 |
| Costa Rica's work force is
very educated and highly trainable in specialized
fields. |
| Courtesy ICE |
 |
| Costa Rica's capacity to
produce hydro-electric power is great, as eighty
percent of the country's energy comes from water. |
| Courtesy ICE |
 |
| Wind and sun constitute only
five percent of Costa Rica's energy source. |
| Courtesy ICE |
The Costa Rican Electricity Company (ICE) was created
back in the 1940s in order to better satisfy the needs
of the country and consumers. Bon & Cher, a company
that was present in most Latin American countries
at that time, supplied electrical services. Some time
later, in 1963, the law also nationalized telecommunications,
and ICE was granted the right to become the holder
of this service. Today, this large state-owned company
is the object of much discussion.
The heated speculations on what ICE’s role will
be in the future –when and how will it be privatized,
and will the government prefer to modernize it have
been going on in Costa Rica for as long as anyone
remembers. The current role of ICE is partially related
to and justified by the fact that the Costa Rican
model of governance is based on social democracy.
This is to say that the state is given a strong role
and it takes care of its citizens by providing all
the main services in utilities as well as in social
aspects, namely health and education.
Today, ICE seems to be well respected by Costa Ricans,
and even if the services are not always perfect, they
are equally distributed –well in accordance with
social democratic ideals.
Under international pressure deriving from rapid changes
in the telecommunications sector, ICE has felt cornered.
Not long ago, it was a widely accepted fact that foreign
capital and privatization were the only ways to become
efficient and keep up with the world trends. Costa
Rica underwent its share of proposals on how to define
the future of its telecommunications and electrical
services sectors.
Two years ago the Costa Rican Congress passed a law
that would have led to the privatization of ICE. This
did not satisfy Costa Ricans and demonstrations took
place all over the country, though primarily in the
capital, San José. According to Pablo Cob,
president of ICE, “People considered the law
to be destroying ICE and social democracy, and that’s
why the reaction was strong opposition and protests.
At that time, ICE had become a very loved and respected
old institution and had never presented serious cases
of corruption. In spite of investment restrictions
that had prevented us from giving 100% satisfaction
in both electrical and phone services, people still
wanted us, the government, to maintain the management
and ownership of the company.”
The decision to back out was taken considering the
opinion of Costa Ricans, as well as through the examples
of other Latin American countries that had privatized
their services in the 1980s. President Abel Pacheco
has a firm opinion on this as well, saying, “No,
we don’t want to (privatize), and this is because
people don’t want it either. We have to respect
what people want. ICE is a public institution, but
it does not mean that it is operating in a backward
way. Last time a President tried to privatize it (two
years ago), people went on to the streets to demonstrate.
I believe that you are not supposed to rule against
the will of your people. It would be cruel and unfair.”
Another opinion regarding the dilemma of a state-owned
company comes from the private sector representative
based in Costa Rica. “Normally when you privatize
a large state-owned company, there is a lot of growth
immediately afterwards, but then stagnation comes
–a kind of a hangover of privatization. But of
course there are now many private companies that are
well managed, like in El Salvador and Guatemala. In
Costa Rica, ICE has a clear five-year plan, and in
my opinion it has a good future at least in the short
term even without privatization. Maybe in the long
term, since that seems to be the trend in the world,
privatization is better, however.”
So, how does a giant state-owned company prove its
efficiency under scrutiny? According to Cob, some
measures of efficiency are the cost, coverage and
quality of services. At the moment ICE is offering
electrical and telecommunications services at some
of the lowest rates in Latin America. For example,
basic phone service rates are $5 per month, which,
according to Cob, are maintained through the fact
that no shareholder profits need to be generated.
Sources of ICE’s income include sales taxes,
and taxes to the government on the equipment, vehicles
and materials that ICE provides. In general, the government
receives 10% of what each customer pays ICE. This
year an agreement was established between the government
and ICE that the latter can invest all of its income
into further development.
Approximately 95% of Costa Rica receives telephone
coverage. This is one of the highest rates in Latin
America, and reaches many rural areas through microwave
links. The cellular market is considered medium-sized.
The installation of a GSM network, which started
this year, will most likely increase quite dramatically
the number of cellular subscribers, while maintaining
- or even reducing - the percentage of fixed line
owners. This has been the trend in many developing,
geographically difficult countries, where it is
oftentimes easier to get a GSM connection than to
have a fixed line installed.
Speeding up the connection
Investment opportunities in
the Costa Rican telecommunications sector lie mainly
in two areas: cellular services and the Internet.
Until now, the Internet has been accessed through
traditional ways, bringing a service whose quality
has been variable, especially in rural districts.
The Advanced Internet Project, started two years
ago, will allow Costa Ricans to access Internet
by DSL lines, enabling simultaneous usage of phone
service and Internet –an essential factor to
investors and companies. Naturally, it will also
bring Costa Rica closer to globalization by increasing
the accessibility and transparency of information.
The first tender has already closed, and the second
one closed in November. The total number of DSL lines
will reach 130,000 and by 2007 the DSL system will
be the prevailing means of accessing the Internet
in Costa Rica. The services will be provided by RACSA
(an ICE subsidiary) until the year 2017. Current costs
are a little over $50 USD per month.
Once completed, this project will bring Costa Rica
into the prestigious group of the five countries in
the world with the highest per capita DSL access.
Meanwhile, to prove that Costa Rica really follows
world trends, its congress has passed a law called
Digital Signature, giving a boost to E-commerce by
making soft documents as well as hard documents legally
valid.
The ICE president understands the urgency of completing
this project as soon as possible and is optimistic
about the timeframe. “We have invested almost
$80 million in this project, and it is in our interest
too to have the DSL system as soon as we can, meaning
a couple of months after the second tender closes.”
And, at least in this aspect, having a state-owned
company in charge of telecommunications is a plus.
Costa Rica has one of the best networks of fiber-optic
lines and the most extensive copper wire network in
Latin America, all owned by ICE. Due to technical
aspects, the new system will be faster, easier and
less costly installed this way. The new system will
cover the whole country, not just the most profitable
areas. After all, it goes back to social democratic
ideals – providing services equally to every
Costa Rican.
Installation of GSM-network
The other dynamic aspect of telecommunications is
the introduction of GSM lines. Right now Costa Rica
has 500,000 TDMA technology lines, and another 400,000
lines will be upgraded to the GSM system by December.
ICE has already purchased the majority of the lines.
The second tender will be closing in December, bringing
in another 600,000 lines. In total Costa Rica will
have one million GSM lines by next year, and by
the end of 2004 it will have one million and a half
lines. The installation, which takes places between
now and the year 2004 will eventually satisfy the
entire country.
A few of the advantages include having total national
coverage, roaming abilities with 160 countries, Internet
access at 64 bits a second, plus text messaging between
phones. The timeframe again is tight, and fines have
been imposed for those providers who might not fulfill
their part of the long process. The ICE president
is positive about meeting the deadline of the first
400,000 lines, and he wants them to be operating by
the second half of 2003.
ICE is looking forward to seeing bids from big names,
such as Motorola, Ericsson, Nokia, Alcatel, Siemens,
and possibly Nortel. Competition has been fierce.
However, the largest investment opportunities will
come from the issuance of licenses. For example, in
El Salvador the fifth license was recently sold for
$25 million. The license in Jamaica sold for even
more. Investors’ interest will be even more heightened
once the process reaches Costa Rica.
Renewable energy sources
Costa Rica is one of the richest countries in terms
of the overall variety of its energy sources. For
example, after Africa, Latin America has the greatest
potential in solar energy. Africa has a potential
6 kW per daylight hour for a square meter, and Costa
Rica has the potential of 4.5 kW per daylight hour
for a square meter, compared to Europe where it
is just one kW. Currently 97.2 % of the energy used
comes from renewable sources, such as river water,
volcano steam, wind and sun, and the rest 2.8% is
thermal energy. Hydro- electrical sources provide
80% owing to the multiple rivers of this mountainous
country.
Currently Costa Rica exports energy to Honduras and
Panama, and the future looks even more promising.
President Cob explains: "Today there is an interconnection
line between Guatemala and Panama. It is a very small
one but we already have money from Inter-American
Development Bank (IDB) for a newer, bigger line, which
we are going to start building next year. Our task
definitely is to export not to import.”
What President Cob refers to is the Puebla-Panama
Plan. This past summer Central American presidents
ratified a proposal that will connect countries from
Mexico to Panama. Right now, Costa Rica is the only
country which has the potential to export electricity,
but the plan will help to extend the distribution
even to the most remote areas. The IDB and the Spanish
Government will finance the plan, and the cost of
the network is estimated at $320 million.
Solar energy is used primarily in isolated communities,
but the potential is there. President Cob sees the
future of this proportion in five to ten year’s
time: “We think that we will maintain the same
proportion, and even if the hydro electrical potential
is still much bigger than what we already have, we
are also interested in conservation. Before initiating
any new projects we need to pass ten steps not to
hurt the environment.
One quarter of Costa Rica’s territory is protected
one way or another. The main attraction for tourism
is the country’s stunning, diversified nature,
and if that were ever to disappear, the tourist industry
–the main foreign currency earner – as well
as the whole economy of Costa Rica would be severely
damaged. At the same time, development sometimes requires
sacrifices; especially in countries where funds are
limited.
What worries many people is the destiny of the Pacuare
River. In 1985 it became the first designated Costa
Rican river to have a status of a protected zone.
The river is one of the best sites for hydroelectric
power and, according to the feasibility studies, has
a number of suitable dam sites.
Many of the tourism companies operating in the river
are for obvious reasons concerned about the river’s
future. One such company states, “The Pacuare
River is the most beautiful river in the world. The
whole issue of the dam is sensitive, and if it were
built, it would not only damage the image of Costa
Rica as a country that maintains strict protection,
but it would also damage the River, as has happened
in Turrialba. Right now we can offer river tours all
year around, but if the dam is built I don’t
know what will happen to this very popular product
of Costa Rican tourism – water sports.”
However, the decision to build the dam was taken long
before tourism had any impact on the Costa Rican economy.
Today, the situation is the opposite, and this is
why many are assured that, once more in-depth feasibility
studies are conducted, a fair decision will be made.
If the Siquerres Hydroelectric Project were completed,
it would inundate more than ten kilometers of the
river and its surroundings at a cost of over one billion
dollars. Certainly this presents a typical Costa Rican
case - development versus protection. No wonder the
river has hosted activists camps and witnessed several
demonstrations, with environmentalists claiming that,
besides other problems, a dam would damage the forest
and cause erosion.
Somehow the Costa Rican government, like any other,
needs tools to keep up with globalization and progress,
while attempting to increase the well-being of its
citizens. This is a difficult task in a world where
environmental values are often dismissed. |
