Since 1994, Bentec Medical has produced latex-free medical devices at its headquarters in Woodland, California, in the United States. In July of 2009, the company decided to undertake its first international expansion.
It chose to do so in Costa Rica.
“The main reason we decided to come here was because we have existing customers in Costa Rica and we wanted to continue to have their business,” said Daurice Schriener, vice president of sales and marketing at Bentec. “The more we looked into moving here, the more we saw that we could find great employees with a good skill set and a high education level. Everything matched what we were looking for.”
Bentec’s decision to expand operations to Costa Rica is one that has been shared by many others in the same field. Since Baxter Health Care opened its first plant in Cartago, east of San José, in 1988, an additional 30 foreign medical companies have created or expanded operations in Costa Rica, a trend that shows no signs of slowing down.
“In 2010, we expect that the medical sector will continue to be dynamic,” said Gabriela Llobet, director general of the Costa Rican Investment Board (CINDE). “It will continue to develop into one of the fastest growing industries in the country.”
At least through the first two months of 2010, Llobet’s words have rung true.
According to the Foreign Trade Promotion Office (PROCOMER), January and February exports of medical supplies and devices raked in more than $191 million, representing nearly 13 percent of the country’s overall exports. In 2009, the export of medical products generated more than $1.34 billion for the economy and accounted for 15.5 percent the nation’s total exports. The export of medical products makes up the second largest share of the national export market, following only microprocessors and electronic components, which account for more than 20 percent of exports.
“The medical sector is almost recession proof,” said Andrea Centeno, communications manager at CINDE. “Despite a slow economy and lowered (overall) demand for exports, there is always demand for health products. There is always a need for forceps. There is always a need for medications. There is always a need for medical products, no matter the economic situation.”
Big Companies, Little Country
When Baxter Health Care arrived in Costa Rica 22 years ago, the decision of the large multinational corporation that makes intravenous sets and products to treat hemophilia and kidney disease piqued the interest of other members of the medical devices and products industry. Though Baxter has locations in several other countries, the company chose Costa Rica to house its lone Central American plant.
Other giants of the medical sector have since followed Baxter’s lead.
The pharmaceutical and medical devices producer Hospira Inc., based in Chicago in the U.S. state of Illinois, arrived in Costa Rica in 1999. Heart and cancer product specialist Boston Scientific arrived in 2004 (and announced an expansion in 2009). In 2008, St. Jude’s Medical, headquartered in St. Paul in the U.S. state of Minnesota, announced plans to construct three plants in the Central Valley.
So why is Costa Rica a hotbed for the medical industry? The answer appears to have three parts.
“We picked Costa Rica to build this plant because this country offers a skilled, well-educated population,” said Gary Hicks, vice president for Boston Scientific’s operations based outside the U.S. “And that is very important for us. We view it as much as an investment in people as in facilities.”
The frequent references by managers to a well-educated and highly bilingual populace show that these are two of the pillars that have supported decisions to establish operations in Costa Rica. The other pillar, and typically the most important factor in the decision to locate in Costa Rica, is the benefits offered by the zonas francas, or freetrade zones.
“The incentives set forth by the government are very attractive, and they are very lucrative,” Schriener said. “The first 15 years you are here are tax free.”
There are currently 247 companies in Costa Rica’s free-trade zones, most of which are in the Central Valley. In a free-trade zone, businesses can import and export goods without barriers, such as quotas or tariffs.
For companies that export most of their finished products, such as medical device companies, the waived tariffs represent a huge opportunity for financial gain.
A reform of the law regulating free-trade zones was approved in December 2009. Of the many facets of the reform, the primary addition extends tax breaks to companies that establish operations outside of the greater metropolitan area. The aim of the reform was to provide incentives for companies to establish plants in other regions of the country and, thus, increase investment and employment opportunities in areas such as Limón on the Carribean coast, Puntarenas in the Central Pacific and Guanacaste in the north Pacific region.
According to the Foreign Trade Ministry (COMEX), businesses in the free-trade zones nationwide employ more than 53,000 workers and account for approximately $5 billion in annual exports. There are currently more than 9,000 people employed by the medical sector alone (TT, Dec. 24, 2009).
“The changes in the free-trade zone legislation were necessary, not only to maintain investment, but also to promote local investment and attract new capital,” said Jorge Brenes, president of the Costa Rican Association of Free Zone Businesses at the time of the reforms. “The reform of this law is a great boost to the development of Costa Rica.”
With the three pillars – including an educated population with the capacity to speak English, and strong financial incentives to invest in Costa Rica – in place, the continued growth of an export-oriented medical industry seems assured.