Overview
The world economic downturn in 2008 brought a dramatic halt to a previously flourishing construction sector. In recent years the sector has begun to recover. However, in 2022 (Q3) area permits declined slightly (-.42%) as a result of lower investment in private sector industrial projects. However, in general 2023 the construction industry has come back.
Leading Sub-Sectors
The construction equipment’s market potential includes tractors, backhoes, shovel loaders, asphalt and concrete mixers, and dump trucks. U.S. construction equipment enjoys an excellent reputation in the Costa Rican market due to its high quality, the availability of spare parts, maintenance and repair services through dealerships, competitive pricing, and reliable ocean and air shipping services.
The building materials market has been shifting towards local materials, and imports continue to fall. The lower cost of locally manufactured building materials has fueled the increase in local production.
Opportunities
In 2020 there was a market increase in imported construction equipment. While construction of roads and highways during the pre-electoral period partially compensated for the decline of residential and commercial construction, overall construction declined by 2.1 percent. However, in 2022, based on construction permits issued, there was a 0.42 percent decline in overall activity. However, there was a notable increase in the housing and commercial construction sectors in the Central Valley and the tourist province of Guanacaste.
The United States is the second largest supplier of construction equipment to the Costa Rican market. Major competitors are Brazil, China, Japan, South Korea, Sweden, the U.K., Italy, and Germany.
Opportunities exist across a range of residential construction sub-sectors in Costa Rica. 2021-2022 residential construction recuperated due to new financing opportunities offered by public and private banks. During 2023 with an stable foreign exchange rate, bringing companies certainty in the cost of building materials, and construction credits have emigrated from U.S. dollar loans to local currency due to the risk of devaluation. Over 50 percent of permits submitted for new construction were for residential construction.
A good opportunity for U.S. companies in Costa Rica is the Expo-Construcción trade fair, which takes place annually in mid-February. The coming 2024 version will host several international companies, generating both global and regional appeal. For additional information contact Ms. Ivannia Mora at the Chamber of Construction at: camara@construccion.co.cr
Concessions Overview: A Demand Pull-through for Construction Equipment
The Government of Costa Rica uses the Public Works Concession Law for the development of large infrastructure projects. These projects include roads, highways, bridges, airport modernization, port improvement, rehabilitation of the railroad system, and water-wastewater systems, among other projects. The projects are offered to private local and foreign companies and consortiums through a public bidding process under the BOT (build-operate-transfer) concession scheme, as stipulated in the Public Works Concession Law.
A goal of the Chaves Robles administration (2022-2026) has been to revise the concession law to correct its loopholes in which companies can overcharge the Costa Rican government for design, construction, and operation of different projects. In late 2017 the Costa Rican government issued a new regulation that allows Public-Private Partnerships. This is expected to be widely supported, increasing overall investment in different infrastructure projects.
The Ministry of Public Works and Transportation has announced that it will be using new public tenders for the construction and maintenance of several roads delayed during pandemic. A list with 17 urgent projects has been announced with a total cost of $263 million. An additional project is the Pan-American highway from San Jose to San Ramon with a total cost of $65.7 million. Funding for the project will come from a joint trust between the government and Banco de Costa Rica funded fueled by toll collections on key roads.
Recently, the Costa Rica Government, jointly with Central America Bank of Economic Integration (CABEI), announced the “Ciudad Gobierno” project that aims to build more than 178,000 square meters of government offices. The project will be tender will be run by CABEI (owner of the buildings), and after 20-25 years CABEI will transfer them to the Costa Rican government. Total cost is estimated at $370 million. CABEI is fully supporting the investment which was to start in December 2023. The project will not start soon as the Controller’s Office has suspended citing illegality issues. The government will have a new bill proposal for 2024 in order to revamp the project during its term.
INCOFER (Costa Rican Railways Institute) has also announced a project to modernize the current freight operations serving the Caribbean corridor of the country with the goal of converting the train system to electrical. The project will include improving 260 km of railways, rebuilding a group of bridges, rolling equipment, and signaling.
U.S. Foreign Commercial Service Costa Rica has implemented the Deal Team initiative to help U.S. companies interested in participating in these infrastructure opportunities by providing market intelligence and support to connect with other interested companies and U.S. financial agencies. The Chaves Robles Administration has a stated interest in promoting infrastructure projects to reactivate the economy post-pandemic and recognizes the contribution of the sector to the local economy.
Web Resources
Cámara Costarricense de Hoteles (Costa Rican Chamber of Hotels)
Consejo Nacional de Concesiones (National Concessions Council)
Costa Rican Chamber of Construction
Costa Rican Customs Directorate
Ministry of Public Works and Transportation
U.S. Commercial Service Costa Rica
Ricardo Cardona - Senior Commercial Specialist
Email: Ricardo.Cardona@trade.gov