Investment Opportunities According to Risk

(1) Certificates of Deposit in dollars through a state-run bank paying about 3 to 3.6 percent annually. Advantage: Your money is insured by the Costa Rican government and earns tax-free interest.

(2) Real Estate Advantages: If purchased at the right place and in the right location, you are assured your property will double or triple over the next 10 years. Areas such as the Central Pacific and Southern Pacific are booming. Real Estate Investment Trusts are also a good bet. Disadvantages: Overpaying or purchasing in a bad location. See the section in Chapter 3 and this chapter about investing in Costa Rican real estate.

(3) Certificates of Deposit in colones (local currency) from a government bank. Advantage: Pay about 20 percent annually and are insured. Disadvantage: Mini-devaluations give you a net annual yield of about 10 percent at the most. If there is a huge devaluation, you will lose a lot of money. This hasn't happened since 1982. The minidevaluations exist as a measure to prevent large devaluations.

(4) Personal Loans on Secured Property in dollars or colones. Advantage: Can earn up to 3 percent monthly in colones and hold a note on the property. Disadvantage: If borrower defaults, you might have to go to court to recover your property.

(5) Certificate of Deposit from a private bank in an offshore account. Advantage: You can earn a little more interest than through the state- run banks and investment is tax-free. Disadvantage: Your money will not be insured. Several private banks offer these types of investments. It is best to visit different banks and to shop around for the best interest rate.

(6) Starting a Foreign-Based Business. Advantages: You don't have to depend on the small local economy. Dependence on a larger market. You have a low U.S. tax liability if you use a Costa Rican or Panamanian corporation. An example of this would be an export or Internet-based business. Disadvantage: Not doing your homework and choosing the wrong business.

(7) Starting a Local-Based Business. Advantages: There are a lot of opportunities for entrepreneurs here. It is highly advisable to have prior experience in the venture you undertake. You should do a thorough feasibility study. Disadvantages: Not understanding the local economy, not doing your homework and thinking that what works abroad will work here. On the average, only three of 10 foreigners succeed here for a variety of reasons. There is a section in this chapter with details and advice about going into business in Costa Rica, including success stories and failures.

(8) Offshore Mutual Funds. Advantages: All the wonderful benefits of investing offshore with the peace of mind of knowing your assets are held safe and secure with a major New York Stock Exchange firm. By moving liquid assets offshore, you also achieve substantial protection from illegitimate creditors and financial predators and limit your tax liability. Disadvantages: Although mutual funds have more built-in safeguards than regular stocks, they are still subject to fluctuations in the market.

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