Costa Rica Packaging Industry Overview (2013)

The import market for food processing and packaging equipment in Costa Rica has been contracting during the last several years, going down from $41.0 million in 2007 to a total of imported equipment of $24.4 million in 2010. Although total imports increased by 12.5% from 2009 to 2010, imports from the U.S. decreased by 0.4%, but it is expected to start increasing during 2011-2013, mainly because of the world economic crisis that stopped the private sector from investing in new equipment. Representatives of the private sector expect to invest in equipment in the next three years. Based on the total imports for the last three years (2008-2010), the average import market for food processing and packaging equipment in Costa Rica is $24.3 million per year. In the last three years, the U.S has been the largest supplier of food processing and packaging equipment for the Costa Rican market, accounting for 38.8% of total imports in 2008, for 38.0% in 2009 and for 33.7% in 2010. Other major countries competing in the market are mostly European countries, such as Italy, Germany, and Spain. There is also a good participation in the market of other countries, such as Argentina, China and Brazil. All these competitors have a good portion of the market mainly because they manufacture smaller equipment that adjusts better to Costa Rican industry than the larger equipment made by U.S. companies. European companies have improved their market position by using more dynamic and personalized marketing strategies. In addition, they possess the latest technology in several segments of the industrial food sector, such as production of pastas and macaroni, chocolate and confectionery (Italy), and sausages and beer (Germany), among others. However, a strong preference has arisen for the U.S. equipment, attributed to the excellent quality of the equipment, the exchange rate of the Euro and the proximity of Costa Rica to the United States. Domestic production of food processing and packaging equipment is not significant and does not represent much competition to imported equipment. Most local production is based on the free trade zone production that is nationalized and sold in Costa Rican territory. Domestic production is limited to small cooking pots (kettles), steel metal tables for production lines, molds for bakery production, metal frames for conveyor lines, small ovens and furnaces for bakery production, small storage steel tanks, and other small equipment that requires very little technology. Domestic production of this type of equipment is estimated to be about less than 2% of total market demand. The lack of technology and adequate infrastructure in the local metal-working industry will continue to limit domestic production of food equipment in future years. Exports of this type of equipment reflected in statistics provided by the Costa Rican Customs Directorate correspond basically to equipment that was originally imported into the country and later re-exported to other countries in Central America. Therefore, the total market size for food processing and packaging equipment in Costa Rica is reality very similar to the import market. Best Products/Services: Based on an interview with the Costa Rican Chamber of the Food Industry (CACIA), the Costa Rican industrial food sector is one of the country’s most stable sectors. Before 2008, the food sector traditionally experienced an annual growth rate from 3 to 4%, similar to the growth of the country’s GDP. This sector is expected to have an annual growth of 2-3% for 2011-2012. The sector is comprised of approximately 1,218 companies, of which more than 94% are considered medium -and small- sized companies (less than 100 employees). These companies are split among the many segments of the country’s industrial food sector. Only 6% of the companies are considered large. The chamber of food companies called Costa Rican Chamber of Food Industry (CACIA) groups has approximately 385 members and includes companies from the different segments of this sector. The local food industrial sector is quite diverse and includes many important segments such as dairy products, meat and sausages, poultry, bakery and bread, chocolate and confectionery, and beverages. Therefore, the type of equipment in high demand for the next three to four years is also very diverse. U.S. companies should be alert to the needs of the local food producers for new and used refurbished equipment. Automated food processing and packaging equipment currently in use in the entire sector is considered to represent around 40% of the market, while the other 60% is mixed with automated and hand-driven equipment. Some medium and small food producers purchase equipment from China and Taiwan due mainly to price, although the equipment from these countries generally does not meet the standards of high quality and reliability as those from the United States and European countries. Opportunities: U.S. manufacturers and distributors of food equipment should make efforts to be more adaptable to local market conditions, mainly as to the size of the equipment offered to this sector. Costa Rican food producers respond to a more personal approach, requiring equipment manufacturers to maintain direct contact with the local client through periodic visits, to provide quick and satisfactory responses to their requests, to provide good prices and flexible payment terms, reliable after-sale technical assistant and training, and to ensure availability of spare parts for maintenance and repair services. It is also expected that with the implementation of the CAFTA-DR agreement in 2009, local food producers will need to replace and upgrade existing equipment with more advanced and automated equipment, both for processing and for packaging, if they intend to survive and strengthen their position in the local market. Another benefit from CAFTA-DR agreement is the reduction on import duties for some equipment manufactured in the United States from 10% to 0% in ten years. Therefore, food processing equipment and machinery contained under the following HS Codes will pay an import duty of only 5.8% during 2011: • 841720: Bakery ovens. • 843710: Machines for cleaning/sorting/grading seeds/grains. • 843780: Flour and grain mill machines. • 843860: Machinery for the preparation of fruits and vegetables. • 842240: Packaging equipment-cardboard, plastic containers and bags or glass packaging. In other cases, such as cream separator equipment, HS Code No. 842111, the reduction went immediately to 0% import duties after the implementation of the CAFTA-DR agreement. There are no special requirements or impediments for the import of food processing and packaging equipment into Costa Rica. The market is free and open to any brand and technology. U.S. companies should also consider taking advantage of the openness of the Costa Rican market toward used refurbished equipment, especially for small to medium size companies. Resources: • Commercial Specialist: Victor.Cambronero@trade.gov • Costa Rican Customs Directorate: www.hacienda.go.cr • Cámara Costarricense de la Industria Alimenticia: www.cacia.org • Promotora de Comercio Exterior: www.procomer.com • Arancel Tica: www.hacienda.go.cr/tica/consultas/