OECD INVESTMENT POLICY REVIEWSCosta Rica’s experience

Alexandre de CrombruggheInvestment Division

OECD

• Context setting

• Costa Rica’s Investment Policy Review

• Importance of the Investment Policy Review

and adherence to the Declaration on

International Investment and MNEs for Costa

Rica

Content

Context setting

• A small country of

51,100 km2

• With 4.7 million

inhabitants (less than ½

of the population of

Seoul)

• Rich in natural

resources

• Strategically located in

the middle of the

Americas

• A middle income

economyo GDP: US $49.6 billion

o GDP growth rate :

3.5%

o GDP per capita (PPP)

$ US12,874

o Inflation: 3.7%

• With high social

progress and human

development indexes

(#1 & #10 in Latin

America, respectively)

• High adult literacy rate

(96.3%) and life

expectancy (79 years)

• And other high

rankings (2013)o #1 in education in

Latin America (WEF)

o #1 exporter of high

technology in Latin

America

o #3 per capita exporter

in Latin America of

products not related

to natural resources

About Costa Rica

Politicalstability and long-standing democracy

High human developmentand commitmentto education

Sustainableenviron-mental policies

A stable economy open to international trade and investment

Costa Rica’s key drivers

A stable economy open to

international trade and investment

• The country’s efforts over the past decades have

created proper conditions for high integration to

the world economyo Export platform of trade agreements provides

preferential market access to 57 trading partners

that represent nearly 2/3 of the world’s GDP

o 85% of the country’s exports and imports are covered

by these agreements

o Costa Rica is an active participant and supporter of the

multilateral trading system

… and an open and transparent

legal regime for FDI

Foreigners and nationals are granted equal rights by constitutional mandate

Limited exceptions to national treatment are established by law

Access to information is guaranteed by the Political Constitution

Free transfer of funds

14 bilateral investment treaties in force and 11 FTAs with investment provisions in force

Main effects of FDI in the economy

Costa Rica’s Investment Policy Review

Rationale

Why is an Investment Policy Review useful?

• Deep examination of the country’s investment policies

• Benefit from the best practices and experiences of advanced economies to address challenges

• Contributes to promote reforms in key areas

• Prior step towards adherence to the Declaration on International Investment

• Forms part of Costa Rica's engagement with the OECD

Process: main steps

March2011

• Letter from Costa Rica requesting adherence to the Declaration

October2011

• Costa Rica was invited to adhere to the Declaration, subject to the IPR

Jan 2012 – May2013

• Preparation of the IPR report

June 2013

• Presentation to the OECD Investment Committee

July2013

• Approval by the OECD Council of Costa Rica’s adherence to the DIIEM

Sept 2013

• Exchange of letters and formal adherence to DIIEM

• Launch of the IPR report

Process: participation of a wide range

of stakeholders

Ministries

Publicentities

Regulatorybodies

Privatesector

NGOs

Academia

Main findings: FDI Restrictiveness

Index

OECD average

NON-OECD average

0.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

Ch

ina

Sau

di A

rab

iaIn

do

ne

sia

Jord

anIn

dia

Jap

an

Ne

w Z

eal

and

Me

xico

Mal

ays

iaTu

nis

iaR

uss

iaIc

ela

nd

Can

ada

Mo

ngo

liaK

azak

hst

anK

ore

aA

ust

ralia

Isra

el

Ukr

ain

eP

eru

Au

stri

aU

nit

ed

Sta

tes

Bra

zil

Swit

zerl

and

Kyr

gyz

Rep

ub

licN

orw

ay

Turk

ey

De

nm

ark

Po

lan

dC

hile

Mo

rocc

oLa

tvia

Egyp

tU

nit

ed

Kin

gdo

mSw

ed

en

Cze

ch R

ep

ub

licSo

uth

Afr

ica

Ital

yC

ost

a R

ica

Hu

nga

rySl

ova

k R

ep

ub

licFr

ance

Ire

lan

dLi

thu

ania

Be

lgiu

mG

ree

ceA

rge

nti

na

Co

lom

bia

Ge

rma

ny

Esto

nia

Spai

nFi

nla

nd

Ne

the

rla

nd

sR

om

ania

Slo

ven

iaP

ort

uga

l

2012 FDI RR Index

Source: OECD

Closed = 1; Open = 0

Key challenges

Managing and developing infrastructure

Modernizing and enhancing private participation in the energy sector

Streamlining procedures

Building further human talent

Strengthening linkages between domestic companies and MNEs

Establishing the National Contact Point

Compliance with OECD

Guidelines on RBC - examples

• Comprehensive legislative and institutional framework

• Adopted most UN human rights instruments

• First country to adopt binding jurisdiction of Inter-American Court of Human Rights

Human Rights

• Core labour rights guaranteed by the Constitution and 1943 Labour Code

• Ratified eight fundamental conventions of the ILO

• Several FTAs contain labour standards provisions(CAFTA, EU-CAAA)

Employmentand industrial

relations

• Party to Inter-American and the UN Convention against Corruption, participates in review mechanisms

• Strong legal framework and independent oversight bodies

• Independent oversight of public procurement systems

• Constitutional protection of right to information

Combating bribery, bribe solicitation

and extortion

Importance of the

Investment Policy Review

and adherence to the

Declaration for Costa Rica

Importance of the IPR for Costa

Rica

Serves as a tool for dialogue with potential investors and relevant actors

Provided comparative data on FDI restrictiveness of the country

Evaluated effectiveness of initiatives underway to address challenges

Objective assessment that can be used to inform discussions in the country regarding reforms

Provided opportunity to articulate different policies and actors in responsible business conduct

Benefits of adherence to the

Declaration

Ensure national treatment to investors from adhering countries

Strong signal to investors of the country’s commitment to a stable and transparent investment framework

Participation in IC as an associate allows interaction with OECD members regarding best practices and potential tools/ experiences to address key challenges identified in IPR

Thank you for your attention!