Interview with Costa Rica’s Minister of Foreign Trade, Alexander Mora
What has your ministry done to boost Costa Rican exports?
Minister Mora: The first achievement that we can claim is that this government has accelerated the process for Costa Rica to become a full member of the OECD. The path to accession is well underway and will help improve the business environment in the country. Another important technical step was the ratification of the World Trade Organisation’s trade facilitation agreement. We are proud because we didn’t just sign the standard deal but actually created a unique agreement which involved the National Council of Trade Facilitation, a public-private sector trade-focused organisation.
One of our biggest achievements was completely unplanned. When Intel announced it was closing its Costa Rican semi-processor manufacturing plant, we saw around 20% of our exports disappear within one year. However, we managed to work with Intel to convince them to open an investigation centre that now employs approximately 2,200 Costa Ricans and is transforming our electronics industry. Last year our exports in goods grew by 8% while our services are growing at 12% so it is clear that we have a very dynamic export sector.
Independent assessment of this ministry and its associated agencies – Procomer for trade and Cinde for inward investment – also tell a positive story. Procomer, is ranked as the world’s most efficient trade office by the WTO’s International Trade Centre. Meanwhile, Cinde is regularly rated as the best investment agency in Latin America and the Caribbean. Finally the Ministry of Foreign Trade was recently given a 100% score by the national comptroller for the quality of its leadership. So I think that shows Costa Rica’s foreign trade effort is being well led on all fronts.
Costa Rica’s poor transport infrastructure is one of the biggest challenges for its exporters; will be fixed?
MM: The infrastructure is a challenge here. There are various different reasons for it. One of the most important was that past corruption scandals meant that Costa Rica decided to take a stringent anti-corruption stance. That has led to delays in implementing the type of public private partnerships that are needed to fund large infrastructure works. However, when you look at the infrastructure scandals in other parts of Latin America you can understand why Costa Rica took that path.
the Ministry of Foreign Trade was recently given a 100% score by the national comptroller for the quality of its leadership…
But it is important to note that we have had some successes. We are building a new container terminal on our Atlantic Coast port of Limon that will be five-times more efficient than the existing terminal. Meanwhile our Pacific Port, Calderas, is privately-run and very efficient. We have also made some progress with the roads, for example we are beginning work on a highway that will serve the new container terminal on the Atlantic. Another area of progress has been the border crossings and we are set to invest in upgrades on five key frontier points with Panama in the south and Nicaragua to the north. As for the airports, a British firm, Mott Macdonald, is currently working on a master plan for a new airport to serve the greater metropolitan area. Looking further ahead there are even more ambitious projects, such as the dry canal. So international businesses should feel optimistic that the transport infrastructure situation will improve.
What are the opportunities for LatAm INVESTOR readers?
MM: I think Intel is an excellent case study of what’s available here. The firm has been in Costa Rica for 20 years. For the first 18 years Intel operated a manufacturing plant in Costa Rica and for the last two years it has been an investigation centre. That shows that Costa Rica has a diverse offer. We are a not a big country, so operations here are never going to be about low margins and large scale. Instead we are a country of niches. Take agriculture for example. Costa Rica is a recognised leader in organic and sustainability, so it is the ideal place for niche agricultural producers that want to make a high-quality, value-added foodstuffs that have the best environmental and social standards.
The same applies to industry. Our electricity system is almost 100% renewable and is one of the most reliable in the world, which makes it a perfect fit for manufacturers who need a good power supply but also want to produce sustainably. Our most important asset is our workforce. Costa Rican workers are ranked highly in global tables for English speaking skills, innovation and general education, while the general business environment is praised for its quick adoption of global technology trends. That makes Costa Rica a great place for cutting-edge manufacturers, which is why we have seen huge growth in the medical instruments industry. It is a sector that is constantly innovating so it benefits from Costa Rica’s extra advantages.
Finally, I have to mention our services sector. In a few years Costa Rica’s export of services will outstrip its exports of goods and we are seeing growth in all types of services. Perhaps the most common is the corporate service centres, when multinationals place their administrative hubs here. Our entry in services was call centres but now they have mostly evolved to more advanced business processes.
It is worth noting that the successes of these different areas combine in a complimentary way to create an excellent ecosystem for international investors. For example the success of the medical industry prompted us to pass a new biomedical law that will pave the way for a medical trials service industry here. There are also other externalities, such as the protection of international property and the constitutional protection for international investors. Of course another big attraction is that firms based here have access to a huge market. We have free trade agreements with the US, EU and China, which gives us preferential access to markets worth 2/3rds of global GDP and approximately 2.8 billion potential customers.
How will Costa Rica’s trade have changed by 2021?
MM: In 2021 services will be make up at least 50% of Costa Rica’s exports. But goods exports will still be growing strongly. We had hoped to be fully carbon neutral by that year but it seems that our progress will be delayed slightly. But by 2021 we will see that Costa Rica has found a way to build the transport infrastructure it needs and several key projects will be in full swing.
One of the areas I am most hopeful for is the sea. Costa Rica’s maritime territory is ten times greater than its land surface yet our seas contribute just 3% to our GDP. This government recently reset the country’s maritime strategy by improving the fishing permit process and I am hopeful that by 2021 the country will be starting to see the benefits. Finally I think that our education system will have improved even further by 2021. One of the challenges implemented by this government is that all Costa Rican universities offer internationally accredited courses. We have realised that although we spend a lot on education, have one of the best rates of access in the world, we get less results per dollar invested than the OECD average. This government made the steps to fix that and by 2021 we should be able to see the res