Nearshoring is a company’s process of transferring part of its business from a geographically distant country to one closer to its main place of operation.
In recent decades, many manufacturing and service companies have sought to establish themselves in various jurisdictions around the world to operate at a lower cost and diversify their production capabilities, in a process known as Offshoring. This trend was initiated by large American manufacturing companies in the late 1970s, mainly in Asia; however, what until now had been a convenient decision, as a result of the pandemic, became a risk factor due to the closure of total operations in these countries. Added to this is the Trump Administration’s position on China, and the trade war between the two countries.
It is in this context, the companies that had at some point opted for Offshoring, today are considering applying Nearshoring either to have more viable operations for their geographical location, time difference and stability for the business or to diversify risk and add another alternative to produce (China + 1).
Costa Rica has positioned itself for years in the attraction of Foreign Direct Investment, and that is why it offers the enabling environment as an excellent alternative for companies that are looking to relocate their manufacturing or services operations to the Americas.
Geographic location, a highly skilled workforce, a 98% literacy rate, political stability, the more than 14 free trade agreements signed, including the United States, China, and Europe, an attractive tax incentive system, and the recent invitation to join the OECD, are part of the elements that position Costa Rica as a strong candidate for attracting American companies seeking to do business from a jurisdiction that is closer to their needs.
In the global economic crisis environment, we can anticipate strong competition to capture or retain such projects, China itself is taking steps to prevent an investment leak, and there will certainly be many other countries on the hunt, but Costa Rica is already on the track. Timely actions by the Government to attract this investment would be decisive in achieving this task.