Costa Rica, literally meaning 'Rich Coast', is a small democratic country, sandwiched between Panama to the south east and Nicaragua to the north west. Part of the Spanish Empire until 1812, the country has had a more stable past in recent times than many of its neighbours, which has allowed steady economic growth.
Economy and cement market
Costa Rica has one of the largest economies in Central America1 and is a consistent high performer in the region in terms of its Human Development Index.2 It has achieved a considerably higher human development rating than countries with comparable incomes. In 1949 Costa Rica took the dramatic decision to abolish its army. Its neutrality and track-record of diffusing tension in neighbouring countries sometimes earns it the nickname 'Switzerland of Latin America'.
Costa Rica has a mature economy, with the service sector representing 72% of GDP in 2011, industry providing 22% and agriculture contributing 6%.1 The country exports tropical produce such as coffee, bananas and sugar, as well as beef, and imports manufactured consumer goods, petroleum and construction materials.
Costa Rica's primary trading partner is the United State. It sends 33% of its exports to, and receives 43% of its imports from that country.
The country's steady economic growth in recent decades has enabled a high level of infrastructure development compared to many of its immediate neighbours. Notably, the country has managed to achieve this growth while making stringent efforts to preserve its natural resources, flora and fauna. In the 1990s the country pioneered eco-tourism, which has reaped benefits for nature, residents and tourists.
Figure 1 shows how the economy has steadily grown year-on-year in the past two decades, with contractions in 1991 and 2009.3 Over the same period production of cement in the country has increased. Production has gone from 0.7Mt in 1991 to 1.1Mt in 1999, 1.9Mt in 2004 and 2.5Mt in 2008.4
In 2009 and 2010, this level of production plateaued as demand rose to meet new domestic capacity. Figures for 2011 are not yet available.
GDP | US$55.73bn |
GDP/capita | US$8676 |
Population | 4.63m |
Area | 51,100km2 |
Cement plants
Costa Rica has two integrated cement plants, which are both currently co-owned by major international cement producers, namely Holcim and Cemex.5
The Holcim plant, located at Cartago, was originally established as Industria Nacional de Cemento SA, (INCSA) and has been in operation since 1964.6 It was reported that the plant had a capacity of 0.4Mt/yr in 1994, 0.55Mt/yr in 1999 and 0.8Mt/yr in 2002.4
Throughout the 1990s Switzerland's Holcim acquired an increasing stake in INCSA and took its stake to over 50% in 2003. The company was renamed as Holcim (Costa Rica) S.A. in the same year.
The Cartago plant was extensively overhauled by Fives FCB with the installation of a new dry process cement line in the early 2000s.7 Fives installed a 3000t/day line, which is equipped with a zero-NOx precalciner. The plant now uses alternative fuels, such as liquid and solid industrial waste. The plant, commissioned in 2004, now has a capacity of 1.45Mt/yr. The new line is considerably more efficient than the plant's previous process. In 2005 Holcim recorded that the new line emitted only 545kg of CO2 per tonne of cement produced, well below Kyoto protocol targets and more stringent targets set by the producer itself.
In 2011 the cement Cartago plant reached an alternative fuel substitution rate of 22%. Electrical and energy-efficiency savings contributed US$600,000-worth of savings throughout the year.8
Despite falling sales volumes for the year, the company was able to control margins by cost-cutting, in line with Holcim's central policies. Production costs were cut by 4% year-on-year, despite higher electrical and fuel costs.
Cemex's named involvement in the Costa Rican cement market dates back to 1999, when it acquired 79.5% of domestically-owned cement producer Cemento del Pacífico for US$72m.9 This took its stake in the producer to 95.3%.
The plant was built by Edica Ltda. in 197910 and is located at Colorado de Abangares, close to the Nicaraguan border, with a capacity of 0.85Mt/yr. The plant provides strategic exports of around 0.1Mt/yr to that country, where Holcim does not have any cement production facilities.
In 2011 Cemex was awarded a contract as the primary supplier of cement for the first stage of the US$850m Reventazón hydroelectric plant project, which flows into the Caribbean.11 Cemex's scope involves 50,000t in the first phase. Cemex has seven concrete plants in the country, which will support it in this substantial undertaking. It is anticipated that the project will be complete by 2016.
Recent developments
In May 2012 Comcoas SA, which ground and marketed David-brand cement in Costa Rica, exited the country after five years of what it called 'legal harassment' since it entered the country in 2007.12
The case highlights Costa Rica's continued high levels of bureaucracy, which have generally been tolerated by firms until now. It is thought that this is the first time that a high-profile company has left the country for this reason. Comcoas even went as far as taking adverts in local media explaining its departure, in which it rapped the Ministry of Economy for not helping the company after a series of regulations inhibited the flow of clinker and other materials imported from abroad.
Future prospects
Costa Rica is forecast to experience economic growth of 5.5% in 2012, with inflation likely to register below this level for the first time in 20 years.13 Worries persist regarding its continued budget deficit, (ranked 169/212)1 and poor business environment (ranked 121/183,14 which currently limit the gains that improved GDP can bring.
Despite this, economic development persists and cement demand, having recently been met by new capacity, is gradually increasing. Large projects like the Reventazón hydropower plant development provide a solid baseline for retail cement consumption. Cemex has the potential to source additional cement from its current Nicaraguan export stock, should the need arise.
Notes
i. GDP, population and area data sourced from:
CIA World Factbook, 'Costa Rica', https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html, Accessed 13 August 2012.
ii. GDP/capita data sourced from: World Bank indicators website, 'GDP per capita (Current US$),' http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.
iii. Cement production figures sourced from: US Geological Survey website, 'North America, Central America and the Caribbean,' http://minerals.usgs.gov/minerals/pubs/country/latin.html, various reports.
iv. References
1. CIA World Factbook, 'Costa Rica', https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html, Accessed 13 August 2012.
2. United Nations Development Programme, 'Human Development Report 2010,' http://web.archive.org/web/20101108160356/http://hdr.undp.org/en/media/HDR_2010_EN_Complete.pdf.
3. World Bank Indicators website, 'GDP per capita (Current US$),' http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.
4. US Geological Survey website, 'North America, Central America and the Caribbean,' http://minerals.usgs.gov/minerals/pubs/country/latin.html, various reports.
5. PRo Publications International Ltd., 'Global Cement Directory 2012,' Epsom, UK, 2011.
6. Ticopedia website, 'Holcim (Costa Rica),' http://ticopedia.wikia.com/wiki/Holcim_Costa_Rica.
7. Fives FCB website, 'Cartago plant (3,000 tpd) Holcim (Costa Rica),' http://www.fivesgroup.com/FivesFcb/EN/References/Pages/Cartagoplant–Holcim(CostaRica).aspx.
8. Holcim (Costa Rica) S.A., 'Memoria Anual 2011 - Informe de la Presidencia y Dirección Ejecutiva,' http://www.holcimnews.cr/docs/memoria_anual_2011.pdf, 2012.
9. Cemex website, 'Cemex Annual Report 1999,' http://www.cemex.com/InvestorCenter/files/1999/Ar99full.pdf.
10. Edica Ltda. website, 'Edificio Cementos del Pacífico S.A. (Cempasa),' http://www.edica.co.cr/cementos_pacifico.htm.
11. Cemex website, 'Cemex to supply cement for construction of largest hydroelectric plant in Central America,' http://www.cemex.com/MediaCenter/PressReleases/PressRelease20110328.aspx, 28 March 2011.
12. Fijatevos website, 'Cement firm closes, charges legal persecution,' http://www.fijatevos.com/latest-articles/business-news/1482-cement-firm-closes-charges-legal-persecution.html, 4 May 2012.
13. Inside Costa Rica website, 'Costa Rica 2012 GDP growth forecast raised to 5.5%' http://www.insidecostarica.com/dailynews/2012/july/07/costarica120070704.htm, 7 July 2012.
14. IFC / World Bank, 'Doing Business in Latin America 2012' http://www.doingbusiness.org/reports/~/media/FPDKM/Doing%20Business/Documents/Profiles/Regional/DB2012/DB12-Latin-America.pdf, 2012.