, Costa Rica Emerges as a Nearshoring Hub in Latin America

Costa Rica Emerges as a Nearshoring Hub in Latin America

In a global context marked by the pursuit of supply chain efficiency and geographical diversification, Costa Rica has emerged as a strategic destination for nearshoring in Latin America. According to the recent JLL report, “Nearshoring – Unveiling Latin America’s Potential,” Costa Rica stands out for its favorable business environment, highly skilled workforce, and political stability, establishing itself as a key hub for global companies, particularly in the life sciences and technology sectors.

The report highlights Costa Rica as one of the most business-friendly countries in the region, thanks to its political stability and commitment to transparency. This is reflected in the country’s high ratings in key indicators such as country risk and ease of doing business. Costa Rica has fostered an environment conducive to foreign investment, supported by a competitive tax regime and a range of incentives for international investors.

A Hub for Life Sciences

Costa Rica has become a regional center for life sciences, attracting global companies like Boston Scientific, Johnson & Johnson, and Pfizer, which have established significant operations in the country. The availability of a highly skilled workforce, with over 60% of workers holding university degrees, has been a key factor in this attraction. Additionally, Costa Rica’s commitment to sustainability and environmental conservation aligns with the corporate sustainability goals of many of these companies.

Leading companies such as Roche, JLL, and Equifax have invested millions of dollars in establishing their shared services centers and operations in Costa Rica, capitalizing on the country’s advantages in operational costs and proximity to North American markets. The continued expansion of these operations is a testament to Costa Rica’s success in attracting and retaining foreign investments.

The report evaluates various Latin American markets based on several key indicators, including the business environment, foreign investment history, labor availability and cost, real estate infrastructure, proximity to the U.S., and logistical performance. The results highlight key players in each dimension, presenting case studies such as Costa Rica’s Life Sciences Center, Mexico’s industrial cluster, and Guatemala’s appeal for process outsourcing.

Key Findings

  1. Mexico stands out for its unparalleled location and economic size, serving both as an export hub and a destination market.
  2. Brazil combines the best logistical performance with the largest economy and population in the region.
  3. Costa Rica and Chile excel in their favorable business environments and established foreign investment ecosystems.
  4. Panama emerges as the logistical center of the region.
  5. Colombia shows strong performance across multiple dimensions.
  6. Argentina and Peru are notable for their skilled and affordable labor.

Rodrigo Torres, JLL’s Director of Research for North Latin America, notes: “This report should be viewed as a data-driven overview of the various opportunities that Latin American countries offer. For specific relocation cases, JLL recommends a thorough analysis that considers the company’s specific priorities, supply chain configuration, and industry requirements.”

Which Countries Would Benefit Most?

JLL cites an IDB analysis estimating the potential increase in exports to the U.S. due to nearshoring. Mexico is expected to be the primary beneficiary with approximately $29 billion in additional annual exports. Relatively, Panama, the Dominican Republic, Colombia, and Peru would see double-digit increases in non-traditional exports due to this trend.

Benefits of Nearshoring

Nearshoring offers significant advantages for companies considering expanding or outsourcing their operations in Latin America. Firstly, cost efficiency is a major benefit, as wages and operational expenses in Latin American countries are generally lower compared to developed markets.

Nearshoring also facilitates greater cultural alignment and provides opportunities for talent development, as similar time zones and cultural nuances lead to better collaboration and understanding.

Additionally, nearshoring allows companies to optimize supply chains, reduce delivery times, and improve customer service by being closer to the end market.

Challenges and Opportunities

Companies looking to leverage nearshoring in Latin America must consider challenges such as water scarcity, energy reliability, and security, particularly in countries like Mexico. However, the opportunities to enhance supply chain efficiency, reduce delivery times, and improve customer service make Latin America an attractive option for nearshoring.

Notable Case Studies

  1. San José, Costa Rica: Transition from call centers to Shared Services Centers for major corporations like Roche, Equifax, JLL, and Pfizer. Companies are investing significantly in infrastructure and employing thousands of people. Costa Rica has become a preferred destination for life sciences companies due to its skilled workforce, political stability, and commitment to sustainability.
  2. Mexico: The automotive industry leads the nearshoring trend, attracting significant investments from companies like BMW, Ford, and Honda due to tariff stability and reduced transportation costs. Additionally, Mexico’s proximity to the U.S. allows for shorter transit times and lower shipping costs.
  1. Guatemala: Emerging as a regional hub for call centers due to low real estate costs and affordable wages, attracting companies looking to optimize their business process operations.

Impact of Nearshoring on the Region

Nearshoring offers a unique opportunity for U.S. companies considering relocating their operations to Latin America. Northern Cone countries like Mexico and Guatemala offer shorter distances to the U.S., resulting in shorter transit times and lower shipping costs. However, the region faces logistical challenges that need to be addressed to fully capitalize on these opportunities.

JLL’s report demonstrates that Latin America presents a unique opportunity for companies seeking to diversify their production locations and minimize operational risks. With key markets like Mexico, Brazil, and Costa Rica leading the charge, the region is well-positioned to attract foreign investment and foster economic growth.

Source: Vida y Éxito

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