AZOFRAS Opposes Any Attempt to Affect the Free Trade Zone Regime

• The Free Trade Zone Regime brings significant benefits to the Costa Rican economy.

AZOFRAS, May 23, 2025. The Costa Rican Free Trade Zone Association (AZOFRAS) categorically opposes any attempt to modify the benefits of the Free Trade Zone Regime, including income tax exemptions.

For AZOFRAS, the regime and its incentives have been essential in attracting Foreign Direct Investment (FDI), creating quality employment, and strengthening productive linkages that drive the country’s economic development. This opposition comes in response to recent recommendations from the International Monetary Fund (IMF).

According to AZOFRAS representatives, such discussions should not be addressed in isolation. Any decision in this area must be taken with a 360º vision, thoroughly analyzing all the factors that influence the global FDI context: geopolitical conflicts, trade tensions, monetary and fiscal policies, social movements, public policy shifts, among others.

“Our current context shows the importance of evaluating multiple factors before making decisions that could impact a regime that has proven to be highly profitable and strategic for the country—not only for its ability to attract FDI, but also for its contribution to formal, quality employment, the generation of productive linkages, and the boost to exports”, stated Ronald Lachner, president of the organization.

Thanks to its dynamism, the Free Trade Zone Regime brings significant benefits to the Costa Rican economy. Any attempt to weaken it would have a devastating impact on thousands of people and businesses that currently thrive, create jobs, and take advantage of the opportunities offered by this essential sector for the country’s development.

Acting as engines of economic growth, nearly 600 companies generate almost 300,000 direct and indirect jobs—well-paid jobs with salaries 1.8 times higher than the sector average. These companies also establish productive linkages with local businesses, strengthening the national economy through local purchases exceeding $6 billion.

As a result, the regime accounts for 14% of the country’s Gross Domestic Product (GDP) and 65% of exports. Additionally, for every dollar exempted for free zones, there is a return of $2.8—resulting in a net benefit of $1.8 per dollar to the country—clearly demonstrating its positive and direct impact on the national economy, social inclusion, and gender equity, as women make up 44% of the workforce in this sector.

According to Lachner, rather than focusing on taxes, in today’s context it is imperative that Costa Rica focuses on strengthening its competitiveness. Economic studies by the Organization for Economic Co-operation and Development (OECD) indicate that the country faces major challenges such as human talent development, closing skills gaps, bilingualism, infrastructure, among others. Only by decisively addressing these issues will Costa Rica continue to attract and increase foreign investment that positively impacts the lives of hundreds of thousands of Costa Ricans.

Regarding the global minimum tax, AZOFRAS emphasizes the need for extreme caution, as the international discussion is still ongoing. In fact, one of U.S. President Donald Trump’s first executive orders in January 2025 was to withdraw the United States from the initiative and instruct the U.S. Treasury to prepare “protective measures” against countries that have implemented—or are likely to implement—tax regulations that disproportionately affect U.S. companies. In addition, it was recently announced that a bill has been proposed in the U.S. House of Representatives to impose higher taxes—up to 20 percentage points—on foreign companies based in “discriminatory” countries applying OECD global minimum tax rules. “We reiterate that legal certainty and predictability are essential elements to sustain and strengthen Costa Rica’s position as an attractive destination for high-quality investment. We urge national authorities to defend the Free Trade Zone model as a proven and strategic public policy,” concluded the president of AZOFRAS.