It was interesting to read the report about the recent visit of the Costa Rica President to China. Costa Rica knows exactly what needs to be done to grow its economy. And although it is now dealing with a very particular market, some time ago the country proved their technique to be successful.
With a population of only 3.5 million people, similar in Latin America to Uruguay, Costa Rica succeeded in 1996 by convincing Intel that its geographical position, high end manufacturing talent availability, business climate and incentives through the Free Trade Zones were the best option to establish a chip assembling plant with an initial investment of U$ 300 million. That plant employs today 2.800 people directly, donates more than a million dollars in educational programs, has been able to stimulate changes in upper education and represents more than 6% of Costa Rica GDP.
The methodology to attract Intel: Direct involvement of the then president of Costa Rica, who lead the promotion and establishment of Intel in his country.
It seems that history wants to repeat itself. The current president of Costa Rica, directly talking in China, announces the intention to create a Chinese Free Trade Zone in Costa Rica. Imagine a Chinatown, but within a Free Trade Zone. In here, but from there. Just miles away from the largest buyer market. And within it’s same time zone.
Even if we have some doubts about the long term necessity to move merchandise from China, a large local distribution and transformation center will make transportation and costs much more efficient. And being on the same time zone it will lead to future investments in the service area as well. Chinese service centers to support the region ?. Too much optimism? Well, we think not. With all Chinese investments that are pouring into Latin America, including energy, tourism, healthcare, transportation, mining and others, it seems reasonable that other Chinese service companies try to serve their peers from short distances. And then grow to other customers.
Free Trade Zones in Latin America have a bright future. But they will not do the right job by only leveraging their fiscal incentives. They need to specialize, understand global reality and understand what their location country competitive differences are as they settle down.
Let’s whish Costa Rica good luck. It’s always good to foster competition.
MVD Consulting can help to decide the best approach to leverage benefits of the free trade zone along Latin America. We can also successfully help to implement processes, relations with the community and the market. For those who operate Free Trade Zones we provide an array of services that include operational design and strategies for positioning, marketing and sales.
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