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Caribbean Management Talk

Costa Rica: The Human Capital Advantage

Author: Staff
Last Update: Aug 12, 5:08 AM ET

Pilar Madrigal
Costa Rica stands out as the only nation in Central and Latin America to have attracted foreign direct investment in manufacturing and services. That distinction seems even more unique, considering that most of this is efficiency-seeking FDI on sectors such as advanced manufacturing, medical devices and services.
CINDE - Costa Rican Investment Promotion Agency
Q: What are the unique characteristics of Costa Rica that foreign investors should know about?

Costa Rica’s tradition of peace and political stability, as well as a highly qualified labor force has made it a hub for foreign direct investment in specific sectors.

Costa Rica is a country with a population of 4.54 million people and the most stable nation in Central and Latin America. Costa Rica abolished its army in the late 1948, which allowed the government to focus its resources on training and educating its human labor force. This has resulted in the availability of skilled and educated talent for many companies around the world. The government, by constitution, has to allocate at least 6% of the GDP to education. There are 95 technical schools and about 60 universities. All in all, there is a strong focus on the development of the human capital. The secret of our success lies on our policy of investing in the development of our human capital. Today, Costa Rica has among the most talented labor force in the world.

In relation to our economic stability, currently the GDP per capita in Costa Rica is $6,520, almost three times as it was in 1991. Also, we have had a policy of having a very open economy and since decades ago we have pursued the policy of integrating the nation in the world economy and attracting foreign direct investment.

We have signed free trade agreements with the U.S., Canada, Mexico, Chile, the Dominican Republic, Panama, Central America and the Caribbean Community (CARICOM). Currently, there ongoing free trade negotiations with China, Singapore and the European Union. Therefore, these treaties and agreements have helped open our markets and expand opportunities for both Costa Rican businesses and workers as well as for foreign companies that want to use Costa Rica as a hub for services and operations.

Q: Why have multi-national companies chosen Costa Rica for investment?

There are about 200 multi-national companies that have chosen Costa Rica for their operations and it is mainly because of our track record. We have a talented and bi-lingual young workforce as we have a number of people who speak both English and Spanish. Furthermore, we have a preferential access to about a third of the world’s population and two-thirds of the world’s GDP; 90% of our goods exported are through our free trade agreements, our business climate, tradition of economic and political stability, as well as a developed infrastructure are other significant factors.

Another key point is that 93% of our energy is generated from renewable sources so we do not have to rely on imported energy sources like crude oil and natural gas for electricity. That translates on a very reliable and cost-effective energy prices. In addition, we have a reliable and advanced telecommunication infrastructure.

In terms of the quality of life, Costa Rica is ranked among the safest countries in Latin America and one of the top five environmental conscious nations in the world.

Q: Can you give us an overview of the various sectors and segments in the economy?

It is worth noting that at present 40% of our GDP is high tech manufacturing related. There is a significant change from the mid-80s when most of our exported products were perishable products like banana and coffee while today most of the products are high-tech related.

Our organization, which is a not-for-profit organization, focuses on efficiency-seeking foreign direct investment. Due to the advances made in the Costa Rican in terms of its economy and its availability of talent, the types of industries that have sought Costa Rica for foreign direct investment are specifically three – advanced manufacturing, medical devices, and services.

Foreign direct investment inflows have grown at an average of 22% since 2000. In 2008 we received about $2 billion in foreign direct investment. Foreign direct investment represents about 7% of the GDP and the FDI per capita in Costa Rica is $448 in 2008. Costa Rica ranks 2nd in Latin America in both indexes.

Q: How has the services sector grown in recent years?

The services sector is one of the most dynamic sectors right now. In 2000 we had five multi-national companies with their service operations in Costa Rica and by the end of 2008 we had 80 companies. To illustrate the growth in numbers, industry went from having 1061 employees in 1998 to 23,830 employees in service-related companies. Hewlett-Packard, IBM, Procter & Gamble, and Oracle are some of the companies that have chosen Costa Rica for their services operations.

The range of services include shared services, back office, contact centers, software development, architecture, design and engineering, interactive advertising and audiovisual design.

What is noteworthy is that even though 80% of the services are given in English, there are companies that are now able to offer some of these services in other languages such as Portuguese, French, Italian, German and a little of Cantonese and Mandarin. So there is a slow evolution into a diversification of language capabilities within Costa Rica.

Q: What are the leading Costa Rican imports and exports?

The five top imports in Costa Rica are petroleum-based products, integrated circuits and electronic microstructures, petroleum, automobiles, and pharmaceuticals and medicines. The exports are integrated circuits, computer parts, banana, pineapple and medical devices.

Q: How has investment from Intel helped Costa Rica?

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