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| President of INCAE, Roberto
Artavia |
| Courtesy INCAE |
In the last 15 years of the 20th century Costa
Rica built an economic structure that should allow
it to grow sustainably and combat poverty very effectively
in the coming decades. Some of the landmarks of
this period were: the celebration of 100 years of
democracy; the award of the Nobel Peace prize to
President Oscar Arias; the investment by INTEL of
several hundred million dollars in a microprocessor
plant; the rise of Franklin Chang as one of NASA’s
most important astronauts in the last decade; the
introduction of IT and second language education
in all public schools; the effective diversification
of exports and markets that places the country as
one of the world’s leaders in per capita export
trade; the reality and international perception
of the country as a leader in biodiversity and its
effective management, and the placement of the country
as an international leader in ecotourism.
These – and many other – facts have
given Costa Rica international credibility and a
level of leadership that is unusual for such a small
country. Most importantly, they have given Costa
Ricans a sense of their own potential and the confidence
that overall success is reachable in a relatively
short period of time.
However, Costa Rica still faces very significant challenges
in its road to development. A full 20% of its population
lives under the poverty line, a percentage that hasn’t
changed in the past 10 years. National finances are
a challenge and seem to be stuck in place by a system
of concessions to a very large public bureaucracy,
public debt, and a system of government-run utilities
and services with limited growth and modernization
capabilities. The country is in many senses split
in two, with the very successful Central Valley ready
for international competition and globalization, at
the same time that international borders and portions
of the coastal areas concentrate poverty, illiteracy,
and economic systems that resemble more the plantation
economies of the mid-20th century than the knowledge-based
economy of the Central Valley.
So, what is needed for Costa Rica to leapfrog into
the 21st century? The answer to this question lies
in three fundamental steps. Many other things are
needed; but in strategic terms, dealing effectively
with these issues will launch the country into an
upward spin that will result in higher levels of prosperity
and distribution.
The first strategic focus is regional integration
with Central America and the Caribbean. A small economy,
Costa Rica needs to create a larger local market to
attract investments and to fully develop the potential
of many productive sectors. The Central American-Caribbean
integrated market, will turn a medium income country
of four million into a medium income market of 50
million, with more than 40 urban centers of importance,
with more than 75 billion dollars of aggregate consumption,
and the possibility of deploying corporate strategies
in which economies of scale, differentiation, segmentation
and niche competition are all feasible.
Being the most competitive nation in this region,
Costa Rica should lead the way to integration, a process
in which national authorities are already immersed.
In fact, Costa Rica has stepped forward in the last
year to accelerate regional integration and now has
free trade agreements not only with the Central American
nations, but also with the Dominican Republic and
Trinidad & Tobago, which have become the entry
points for a larger Caribbean agreement.
In the last few years there has been significant progress,
with specific actions to reduce the costs of doing
business in the region taking place, as are the integration
of customs, the deployment of regional logistical
and energy distribution infrastructure, private sector-led
integration of capital markets, and recent investments
by many international corporations in areas such as
telecommunications, generation and distribution of
energy, banking, and other key sectors in all nations
of the region. The consolidation of this integration
process should be one of the three national priorities.
The second priority should be to break local gridlock
around political and government systems that became
stuck in their past success and are having a hard
time adapting to the challenges of the new economy.
Costa Ricans are proud of their institutions, which
have allowed them to have one of the most developed
and widespread systems of telecommunications, electric
power, public health, public education (at all levels),
pensions for the elderly, freedom of speech, rule
of law, and representative democracy in Latin America
and in the world. Costa Rica is ranked way above
what its national income level predicts in human
development and welfare.
The new century will demand more flexible institutions
that can invest and react to the very rapidly changing
needs of the business sector and a more demanding
population. To achieve success in this area there
needs to be an agreement, implicit or explicit, on
the country’s development model so that decisions
at government level can be made around progress in
this model rather than on political gains for specific
groups. The current development model, to a great
extent driven by globalization and free trade, should
contribute positively to break gridlock, allowing
local institutions to change at a more rapid pace
and, more importantly, distribute the growing levels
of wealth better among the poor.
The third and final priority should be to sign a mutually
convenient free trade agreement with the United States.
The US already represents the largest and most important
market for Costa Rica. A free trade agreement becomes
a tool to assure local and foreign investors in Costa
Rica that the relationship between the two countries
(and the other nations of Central America) is stable,
that the rules of engagement are known to all concerned
and cannot be changed unilaterally by either country.
Some important principles dealing with the way the
economy is run will be an integral part of the agreement,
adding to the transparency that local and foreign
investors require for their operations. The government
of Costa Rica has already made the signature of CAFTA
its top trade priority.
The agreement with the US, along with the agreements
already signed and operational between Costa Rica
and Canada, Mexico, Chile, Dominican Republic and
Trinidad and Tobago, will provide local and foreign
investors with a truly unique business platform. From
highly productive Costa Rica operations can be designed
to exploit the integrated Central American-Caribbean
region as an efficient local market, as well as the
integrated North American market, offering one of
the largest and richest combined markets in the world
to its local and foreign business sectors.
One country and three priorities. All of them
already on the national agenda for the next few
years. Costa Rica seems as ready as ever to leapfrog
into the 21st century and become, very likely, a
true example of economic and social success for
all of Latin America.
Roberto Artavia is currently
the Rector (President) of INCAE, the leading school
of business in Central America, and was previously
Dean of INCAE's business school.
The Founding Director of
the Latin American Center for Competitiveness and
Sustainable Development, Mr. Artavia is currently
an international consultant to at least 12 governments
in Latin America, Asia and Eastern Europe in topics
of national competitiveness.
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