OP-ED by Christopher Clarke — The Deloitte analysis is correct in suggesting that some tariffs make investment outside the US more attractive in general.
The restrictions on H1B visas will heighten this effect.
Uncertainty caused by abrupt US policy changes in general and attacks on green energy are adding to this trend.
There are major issues in Costa Rica that reduce its attractiveness for US investors.
Qorvo has announced closure of its plant here and relocation to Asia. Intel’s closure is another major blow.
Costa Rica is unattractive to foreign investors for several reasons. It has:
- The highest regional energy costs.
- Years of underinvestment in infrastructure have led to floods, landslides, congestion, and slow travel.
- Costs of employing locals, due to Caja (social security) charges.
- Security risks due to narco trafficking, road safety, and corruption. Important issues for US citizens, especially those bringing families.
Reuters reported that 30% of German companies planning to invest in the United States are postponing their decisions.
Some of these may move to other countries, some may simply be cancelled.
Indian nationals are the largest recipients of H1B visas and the obvious solution for corporations wanting to employ them is to shift investment to India.
Costa Ricans are unlikely to be significant H1B recipients.
Five Planned factories for electric vehicle and battery storage manufacture in Indiana, Michigan, Colorado, Oregon and New York have been cancelled. This is due to the end of federal subsidies via tax credits on e vehicles and the encouragement of more fossil fuel investments.
More than 17,000 prospective jobs in the US have been lost so far this year from such moves.
Some of these investments might be relocated to other countries, but many were dependent on an expanding US market for green vehicles.
Deloitte quoted projections for Costa Rican GDP growth. The way Gross Domestic Product is calculated masks the reality of economic growth or decline. It includes work conducted by inefficient employees in the state sector.
There are unnecessary, overpaid, or inefficient employees in ICE, Caja, RECOPE, municipalities and other such organisations.
Their pay is included in GDP. That is the same as including the pay of thousands of people paid to do nothing.
Corporations allow for depreciation of assets in their accounts.
This contrasts with GDP calculations. They do not deduct depreciation for decaying bridges, roads and other infrastructure.
Sadly, any motorist will attest to the mess Costa Rican infrastructure is in after years of neglect, corrupt repair contracts and badly planned investments.
Repairs after earthquakes, floods and other natural events count as growth using GDP, in reality they are just trying to maintain existing wealth.
In summary, it is difficult to make a general case for inward investment to Costa Rica.
There may be specific opportunities in fast food, tourism and other sectors. Potential further problems in Costa Rica and the world economy, add to the risks of these.
If a recession in the United States were to occur, the current boom in Costa Rica’s construction and tourism could prove a problematic bubble.
The opinions expressed here are those of the author and not necessarily the view of QCostarica.com and TheQmedia.com
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