In 1995, as Costa Rica faced diminishing foreign investment, the Costa Rican Investment Promotion Agency (CINDE) decided to chance it all.
Around the world CINDE offices had been closed due to dwindling funds, since the association no longer received funds from the U.S. Agency for International Development (USAID). In the mid-1990s, the number of employees at CINDE dropped from 300 to 80. The only foreign office that stayed open was in New York City. And rumors circled that the New York office would be shuttered, and CINDE would be shut down completely.
The government insisted to CINDE’s head, Enrique Egloff, that the agency should be focused on attracting investment from apparel and garment makers. Instead CINDE chose to “bet their salaries” on a firm so big that Costa Rica barely had the room to support such a gigantic operation, recalled Armando Heilbron, head of the New York City CINDE office at the time.
After 19 meetings between Costa Rican officials and Intel, the U.S. company based in Santa Clara, California, agreed to build a 52-hectare microchip plant in Belén, a city with tax-free-zone incentives northwest of the capital. The initial investment represented $115 million.
“It was so unlikely that it got press around the world,” Heilbron said. “When it gets press around the world you get your little country put on the map.”
Heilbron remembered stories that proclaimed “from banana chips to microchips.” Intel’s decision shocked Latin American
rivals like Mexico, Brazil and Chile. In choosing to invest in Costa Rica, Intel altered the economy of the small Central American country. Costa Rica no longer relied on exporting fruits and coffee to sustain itself. The high-tech computer processor company is the No. 1 exporter in Costa Rica in 2012, a contribution that stands for 6 percent of gross domestic product.
On Wednesday night, Intel hosted a gala at the Central Bank Museum in San José, celebrating Intel’s 15th anniversary in the country. President Laura Chinchilla spoke. High-ranking government officials, Intel managers and U.S. Ambassador to Costa Rica Anne Slaughter Andrew were in attendance. The presentation included two studies demonstrating Intel’s influence on Costa Rica’s growth.
“Intel’s arrival can be seen as a bridge between the country’s future and the country’s past,” Chinchilla said.
The numbers signified the monumental changes brought to Costa Rica’s economy. Intel has invested $900 million since 1997, and the number of local employees has grown from 500 to 2,800. The company exports an average of more than $2 billion in products per year.
Still, the major announcement of the night came when Chinchilla challenged Intel to put more capital into Costa Rica, asking for $500 million over the next five years. She wants the Costa Rican government to work closely with Intel managers to find out what is necessary to make that massive figure a reality.
But the force of Intel’s arrival extends beyond the numbers. The computer technology leaders changed the landscape of education, business practices and foreign investment in Costa Rica, the fourth most competitive country in Latin America according to a report this week.
Since Intel’s move, more Costa Ricans have graduated with degrees in highly skilled areas like engineering or tech design. Costa Ricans went from knowing almost nothing about electronics to experts. There’s a greater emphasis on the sciences, math and technology in education curriculums, and many students learn English at a young age. One study showed that before Intel came to Costa Rica, 3,000 grade school students participated in the annual science fair. Now 600,000 students take part.
Workplace standards, infrastructure and safety measures have been enhanced since 1997. Workplaces are better-regulated in an attempt to stack up to international standards.
More than anything, Intel transformed the focus of the economy. After CINDE convinced Intel to invest here, other companies started wondering what the country had to offer. Costa Rica soon became the call center capital of Latin America. IT call centers and support centers for major business have hubs in the Central Valley. The free zones turned into a prime location for U.S. medical supply manufacturers like Boston Scientific. IBM also invested here.
One weakness the studies pointed out is the education system needs to keep advancing. Costa Rican schools seem to be falling behind the rapid pace of improving technology.
In addition, Costa Rica must cooperate better with Intel to not miss out on the company’s newest projects. In recent years, major investments that could have gone to Costa Rica went to Argentina, Mexico and Vietnam.
During his speech praising the relationship between Intel and the Costa Rican government, Intel Costa Rica General Manager Mike Forrest implored officials in attendance to focus on further developing its education system.
“A strong partnership between industry, government and academia is critical to achieving this goal,” Forrest said. “I look forward to continue partnering with the country in this challenge.”
If Intel ever did choose to leave, Costa Rica – whether due to an increase in production costs or a hike in taxes on free-zones companies – Heilbron believes the company’s influence would not be forgotten. The absence would leave a big hole in Costa Rica, Heilbron said, but there’d still be “a lot of things happening around it.”
The investment even has made it into textbooks, and is a popular case study in business programs and government policy courses. Heilbron, who works for the World Bank Group in the United States, said he’s met plenty of Ivy League graduates who learned the Intel case in Costa Rica in college.
The move even influenced other investment promotion agencies in the region, which learned from CINDE’s flexibility and forward thinking more than 15 years ago. ProNicaragua, named the best investment promotion agency in the world this month, picked up aspects of its investment strategy from Costa Rica, Heilbron said.
Seeing other successes both in Costa Rica and in the region is what leads Heilbron to think that Intel’s mark will be felt in Central America for a long time.
Said Heilbron: “There’s a transformation of footprints that are here to stay.”