Grecia's Transition From Rural Town to Urban Center

Author

Spencer Barber
December 20, 2023

Why is a rural town in Costa Rica rapidly transforming into an urban center? 

Look no further than this guy.

Michael showing us how he put the free zone together

Michael held an equivalent position to a senator in Costa Rica.

Eight years ago, he instigated a change in how Grecia, Costa Rica, was zoned. Previously, Grecia and the surrounding region were part of the San Jose downtown district.

Michael removed the area from the downtown district, thereby allowing the creation of new free zones since the downtown district had already reached its maximum capacity for free zones.

This move was ingenious because many Costa Ricans were already relocating to the area to escape the city. Despite being outside the city, the access to the airport and other town amenities is reasonable (30 minutes away).

Three free zones have been established, with a couple more in progress.

The current three available free zones

Technically, other properties can be rezoned if they meet specific qualifications.

What are the benefits of the free zone?

Companies operate under the country's law-granted Free Trade Zone Regime—a leading fiscal incentive in the region. This regime allows firms to conduct tax-free operations for several years after establishment, contingent upon anticipated investment and recruitment levels.

Benefits include:

  • 12 YEARS: 100% EXEMPTION OF INCOME TAX

  • 6 YEARS: 50% EXEMPTION OF INCOME TAX

Companies meeting criteria—investment exceeding US $10 million and maintaining 100 employees—under this regime can secure an additional 12-year renewal upon reinvestment.

Incentives without expiration include:

  • 100% exemption on custom duties for imports/exports

  • 100% exemption on interest income (statutory tax rate at 8%)

  • 100% exemption on withholding tax for royalties and fees (statutory tax up to 25%)

  • 100% exemption on sales tax for local purchases of goods/services (statutory tax at 13%)

While I won't delve further into free zone details, it's crucial to note that several international companies have committed to these locations. The momentum surpasses what I previously mentioned in my earlier newsletter.

Drone footage we got last week showing the progress of a free zone

Why is this significant?

In the past five years, there has been substantial evidence of onshoring. Successful onshoring requires a stable government, a skilled workforce, and available space for constructing new facilities.

This location embodies the ideal combination, evident from its current momentum.

Although new jobs are emerging in this region, it's still in the early stages. Presently, residential land values don't reflect the anticipated surge in demand for the area.

Our objective is to acquire land in this vicinity at current lower prices and initiate the process of rezoning these properties for higher-density usage.

In the coming weeks, I'll disclose any properties I secure under contract. I'll also elaborate on the process of 'rezoning' these properties. Additionally, I'm optimistic about potentially unveiling new partnerships with local developers, although this is still a work in progress.