The Costa Rican army was abolished in 1948, allowing the government to focus on important infrastructure issues such as telecommunications and human welfare.  The democratic tradition and political stability has helped create a solid business environment and a high standard of living.  This type of attention has contributed significantly to the country's ability to support high technology development, both internal and by direct foreign investment.  However, all telecommunications efforts are still controlled by the state-owned monopoly Instituto Costarricense de Electricidad (ICE).
 
Costa Rica prides itself on the benefits it offers for foreign trade incentives.  These benefits, however, DO NOT apply to government telecommunication, energy and insurance monopolies.  (See Analysis:  Impact on the (non-IT) globally competing firm for more info on trade incentives).
 
Listed below are the reported revenues generated by the telecommunications industry in Costa Rica.

	COSTA RICA	UNITED STATES	WORLD
Telecommunications Revenue:                           Total (M US$) 1996                   Per Inhabitant US$ 1996                            Per Main Line 1996                           As a % of GDP 1995	231.8  68.2  441  2.4	182'683.5  685.3  1'071  2.5	620'196.1  110.0  839  2.1
Telecommunications as a % of revenue:	49.9	13.2	25.1

 
Economic Initiatives
Historically, economic growth in Costa Rica has been supported by a series of initiatives.  Today, these initiatives have made the country an attractive option for high technology development both internal and external.  These began in the 1960's when the country nurtured its manufacturing companies by limiting trade competition  with developed countries.  Then in the 1980's, it pushed exports by joining the Caribbean Basin Initiative, allowing it to export products duty-free to the United States.  This created an incentive for inefficient manufacturers to cut costs to compete in this market.  Also, during this time, industrial, duty-free parks and zones were created which are now the sites for high technology companies.  (See IT Geographics for more information.)

However, because of Costa Rica's educated work-force, the country began losing to lower wage countries such as Honduras and the Dominican Republic.¹⁷  This fact is seen in the country's unemployment figures, which show that while 6.2 percent of the work force was unemployed in 1996, 13.9 percent were underemployed.

Therefore, by the early 1990's, government officials began to realize the dilemma they faced and a policy change was initiated towards high technology growth.  Promotional programs began appearing with titles such as "Profit Center of the Americas" and "The Emerging Tiger of the Americas".  By 1995, this strategy began to pay off with high profile companies such as Intel and Motorola began choosing Costa Rica as a location for operations and manufacturing.  (See Computer Hardware/Software for company listings.)

However, with the popularity of the country growing, the fact remains, the country is small.  Although the work force is considered well educated and multilingual/cultural, its numbers are simply limited.  The current high technology companies are fighting for the handful of highly trained employees to the point where companies are accusing each other of cut throat recruiting.

In response to losing its competitive edge by its limited number of engineers and technicians, the government has embarked on an aggressive campaign to transform the country through high tech.  This campaign includes a major upgrade of the country's educational system.¹⁷  (See Human Capital and IT for details on educational infrastructure.)  In addition, the government is trying to use foreign companies' presence to spur development of domestic owned suppliers and other satellite businesses, such as software development firms, of which there are about 40.

National Council for Scientific and Technological Research (CONCIT)
Created in 1974 with the assistance of the Inter American Development Bank (IDB), Costa Rica received an additional $3.3 million in IDB financing to expand the Costa Rican Technological Institute (ITCR), in Cartago.   Currently, this Institute hosts an advanced computer science and software department that is contributing significantly to the training in higher level skill areas.

Decentralized and Expanded Higher Education System
This initiative began in 1978 with funds also from the IDB at a total of $30 million.  Regional centers were built focused on technical training and the expansion of ITCR's main campus.

Science and Technology Program
Also partly financed by the IDB, this program funded 239 post-graduate scholarships, 90 research and development projects and a variety of laboratory and computer equipment at 16 research facilities.

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Last updated December 18, 1998