................ 34 OverviewoftheCostaRicaneconomy .......................... 35 TheroleofFDIinCostaRica’sdevelopment ..................... 40 Notes ...................................................... 49 References.................................................. 49 Chapter2.CostaRica’sinvestmentregimeandtheOECDNational Treatmentinstrument........................................ 51 MainfeaturesofCostaRica’sinvestmentregime................. 53 ExceptionstotheNationalTreatmentinstrumentnotified byCostaRica................................................ 60 MeasuresnotifiedundertheNationalTreatmentinstrument byCostaRicafortransparency................................. 66 Rationalefortheexistingrestrictionsandplansforphasingthem out......................................................... 68 CostaRica’spositionundertheinstrumentoftheOECDDeclaration onInvestmentIncentivesandDisincentives......................... 70 CostaRica’spositionundertheinstrumentoftheOECDDeclaration onConflictingRequirements..................................... 70 FDIRegulatoryRestrictivenessIndexforCostaRica.................. 71 Notes ...................................................... 74 OECDINVESTMENTPOLICYREVIEWS:COSTARICA2013©OECD2013 5 TABLEOFCONTENTS Chapter3.CostaRica’spolicyframeworkforinvestment.............. 77 Investmentpolicy............................................ 79 Investmentpromotionandfacilitation.......................... 101 Tradepolicy................................................. 122 Competitionpolicy........................................... 134 Humanresourcedevelopment................................. 138 Infrastructuredevelopment ................................... 145 Financialsectordevelopment.................................. 155 Publicgovernanceandanti-corruption.......................... 168 Notes ...................................................... 177 References.................................................. 183 Chapter4.CostaRica’sadherencetotheOECDGuidelines forMultinationalEnterprises................................... 187 EstablishmentofaNationalContactPoint ...................... 189 Generalpoliciesforpromotingresponsiblebusinessconduct inCostaRica................................................ 191 CostaRica’spoliciesinspecificareascoveredbytheGuidelines..... 195 Notes ...................................................... 213 References.................................................. 216 Chapter5.CostaRica’spolicyframeworkforgreeninvestment ........ 219 ChallengesandopportunitiesforgreengrowthinCostaRica ...... 221 CostaRica’scommitmenttogreengrowth ...................... 225 Policiesinsupportofgreeninvestment......................... 234 Incentivesandaccesstofinanceforgreeninvestment............ 243 Promotinggreenbusinessconductandstakeholderparticipation ingreengrowth.............................................. 248 Notes ...................................................... 253 References.................................................. 256 AnnexA.CostaRica’sexceptionstotheNationalTreatmentinstrument 259 Tables 1.1. PercentageofrealGDPpersector............................ 36 3.1. Internationalintellectualpropertyrightstreatiesratified byCostaRica ............................................. 84 3.2. BITssignedandratifiedbyCostaRica........................ 95 3.3. FTAswithinvestmentprovisionsratified,signedandunder negotiationbyCostaRica................................... 96 3.4. IncentivesundertheFZR................................... 112 3.5. CostaRicaFTAsandcoveredmerchandisetrade .............. 126 3.6. CostaRica’scompetitivenessindicatorsforinfrastructure........ 145 3.7. Maintransportinfrastructureprojects(ongoingandplanned) ... 149 6 OECDINVESTMENTPOLICYREVIEWS:COSTARICA2013©OECD2013 TABLEOFCONTENTS 3.8. CasesofcorruptionprocessedbythePublicProsecutor, notifiedtothePEP......................................... 176 3.9. ComplaintsreceivedbytheOfficeofthePublicEthics Prosecutor,2007-11........................................ 176 5.1. CostaRica’sprogrammesandpoliciesinsupportofsustainable development.............................................. 225 5.2. EnvironmentalprovisionsinBITsandFTAssignedbyCostaRica.. 232 5.3. Climatescope2012:CostaRica’sperformanceonclimatechange investmentparameters .................................... 237 5.4. RenewableenergypotentialinCostaRica..................... 238 5.5. CostaRica’sPerformanceonTravelCompetitiveness ........... 241 5.6. GreeninvestmentincentivesinCostaRica.................... 244 Figures 1.1. Structureofindustrialexportsbyintensityintheuseoffactors ofproduction ............................................. 37 1.2. FDIinflowstoCostaRica,1990-2012.......................... 41 1.3. FDIinflowsasapercentageofGDPinCostaRicaandLAC forselectedyears.......................................... 42 1.4. CumulativeFDIinflows(2000-12)bycountryoforigin .......... 44 1.5. CumulativeFDIinflows(2000-12)bysector.................... 44 2.1. OECDFDIRegulatoryRestrictivenessIndex,asofDecember2012 72 2.2. OECDFDIRegulatoryRestrictivenessIndexbysectors,2012..... 73 3.1. Easeofdoingbusiness:regionalcomparison.................. 80 3.2. CostaRica’srankinginDoingBusiness2013................... 80 3.3. PolicydialoguewithinCINDE’soperationalfunctions........... 108 3.4. Bankcredittotheprivatesector(%ofGDP,2010)............... 156 3.5. CostaRica’sfinancialsystem................................ 157 3.6. Financialsectordollarization(2005-12)....................... 163 3.7. EvolutionofCostaRica’sEquityMarket....................... 165 5.1. CostaRica’sRenewableEnergyGenerationProfile,2012......... 235 5.2. Privateparticipationinrenewableenergygeneration........... 237 OECDINVESTMENTPOLICYREVIEWS:COSTARICA2013©OECD2013 7