Costa Rica packs a punch in the world of free trade zones (FTZ). Since the start of 2022, the relatively small economy has beaten competition from bigger countries to become one of the world’s leading recipients of foreign direct investment (FDI) projects into FTZs, according to fDi Markets. One of its pioneers is property developer Zeta Group, which operates four FTZs in Costa Rica, including the country’s first privately managed FTZ which opened in Cartago in 1985. It also operates a FTZ in both western Nicaragua and Guatemala, the latter being the country’s first industrial FTZ.

Zeta Group’s CEO, Cesare Zingone, tells fDi what is next for Costa Rica’s FTZ strategy, central America’s drawcards for foreign tenants, and how to choose the ideal FTZ site.

Q: Costa Rica’s free zones are among the most sought after by foreign investors. Why?

A: For decades, the country has focused on developing its human capital, and it continues to specialise in science, technology, engineering and mathematics. This has made it a leader in medical devices, life sciences and electronic components, and it will continue to position itself in the future field of medical technology.

So, what’s next for Costa Rica? The US–China trade war and breakdown of supply chains during the pandemic has moved some production to this part of the world. Going forward, there will be a focus on making the machinery that produces these goods. We at Zeta Group, and Costa Rica as a country, are looking into this. When we analyse our tenants’ production processes, we find that most of the machinery comes from China and the Far East. So there’s an opportunity there to shorten the supply chain by receiving companies that produce that machinery.

Q: What are Guatemala’s and Nicaragua’s advantages for zone tenants?

A: Guatemala has proximity to Mexico. Companies in our FTZ mostly export to Mexico and North America, and are looking for lower labour and rental costs to make low-tech products. 

Lease commitments are also short, particularly compared to Costa Rica where our tenants sign contracts for up to 15 years, as they need to depreciate their investments.

With Nicaragua, the number of people employed in the country’s FTZ is almost the same as Costa Rica. Nicaragua also appeals to firms making low-tech products that are looking for low-cost labour and want a very short-term commitment, given the country’s complex political situation. Some of our tenants there renew their leases annually. 

Q: What are the key real estate features of a successful FTZ?

A: The big challenge is finding the right land — meaning land that is well-served by public infrastructure, mostly flat to avoid large earthworks, and has proximity to a skilled labour force available at the right price.

A key component is then finding anchor clients that you can build a cluster around. 

Q: Has Zeta adjusted its FTZ strategy since the pandemic? 

A: During the 2008 financial crisis, we were very proactive in getting closer to our tenants. During the pandemic we replicated that experience, including by adjusting or postponing rents, and that meant no tenants dropped out.

We also benefited from strong global growth in the warehousing sector, and took the opportunity to reimagine our parks by redesigning their masterplans. We started work on new buildings that meet the highest international standards and targeting the needs of high-tech sectors.

Q: There are close to 50 FTZs in Costa Rica. What sets Zeta apart?

A: We’ve been here for the longest time and we’ve shown adaptability. In the 1980s, Costa Rica was chosen by labour-intensive companies looking for low-cost labour. We’ve accompanied the country through its industrialisation and evolution towards attracting more capital-intensive, high-tech companies, as we see today.

We also understand the needs of the sectors we host, offering diversified clusters to ensure there is a local base of suppliers which generates significant cost savings for tenants. We are a family owned group that has managed our parks for decades, so we have a long-term relationship with our tenants. 

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence

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