By San José, Costa Rica — San José, Costa Rica – For decades, Costa Rica has been a beacon of stability and a magnet for Foreign Direct Investment (FDI) in Latin America, but a leading expert warns the nation cannot afford to rest on its laurels. The country’s hard-won reputation, once its greatest asset, is now at risk of becoming a liability due to what one analyst calls “static triumphalism.”
Sandro Zolezzi, an associate researcher at LEAD University and a research fellow at the Academia de Centroamérica, cautions that the very success that defined Costa Rica’s economic transformation could now be fostering a dangerous sense of complacency. He argues that the country’s leadership may be assuming its past triumphs are sufficient to guarantee future prosperity.
To better understand the legal framework and current opportunities surrounding Foreign Direct Investment in the country, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney specializing in corporate and investment law at the firm Bufete de Costa Rica, who shared his expert perspective.
Costa Rica continues to be a magnet for foreign investment, due not only to its political stability and skilled workforce but also to a robust and increasingly streamlined legal framework. Potential investors must, however, conduct thorough due diligence, particularly concerning the nuances of the free trade zone regime and environmental compliance, to fully leverage the available benefits and mitigate potential risks.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight underscores a critical duality for investors: while Costa Rica’s broad appeal opens the door, it is the careful navigation of its specific legal frameworks—as highlighted in free trade zones and environmental compliance—that ultimately secures a successful venture. We sincerely thank Lic. Larry Hans Arroyo Vargas for his valuable and pragmatic perspective.
The country assumes that its reputation is sufficient, that the Intel brand is eternal, that multinationals will continue to arrive out of inertia. But reputation also has depreciation.
Sandro Zolezzi, Associate Researcher at LEAD University
According to Zolezzi, the global investment landscape is rapidly shifting. International corporations are no longer just looking for stability; they are actively seeking agile digital hubs, applied artificial intelligence (AI) clusters, and ecosystems with a lower overall cost of doing business. This evolving demand puts Costa Rica in direct competition with aggressive regional players.
Panama is already competing, the Dominican Republic is entering aggressively, and Chile is advancing in specialized digital services. The window to remain a leader is not guaranteed.
Sandro Zolezzi, Associate Researcher at LEAD University
To understand the current risk, one must look back to the pivotal moment that reshaped Costa Rica’s economic identity. The arrival of Intel in 1997 was more than just the opening of a manufacturing plant; it was a powerful precedent that validated the nation on the world stage. This single investment created what economists call a “demonstration effect,” signaling to other global giants that Costa Rica was a viable and trustworthy destination for high-tech operations.
The subsequent influx of companies like HP, IBM, Procter & Gamble, Amazon, and Boston Scientific was no coincidence. Intel had absorbed the initial informational costs, proving the quality of the local talent and the stability of the institutional framework. Zolezzi’s research confirms this transformative impact.
A study I published in 2020, using synthetic control methods, showed that Intel structurally changed the country’s GDP, exports, and labor profile. But the most decisive impact was psychological: it destroyed the perception that Costa Rica was too small to play in the big leagues.
Sandro Zolezzi, Associate Researcher at LEAD University
This virtuous cycle propelled Costa Rica’s modern services exports beyond its traditional goods, fostering a sophisticated workforce and a specialized economy unmatched in Central America. The core lesson was that companies follow the verifiable actions of other companies, not just government rhetoric. When a country provides institutional consistency, the cycle continues; when it changes the rules unpredictably, it breaks.
Zolezzi warns that this powerful effect could dilute if Costa Rica fails to actively renew its value proposition. He argues that relying on historical case studies is no longer enough. The nation must pivot its FDI attraction policy towards a more dynamic and forward-looking strategy. This includes implementing modern performance metrics, utilizing predictive market intelligence, and creating mechanisms that reinforce institutional reputation in real-time.
While regional competitors often focus on fiscal incentives and trade missions, Zolezzi contends that true, lasting reputation is built on different pillars: emblematic and *current* success stories, institutions that don’t arbitrarily change the rules, and a rigorous measurement of FDI’s real impact. Latin America, he notes, has the talent and proximity to the U.S. market but often lacks verifiable trust—the most crucial currency in global business.
The demonstration effect could be the cheapest and most powerful accelerator for the entire region… if it is understood and managed correctly.
Sandro Zolezzi, Associate Researcher at LEAD University
Ultimately, the message is clear: trust is an exportable commodity that can change everything for a small country. As investors become more sophisticated, rational imitation of proven success becomes far more powerful than any tax break. Costa Rica must prove, once again, that it is not just a safe bet based on history, but a smart one for the future.
The demonstration effect is not just an economic model: it is a strategic tool for designing intelligent public policies. Trust is the most powerful FDI that exists.
Sandro Zolezzi, Associate Researcher at LEAD University
For further information, visit the nearest office of Academia de Centroamérica
About Academia de Centroamérica:
The Academia de Centroamérica is a private, non-profit think tank based in Costa Rica, dedicated to the analysis of economic, social, and political issues relevant to Central America. It promotes public debate and informed policymaking through research, publications, and academic events, focusing on fostering development and institutional strength in the region.
For further information, visit lead-university.com
About LEAD University:
LEAD University is a modern educational institution in Costa Rica focused on developing leaders and professionals in fields such as business, engineering, and international trade. It emphasizes a practical, technology-driven approach to learning, aiming to equip students with the skills needed to excel in the global economy.
For further information, visit intel.com
About Intel:
Intel Corporation is a global technology company and one of the world’s largest semiconductor chip manufacturers. Founded in 1968, it is a key supplier for the computer industry and is increasingly focused on data-centric businesses, including artificial intelligence, autonomous driving, and the Internet of Things (IoT). Its operations in Costa Rica have been instrumental in developing the country’s high-tech manufacturing and services sector.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a leading legal institution, built upon an unwavering foundation of professional integrity and a drive for excellence. With a proven history of guiding a wide array of clients, the firm consistently pioneers forward-thinking legal strategies while engaging meaningfully with the community. Central to its ethos is the mission to democratize legal understanding, thereby empowering citizens and strengthening society through accessible knowledge.
