Offshoring in Paradise
This article was originally published in Lonely Planet Costa Rica 6 (2004)
When industry elite in Heredia, Costa Rica, began hearing rumors that Intel, the world’s largest microchip manufacturer, was shopping around for a Latin American base of operations, they decided to invite Intel execs down for a quick cafecito.
Costa Rica hadn’t even made the list, which included Mexico, Brazil and Chile. It was considered to small, too laid-back and too expensive (per capita earnings are among the hemisphere’s highest) for the job. But this little country, famed for its exotic wildlife and exploding volcanoes, was conveniently right on the way south. Besides, who wouldn’t want to take a “business trip” to paradise?
The pitch was a pleasant surprise: Half a century of investment in schools rather than soldiers had resulted in a highly educated and relatively computer-literate workforce. Costa Rica’s track record as a peaceful democracy sat well with the insurance people, while the high percentage of locals who already spoke English got human resource’s vote. Perhaps most importantly, Intel reps noticed that almost everyone they met was already online, a convenience quite rare in the other countries being considered. The tech giant was charmed.
Eager for this massive influx of foreign investment, Heredia officials emailed Intel and offer that included a lovely former finca and lots of generous tax breaks. Increased access to computers (subsidized by Intel) and English classes in the public schools was also part of the deal.
On some things, however, Heredia would not budge. Microchip production is both water-intensive and ferociously toxic, while Costa Ricans are famously protective of their landscape. Intel finally agreed to ship all waste products out of the country for disposal; moreover, the most environmentally damaging processes would continue to take place in the USA, with the final product assembled here.
Pentium processors began rolling out in March 1998, and within three years microchip exports were worth three times as much as bananas and coffee combined. Today, Intel products account for 8% of Costa Rica’s total GDP and 40% of all exports. The Heredia facility, where local talent is now also responsible for cutting-edge software development and software design, brings in more than US$1 billion annually.
Many other high-tech companies, including Oracle and Microsoft, have since opened in the region hoping to repeat Intel’s success – and transform the area into Central America’s very own Silicon Valley – but without the Starbucks. Their coffee just couldn’t compete around here.