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Costa Rica has committed to continuing efforts to promote and improve its IT sector. A lot has been accomplished, but there is still room for improvement. To illustrate, below are the most important strengths and weaknesses characteristic of Costa Rica’s IT sector at the present time.
Strenghts50
1. Highly educated, skilled, easy to train and productive human resources.
Costa Rica has the highest United Nations’ Human Development Index among developing nations and one of the highest literacy rate of the American Continent (95%). The abolishment of the armed forces in 1949 freed resources that have been invested in free education and health services for the population. Education is state-sponsored and compulsory until the 9th grade. Strong emphasis is placed on English and computers since early grades. The National Training Institute (INA) offers free technical training in many fields. Several technical schools and universities prepare professionals with the highest international standards. These institutions offer various levels in electronic, electric, mechanical and industrial engineering.
2. Political, economical and social stability.
Costa Rica is the oldest and most stable democracy in Latin America. Its high living standards, education tradition and free health system granted is the highest United Nations Human Development Index among all developing nations. Costa Rica is among the tree countries with the longest life-expectancy rates in the world (76 years). It also has one of the lowest infant-mortality rates in the world (1.36%), and the highest literacy rate of the American Continent (94%). Last, but not least, the Government encourages foreign investment. Guaranteed by law, foreign corporations can fully own and control their assets, as well as repatriate their capital without restrictions. As a result, Costa Rica has an excellent ranking as a low risk country.
3. Economic freedom.
According to the Index of Economic Freedom by the Heritage Foundation of the Wall Street Journal, Costa Rica is the fifth freest economy of Latin America.
4. Strategic location and preferential market access.
Costa Rica is in the middle of American Continent. With ports on both the Pacific and Atlantic oceans, it serves as an operations base for world markets. Also, Costa Rican products enter duty-free to the U.S. through the Caribbean Basin Initiative, to Europe through the General System of preferences, and to Central America and Mexico through bilateral free trade agreements. Currently, Costa Rica is working to obtain NAFTA parity and sign and agreement with Chile.
5. Export-oriented infrastructure, reliable power and advanced telecommunications.
Costa Rica maintains an outward-oriented, export-led development, allowing the economy to grow at a healthy average annual rate of near 5 percent GDP growth over the 1986-96 period. Even though the national telecom and power provider are state owned monopolies, they provide quality services at low prices.
6. Attractive tax and other incentives.
100% exemption on import duties on raw materials, components and capital goods;
100% exemption on taxes on profits for 8 years, and 50% for the following 4 years;
100% exemption on export taxes, local sales and excise taxes, and taxes on profit repatriation;
100% exemption on municipal and capital taxes;
No restrictions on capital repatriation or foreign currency management;
Fully expedited on-site customs clearance;
Can sell to exporters within Costa Rica;
Can also sell up to 40% in the local market.
7. Free professional assistance from CINDE.
The Costa Rican Investment and Trade Development Board (CINDE) assists foreign corporations in efficiently establishing their operations in Costa Rica’s free trade zones. CINDE, a private, nonprofit organization, has expert personnel who provide complete, updated economic and business information, prepare custom-design visits to the country, help in the initial contact with suppliers and professionals, and follow-up to establish the operation. These services are provided free of charge.
8. International Recognition
Costa Rica is ranked 3rd in Latin America in the Technology Index for the quality of its environment for innovation, the capacity to receive international technology and export goods with technological content, and the degree of assimilation of new information and telecommunications technologies. The country is It is also among the 30 leading exporters of high-tech products in the world. (Global Competitiveness Report 2001).
Weaknesses
1. Telecom is a still a state owned monopoly.
This entails several important consequences. First, even though Costa Rica is doing rather well economically, there still are areas in which the government does not have the budgetary means to invest (for instance, high speed lines). Low revenue margins and tight profits of the state-owned monopoly do not allow it to make a serious investment commitment on its own. External sources of investment could prove helpful as a supplement, but many potential foreign investors tend to fear Costa Rica’s lack in certain elements of basic infrastructure and therefore stay away, not willing to make an investment commitment. As a result of this set of circumstances, the country as a whole falls behind relative to where it could have been if such investments were made.
2. Legal Environment.
Many laws against piracy have been passed, but while they do envision strict penalties for non-compliance they are not really enforced to any significant extent.
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