The Central-American economies are relatively small, but as a sub-region, these countries are steadily moving towards prosperity. The sub-region has not only reduced tariffs and inequality, it's also increased exports, mainly through trade agreements with the United States and the European Union. Here are some of the reasons why Central America is on track to becoming a future big player.
Costa Rica boasts one of the sub-region's strongest social and political environments for multinational companies, and an exceptional work force. The country's stable mercantile and banking regulations combined with high standard modern services, create a secure environment for investors and corporations.
The second largest country in Central America is enjoying high levels of commerce and trade, due to its advantageous geographical location and its strategic free trade agreements with the USA, Central America and the Caribbean. Also, incentives for investors are worked in to government policy.
Over the last decade Panama has emerged as one of the leading countries in which to do business in Central America. It has built a robust economy and has a stable government. Panama is known as the largest Free Trade Zone in the western hemisphere thanks to the Panama Canal, its excellent geographical position and modern banking facilities. These have prompted more than 80 national and international banks to operate in the country.
The Dominican Republic hosts corporations from all over the world thanks its targeted social and educational policies. Located in the center of the Caribbean and at the crossroads of North, Central and the South American markets, it has a highly-developed free trade zone system. The Dominican Republic also has one of the strongest telecommunications sectors of the sub-region, making it easy to do business across all continents.
El Salvador, Guatemala, Honduras and Jamaica – the other countries of Central America – also have lots to offer. In fact, six of the eight nations participate in the CAFTA-DR Trade Agreement with the United States, with the objective of eliminating tariffs, reducing poverty, creating jobs and expanding regional opportunities among other things.
Some controversial reforms and actions are essential to continue strengthening Central American economies, and it's expected the countries will continue to move towards higher levels productivity and competitiveness.
Thinking of expanding to Central America?
Despite its status as one of the best-performing markets globally, there are of course challenges alongside the opportunities in Central America.
- Bureaucracy: Everything from opening a bank account to registering your company and gaining product approval can drag on for months. This is due to highly administrative and bureaucratic procedures.
- Labor environment: HR and payroll regulations vary across the countries, so these jurisdictions can never be categorised as one homogeneous whole.
- Tax compliance: A single tax misstep can trigger significant liability, and the ability to settle tax litigation claims is limited.
Key reasons why companies are choosing to invest in the sub-region:
- Institutional security and legal platforms, which allow for effective medium-term planning.
- The ability to adapt to – and adopt – the latest technologies.
- The productivity-versus-cost ratio in Central America is attractive for foreign companies.
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