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| The refurbished passenger
terminal at the Juan Santa Maria International
Airport in San José |
| Courtesy Alterra |
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| Kimberly-Clarke chose Costa
Rica as home to two of its manufacturing plants.
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| Courtesy AMCHAM Costa
Rica |
Costa Rica, known for decades, if not for over a century,
as a Central American banana- and coffee- exporting
country, took an important step economically about
fifteen years ago. The government at that time realized
that it was very important for Costa Rica to become
more deeply integrated into the world economy. This
new policy initiated a very active campaign to attract
more foreign direct investment (FDI) and to diversify
the economy by launching non-traditional export products.
These two aspects were considered to be the main engines
of the integration effort.
The entities responsible for carrying out this task
are the Ministry of Foreign Trade’s Procomer
office, which promotes exports, and the Costa Rican
Investment Board (CINDE), which has been instrumental
in attracting foreign investors into the country.
Its most productive period was in the mid-1990s, when
it succeeded in attracting the Intel Corporation to
Costa Rica. Intel’s exports represented 25% of
the country’s total exports in 2000. The list
of other foreign companies moving to Costa Rica is
endless: Abbott Laboratories, Baxter, Trimpot Electronicas,
to mention few. Bridgestone Firestone decided to invest
a further $40 million this past summer.
Even more added value arrived in 2001 when Procter
& Gamble decided to locate its shared-services
center for the Americas in Costa Rica, and Western
Union opted to establish its financial center there
as well.
Costa Rica’s Minister of External Trade, Alberto
Trejos Zuñiga, confirms this new, global trend,
which no longer affects only factory workers, but
white-collar workers as well. This trend will undoubtedly
have a huge impact on the economies in so-called first
world countries, where costs are higher.
“There’s a very good number of transnational
corporations and companies who have chosen to do a
significant part of their white-collar work not in
their US or European headquarters, but in Costa Rica,”
said the Minister. “You see Procter & Gamble,
you see the Sea Land Maersk, and you see many companies
in that capacity or even some other companies like
Grupo Nueva, the leading company in construction materials.
That’s one area of business that we are happy
to grow. Normally they complement other industries
like electronics or medical devices or pharmaceuticals
or food processing. And all of these industries are
based on the high quality of human capital we have
in Costa Rica.”
Costa Rica also has the highest per capita exports
in software, and one local company, Artinsoft, managed
to attract two big named investors: Microsoft and
Intel.
Anabel Gonzalez, the former general director of CINDE,
and now responsible for Free Trade negotiations at
the Ministry of Foreign Trade, is convinced that the
new government will follow the same model of development.
“It has been a successful strategy for Costa
Rica so far. And although we may move from one product
to another or from one type of investor to another,
the core strategy continues to be the same,”
said Gonzalez.
Several months ago the United Nations published a
report based on its Conference on Trade and Development.
It chose six countries from around the world –
model examples of how to run private investment promotion.
Costa Rica came out as one of those six, the others
being: China, Mexico, Korea, Ireland and Hungary.
According to Minister Trejos, this is due to Costa
Rica’s reputation as a very stable country. “It
is easy to understand our system of investment and
export promotion. Even though we are not one of those
countries that will bribe you to decide and we don’t
offer special treatment, we give you good, fair, sustainable,
trustworthy treatment.” And this is why the World
Trade Organization has praised the Costa Rican economy
as well.
In the last five years over 65% of investors have
come from the US. CINDE’s main task is to identify
potential investors through their offices in the US.
CINDE primarily works to attract investors in four
sectors. Within three sectors - electronics, medical
devices and business services, such as for example
call centers, shared services centers, data developing,
data processing and software development - the approach
is proactive.
With the fourth sector, the work is more reactive.
It covers special projects, which basically refer
to any investor wanting to come to Costa Rica. Most
of the work in this area has been concentrated in
tourism, because the investment opportunities are
endless. So far, CINDE has supported the Institute
of Costa Rican Tourism (ICT) in specific projects
where they request assistance. The relationship between
CINDE and ICT is on going and negotiations are currently
in hand concerning further promotion of tourism and
investment opportunities – especially in the
area of hotels.
The first way to attract potential investment is to
look into the areas where most of it originates. Since
over 65% of investment comes from the US, a presence
there is vital. CINDE organizes different kinds of
events in different cities in the US using local partners
in areas of banking, consulting, and law. When a potential
investor is found, a presentation is made, and if
he wants to proceed, an agenda is set with relevant
government offices, other foreign or similar companies
and academic institutions. Basically, all necessary
care is provided in terms of whatever needs may arise.
Occasionally events in other countries are organized,
such as those in Europe and Latin America, since the
number of investors wanting to enter Costa Rica is
on the increase.
Oftentimes the most important task facing Costa Rica
is in making the world aware of its existence. Costa
Rica is primarily known for its tourism potential,
but even in this sector improvements can be made.
Roberto Tovar Faja, Costa Rica’s Minister of
External Relations claims that his country is often
confused with Puerto Rico. “It’s a challenge
for us to let people know that we are a different
country, and that we have a very high level of human
development,” says the Minister. “For us
it is always surprising that some tourists who come
to Costa Rica get malaria shots. Something that foreigners
should be aware of is that development in health and
education here has very high standards.”
According to Gonzalez Costa Rica is not as well known
as places such as Mexico or China. “However,
once we get past that, it gets easier. We have a very
high rate of potential investors coming into the country
who actually decide on the country.”
What are the incentives that make investors decide
to move to Costa Rica as opposed to some other country,
maybe even those with lower labor costs? Costa Rica
offers a very attractive package in terms of its investment
environment. The legal system works efficiently and
the taxation level can be attractive. Moreover, the
Free Zone legislation has proved to be very effective
when in the process of attracting investors. Costa
Rica offers also a good combination in terms of access
to foreign markets. Particularly the proximity of
the US market and being in the same time zone makes
it very easy to work in Costa Rica and be connected
with the US all times. This is why many US companies
have moved parts of their operation down to Costa
Rica.
“I think that if you stop any Costa Rican in
the street and ask: do you think foreign investment
is beneficial for the country, they will say yes,”
says Gonzalez. “And Costa Ricans also treat foreign
investors very well.”
Perhaps most importantly, Costa Rica boasts one asset
that many other locations cannot a very well educated
and productive labor force. According to Gonzalez
“We do not sell a cheap location. We sell a location
where you can find very good people, who are very
willing and eager to learn, with a good ability to
learn. And they learn rapidly and like to stay with
you. If you ask any US company here what they like
most in Costa Rica, they’ll say the people!”
When it comes to attracting investors, this is really
what distinguishes Costa Rica from many other countries
in the world. Costa Rica has invested in education
for many decades. Its literacy rate is equal to many
Western countries, if not higher. At present, about
6.5% of the nation’s GDP is devoted to education.
A few years ago a decision was made that the country
was going to emphasize the development of skills in
information technology. English is also widely spoken,
and more efforts are being directed towards making
Costa Rica truly bilingual. Such vision takes decades
of careful planning. The fact that Costa Rica maintains
no standing army has helped in the reallocation of
the government funds.
Asked what could be done to further improve the investment
climate, Gonzalez, like many others, refers to the
Costa Rican Institute of Electricity (ICE). This large,
state-owned company has the monopoly, not only for
electricity production and distribution, but also
for telephone and mobile services. Many heated discussions
have taken place regarding its future role (see separate
articles), and it seems likely the government will
modernize the ICE without undergoing privatization.
In most countries fixed lines are not necessarily
the target of competition, but rather the other
services, such as for example the cellular services.
In general, the nation’s telecommunications
services are of good quality. Occasionally, however,
long queues will form frustrating both foreigners
and locals alike. Gonzalez believes it comes down
to competition. “ICE is just a very big institution,
and when you don’t have competition it is more
difficult for it to be in tune with market demands.
It (ICE) works well, and there’s no major obstacle
when it comes to establishing a company, but we
would like to see some kind of competition.”
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