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The seducers: as the tourism business continues to grow throughout the region, countries are competing fiercely to lure investors with fiscal incentives and guarantees.

Whether in the fascinating and varied landscapes of any of Costa Rica's 28 national parks, or in the monumental architecture in Cartagena de Indias, Colombia, both countries--like many others in the region--are certain of one thing: they want to exploit their natural landscapes and create policies that will increase foreign investment in tourism.

Governments know there is a lot of money at stake. Grupo Iberoestar for instance, the Spanish firm that has invested the most in Latin America, has already signed cheques for more than $1.5 billion.

Similarly Grupo Pinedo invested $1.1 billion. Yet governments and business leaders want more. It's now all about seducing investors. The battle for dollars has begun. Allan Flores, Costa Rica's tourism minister, was paying close attention to the representatives of the world's leading hotel chains during a conference involving Latin American tourism ministers and businesspeople, Cimet 2013, in Madrid. Flores said what the representatives wanted to hear: "We offer attractive fiscal incentives that would benefit investors." Flores explained that hotels could benefit from a discount of between 25 and 30 percent, while agencies could reap discounts of up to 95 percent.

Safety IS another factor to keep in mind. Flores is well aware of this, and to motivate investment towards his country, he emphasized that Costa Rica was ranked the safest country in Latin America by Latin Business Chronicle for 2011.

El Salvador's tourism minister, Jose Napoleon Duarte, boasted about his country's tourism growth. "We increased our available number of hotel rooms by 15 percent, while international tourist arrivals increased 6 percent over the last year." He also pointed to the major infrastructure projects currently underway in El Salvador, particularly in airports.

All has been reinforced by the tourism law reform, which has given new tourism investments a breathing space of five more years, from December 2010, to be considered as "tourism projects in the national interest" that qualify for fiscal incentives.

Moreover, the amount required to benefit from the reform was brought down from $50,000 to $25,000 in an effort to attract smaller companies.

One of the outstanding benefits is the exemption from income tax for up to 10 years, counting from the moment a company launches operations. Another benefit is a 50 percent discount on municipal taxes for five years. The investment laws also ensure freedom of transferring funds abroad.


Last year, Guatemala declared tourism a state policy, given its role as the country's number one industry. The vice-minister of tourism, Maruja Acevedo, pointed out that repatriation of profits is a competitive bonus in Guatemala's fiscal system.

Irrespective of which political party is in power in Guatemala, the nation's tourism strategy is one of sustainability, said the tourism minister, Nelly Karina Jerez. "We are totally open to business," she said. "All land that belongs to the government can be considered as suitable for investment." Jerez went a step further in her pitch by explaining the fiscal incentives for new projects, such as a seven-year income tax exemption and 12 years in the case of hotels.

Nicaragua's tourism minister, Mario Salinas, followed the same steps as his counterparts and highlighted the "powerful incentives" his country offers to investors.

The foreign investment promotion law eliminates restrictions on the way foreign capital enters the country.

The law also allows free currency conversion and withdrawal of capital. The tourism industry law for its part establishes the fiscal incentive framework. Once a project is approved through the foreign investment promotion council, the benefits are awarded for 10 years, which can be extended to a further 10 in case of reinvestment.

The long list of benefits includes many fiscal write-offs and discounts. For instance, up to 90 percent exemption of income tax and 100 percent in case of participating in the Paradores de Nicaragua project. It also includes exemption from real estate and sales taxes, applicable to services such as design, engineering and construction.


Over the last 20 years, international tourism to Cuba has grown at an average of 7.3 percent every year in hotel occupancy, and some 11 percent in the number of arrivals. In fact, since 2001, more than 34 million people have visited Cuba, of which 2.8 million arrived in 2012 alone. Despite these figures, which make Cuba the third most visited country in the Caribbean, the government has lots to do in terms of attracting investment. However, the country's tourism minister, Xiomara Martinez, showed she was aware of what is needed: "Foreign investment is well protected under a law that guarantees a transparent legal system," she said. Martinez added that Cuba has some good fiscal benefits and also guarantees the repatriation of earnings. With these guarantees, the Cuban authorities are looking to promote foreign investment to develop hotels and golf courses.

In keeping with those policies, the Cuban government needs to develop a political argument that can gain the trust of the United States. In a conversation with Latin Trade, Martinez acknowledged that the US embargo on the island does affect tourism development. "We have a natural market which is the United States, and that could boost tourism by up to 50 percent, but they don't come, and we've got used to living without them," she added.

Today, the world has turned its attention to the successful growth of Colombia's economy, which translates to an increase in foreign investment. This investment has never been far from the tourism sector. According to FDI Market estimates, during the first six months of each year from 2007 to 2011, Colombia received some $815 million in hotels alone. The foreign trade bank of Colombia, Bancoldex, designed a credit initiative that would finance investments and increase the added value of tourism services.

But the benefits are not just for investors and companies. Anybody who wants to pack their suitcases, lay in the sun and enjoy some margaritas on the beach can feel the benefits. How? Services offered in travel packages in hotels or local travel agencies are exempt from sales tax. What next?

Sergio Manaut reported from Madrid.
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Title Annotation:TOURISM
Author:Manaut, Sergio
Publication:Latin Trade
Geographic Code:3COLO
Date:Mar 1, 2013
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