Interview with Carlos Alvarado, President of Costa Rica

October 23, 2018

How will you strengthen the relationship between the UK and Costa Rica?

President Alvarado: It is low-hanging fruit because there are strong bonds and shared values that we are not using at present. Costa Rica has a lot of English speakers, which makes it easier to communicate, we have similar democratic values as we are the oldest democracy in Latin America, we respect the rule of law, just like in the UK, and we believe in commerce and business. So, we have a lot in common but until now the focus of both countries has been elsewhere. However, I believe that following Brexit there is a real opportunity for Costa Rica and Great Britain to move forward quickly with a bilateral agreement that can help make us a platform for UK investment in the region.

There is also a shared history that binds the two nations. A century ago we were important trading partners and there has been a lot of cultural interchange between us also. For example, I’m a Chevening Scholar and enjoyed studying in the United Kingdom. Finally, it’s worth noting that a lot of our goals as a government, such as climate change and human rights are important themes for the British public too.

Bureaucracy and red tape stymie new road projects; how will you overcome this to fix Costa Rica’s infrastructure deficit?

PA: We’ve committed to a $4billion road infrastructure plan for the next four years, where we will be building new highways or upgrading existing ones. The building work will begin in 2019 so we’re confident we can cut through the bureaucracy. One way we are doing that is by forming special teams to ‘ferociously follow-up’ on stalled projects. I like the phrase because I think that aggressive project management is the way to ensure that we push initiatives through the state machinery. We’re also rewriting the regulations and executive manuals for public sector bodies to streamline their processes.

In 2021 we will start the first electric railway service for the metropolitan area, while in the same year we will also begin the construction of a cargo train that goes from the port of Limon, in the Caribbean, to the multimodal cargo station in the centre of the country. In February next year the new container terminal in Limon will open and within the next five years work will begin on our Pacific Port in Caldera to boost our trade with Asia. But our infrastructure programme is not just focused on transport as we also will kickstart investment in a portfolio of social projects, such as hospitals and schools.

Our commitment to infrastructure is demonstrated by the fact that despite our fiscal constraints we managed to allocate $4million to strengthen the public agency that manages public private partnerships.  Also, it’s worth noting that here in Costa Rica we already have some familiarity with the PPP model. We have two airports operating under a PPP concession, while the new APM Terminals port in Moin and the Route 27 highway are other successful examples. So, we plan to use $4billion of public money to get these new projects started. We realise that Costa Rica needs infrastructure straight away, so the quickest way is for public money to be used to build the project. But then the management and operation can be handed over to the private sector through a PPP. This means that while we are building the infrastructure we can also develop the legal framework for the PPP tenders. By the end of my term in 2021, we will see PPPs being used to build or operate infrastructure projects in Costa Rica.

Austerity measures always reveal the cracks in a society; are you worried that your administration will preside over a period of social discord?

PA: The most important is the message I can give LatAm INVESTOR readers is that we are determined to solve the fiscal situation. This government is not going to avoid a problem that’s been there for almost 20 years. Our economy is growing strongly but we need to fix the fiscal deficit. One reason is that if it is left unsolved it will lead to crisis. But also, because fixing it then lays the foundations for further development, which should be the goal of any Costa Rican government.

The strike has petered out. All of the unions, apart from education, are now back at work. Moreover, as a government we knew that passing the fiscal reform was always going to raise some opposition and we were prepared to answer it by democratic means. The period of strikes reflected well on Costa Rica because it showed how we can resolve these disputes peacefully and democratically.

So no, I’m not worried about discord – I’m worried about solving things. Avoiding those kinds of issues and papering over the differences is what brought us to this point and I’m not about to repeat that mistake. I know it has political costs but I am willing to pay them. In this government we feel we have a duty to be responsible and fix the foundations of our economy for the sustainable wellbeing of our society.

Global commerce is changing – from Trump’s trade wars to Brexit; how will Costa Rica adapt to the new scenario?

PA: Diversification is the answer. The US is our main trading partner, and a very valued one, but clearly there are opportunities in many other markets. The key to our success is adding value. As a small country committed to high standards we cannot compete on volume or price for most goods. However, our production comes with certain values that appeals to a niche of consumers, many of whom are in the UK. Our electricity is 99% renewable, which means our exports are environmentally friendly. We’re working towards being the world’s first carbon neutral economy, which is a big factor for many companies. All of our workers are protected by a generous social security net, which is above the standards required by fair trade. The same applies to our tourism industry. We receive 3 million visitors per year but our goal is not to get the highest numbers possible but to attract people who share and appreciate our values. Costa Rica is not the cheapest destination but tourists that love the environment, nature and wildlife are prepared to pay more to visit a country that does its best to conserve it.

Costa Rica has often been critical of Sica; how do you hope to improve the organisation?

PA: Sica is complicated because on one hand you want to help and be part of regional common project but on the other it becomes very difficult when you have the Nicaraguan situation where an estimated 400 people were killed in the recent unrest. It is hard to have a common enterprise when democracy is at stake. My efforts will be concentrated on emphasising the importance of strong democratic institutions, freedom of the press and the rule of law. These are essential to the wellbeing of citizens but also matter to your readers because it’s hard for companies to grow when there is a threat to those basic principles.

Where are the investment opportunities in Costa Rica for British firms?

PA: We have a large med-tech cluster here in Costa Rica that manufactures all manner of medical devices. There are a range of companies that make everything from heart stents to prothesis. We’ve also seen exciting some medical software and data services being developed here. For example, our social security system, which is like the NHS, now has a fully integrated digital patient record system. That’s just one example but there are exciting opportunities across a range of services. Lots of US companies have their global business service centres here because of the excellent human talent available.

The environmental theme is also very interesting for British firms. Costa Rica is recognised as a pioneer in combatting climate change and in the recent Paris Agreement, we volunteered to become a national laboratory for economic decarbonisation. The world can learn from our efforts to become carbon neutral. However, we still have challenges in this regard, for example 70% of the energy used for our transport sector comes from fossil fuels, so we would be eager to work with international partners to change that. British companies with exciting environmental technologies should come to Costa Rica to develop them.