2008 Costa Rica Business Factors

Costa Rica has a population of 4.4 million people, 34% are between the ages of 15 and 45 years old. The local workforce of over 2 million people enjoys universal health care and education as well as a low unemployment rate.

The countries key advantages for global business investments are its convenient location, educated workforce and competitive costs.

This report provides the local wage, labor and educational requirements as well as objective indicators for conducting business.

Productivity and wages

Costa Rican workers are considered very trainable and productive. The countries main comparative advantage for attracting high-tech investments is to provide sufficient educated professional and technical personnel. In lower technology industries, although Costa Rica’s wage rates are higher than many country competitors abroad, higher labor productivity and modern manufacturing techniques can often compensate for labor costs.

This highly educated, versatile and productive workforce is accessible at competitive rates that currently range from US$1.80 to US$4.11 (per-hour, fully loaded).

Labor Regulations

Labor unions only have a significant role for public sector workers. The main form of labor organization in private companies is the “Solidarity Association” that employers support through a credit union and other assistance services.

Investors seem very satisfied with the operation of solidarity associations, and frequently mentioned that they tend to work with the company, not against it. The associations have not been confrontational in nature or used for negotiating wages. Some companies have a separate permanent council of employees, serving as a mechanism to bring up complaints and problems for solution.

Educational System

Costa Rica has one of the highest literacy rates of the American Continent (95%). Additionally, its National Training Institute (INA) offers free technical training in many fields. Several technical schools and universities prepare professionals with the highest international standards. These institutions offer various levels of education in electronic, electric, mechanical, and process engineering.

A new Gallup poll of 40,000 people in 24 countries was commissioned by the Inter-American Development Bank and it amazingly shows that Costa Rican’ s are much happier with their countries’ public education system than people in other regions that score much better in international student achievement tests and university rankings. When asked whether they are happy with their countries’ public education systems, including elementary schools, high schools and universities, the response was overwhelmingly positive. 85% of Costa Ricans are happy with their countries public education system.

According to the same study, only 66% of those questioned in Germany, 67% in the United States and 70% in Japan are happy with their respective countries’ public education.

There has been a lot of progress in expanding education; literacy rates have doubled since the 1930s, to 86% of the region’s population, but there had been very little focus on improving the quality of education.

In Costa Rica, multi-national companies such as Intel, HP and Procter & Gamble moved in and created the need for higher education standards. This commercial demand for higher educated, English speaking workers fueled the Costa Rican educational system to achieve the highest standards in the region.

Costa Ricans became conscious of their educational systems limitations years ago and took steps to provide specific institutions that focus on training local students to compete in a global economy where knowledge-based exports are in high demand and traditional products such as coffee and fruit succumbing to international competition.

English Skills

Education is compulsory up to 9th grade and places a strong emphasis on computer skills and English skills since the early grades. To this respect, an official nationwide survey showed that more than 258,000 Costa Ricans speak English well.

Educational Institutions

Two key factors have become critical to the country’s educational strategy: science and technology. Costa Rica’s previous and current administrations believe that technical training, along with innovation and technology transfer, are crucial factors to achieve higher levels of productivity and a better competitiveness level in the global economy.

The National Learning Institute (INA) offers free technical training in a wide variety of fields, and is able to provide tailor-made programs to meet specific manufacturing and service investors’ needs. Several other technical schools and universities prepare professionals with the highest international standards. Even Harvard University has had an extension in Costa Rica since 1964 through INCAE, to prepare middle and upper level managers. The America Economy Magazine considered INCAE as the best Latin American business school during 2003 and 2004.

Schools are allowed sufficient flexibility to pursue curriculums that fulfill the needs of a changing society, but are also monitored to ensure excellence and quality. As a result of this ample array of options, the country enjoys a large pool of engineers, business officers and other professionals.

As it was cited in Latin Trade (August 1998), Intel’s Corporate Vice President Mike Splinter said the company chose Costa Rica over Brazil, Chile and Mexico because of its “excellent educational system.”

Education in Costa Rica is universal, free and compulsory up to the 9th grade since 1870. Elementary schools promote a new approach to education that goes beyond teaching how to read and write, and have established programs intended to guarantee world-class literacy in computer sciences and English as a second language. In fact, 82.5% of all Secondary Education students, and 50% of all elementary students have computer-based education. English as a second language is nearly universal in Secondary Education.

The Government has put special interest in providing increased resources to enhance existing English programs and create additional ones nationwide. As a result, a unique, free and widespread education system allows firms to find a wide array of human resources at various levels, from technical schools to university degrees.

High School Education – High School education is divided between academic and technical schools. Academic instruction is centered on science and humanities, while technical schools prepare students in areas such as: accounting, microelectronics, electro mechanics, industrial electronics, precision mechanics, computer programming and network set up and administration, among other.

High school education, with 5-year level, is divided in two cycles, and upon completion of each cycle, students are required to pass tests on all subjects studied during those years. The most notorious of these tests are the Bachelors Tests, which are required to get the high school diploma needed for admission to Universities.

Schools are allowed to change the curriculum to satisfy the needs of a changing society, but are also monitored to ensure excellence and quality. As a result of this organizational axiom, Costa Rica has developed a diverse and sophisticated educational framework that adequately fulfills the needs of the private sector through enhancing the abilities and knowledge of the students.

Amid the private schools, there are world-class institutions with a cultural emphasis on the United States, the United Kingdom, France, Germany and Israel, which further complements the range of cultural diversity of the school system.

As a result of the advances in elementary schooling, Costa Rican high school graduates are educated; enjoy a working knowledge of English, an increasing ability to use computers and a proven aptitude for developing new skills and tasks.

With an average growth of 7.74% for the last 7 seven years, high school education is focused in achieving new competitive skills. For example, the teaching of English language and Computer Science was declared mandatory in all of the nation’s public schools (1994-1998). That implied the training of 500 teachers and a huge expense from the government.

In the Technical Colleges, in the Third Cycle of the General Basic Education, the study plan, besides the academic subjects, includes two exploratory workshops per level that allow students to discover their skills, attitudes, aptitudes and interests and facilitate the process of selection of a specialty.

INA – National Learning Institute – The National Training Institute (INA, for its Spanish acronym) works in order to elevate the productivity of the workers in all the sectors of the economy, by means of actions of formation, training, certification and accreditation for a sustainable productive, competitive and quality

At a technical level, free training programs have been developed in order to address appropriately the requirements of both local and international corporations in specific sectors, therefore allowing Costa Rican technicians not only to work on the cutting edge of technology but to maintain at the same time a productivity rate which is 20% higher than that of workers of other countries in the Americas. The leading educational centers offering this type of training, as well as the main universities are:

Community Colleges:

CEFOF 2004 – The Centro Regional para la Productividad (Regional Center for the Productivity), CEFOF, establishes a regional vision in 1992, with the purpose of offering service of high level to the productive national and international sector.

CUNA 2004 – The Alajuela Community College (CUNA) is a Higher Education College Institute dedicated to teaching shot-term majors (2 years) to obtain a Diploma as well as to further social endeavors.

ILAFORI 2004 – Instituto Latino de Formacion Integral – The institutional campus of the CUC promotes the development of productive activities of the country in three areas: health, services and production. The following programs are offered by the ILAFORI (Associate Degree): Business Administration, Accounting, Human Resources, Tourism, Oral Expression Techniques, Ophthalmology, IT Systems, Publicity Design, Dental Technician, Dental Clinic Assistant, and Electronics

Higher Education

The Costa Rican workforce is considered perhaps the most important attraction for foreign investors, as the population is highly literate and well educated. The government has long placed a high priority in investing in public education, which includes the university system as well as the technical and vocational training scheme.

The abolishment of the armed forces in 1949 freed resources that have mostly been invested in free education and health services for the population, while a generous education expenditure ratio of more than 5% over GDP is currently maintained by law.

As an reflect of these efforts, Costa Rica now has one of the highest Human Development Indexes among developing nations (0.834), and one of the highest literacy rates of the Americas (94.9%); in addition, the expected number of years of schooling has been calculated at 10, according to World Bank’s World Development Indicators 2004.

A nation that long ago realized the importance of education and which currently allocates more than 6% of its GDP to educational programs is indeed the best guarantee for a successful business environment.

Costa Rican investment in higher education is yielding substantial benefits. Universities produce not only highly trained individuals, who are very well appreciated by the multinational companies, but also entrepreneurs with the ability to develop their own companies, specially in high-tech areas.

Currently, Costa Rica has fifty-four universities, four of which are public and the rest are privately owned and managed. The Ministry of Education through the National Council of Higher Education (CONESUP) supervises all of them.

1. Universidad de Costa Rica – UCR (University of Costa Rica)
2. Universidad Nacional — UNA (National University)
3. Instituto Tecnológico de Costa Rica – ITCR (Costa Rica’s Technical Institute)
4. Universidad Estatal a Distancia — UNED (State University at a Distance)

Based on data from the National Deans Commission, in 2005 these four public universities were attended by 66,359 students.

Between 1993 and 2002, 85,038 students have graduated from public universities, while during the same period 96,403 students got degrees from private universities.

With 26,111 students in 2005, the prominent University of Costa Rica leads annual enrollment at the higher education level. This university, founded in 1843 in the city of San Jose, has the most ample range of degrees offered in the country, either by the number of careers it offers or the degree levels that can be opted for.

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The UCR and the ITCR are the leaders in higher and specialized technical education in the country. Between 1993 and 2002, 10,133 degrees in the field of engineering were granted, most of which coming from these institutions. Much of the emphasis put into these areas of study has been stirred by the increasing demand of technologically intensive industries, which shows the interest of local authorities and the capability the higher education system to respond quickly and meet changing demand promptly.

Private universities are generally smaller than their public counterparts, either measured by the number of students or the variety of professional careers they offer. These institutions of higher education usually cater to the demand of working persons that wish to expand their capabilities while still holding their jobs.

The National dean’s commission offers information regarding the number of graduates from public and private universities, which totaled 26,472 in 2004.

In addition to local education, Costa Rican students have been successful in accessing internationally recognized foreign graduate degree programs, especially in the US. Recognizing this potential, Harvard University established a highly accredited extension program in Costa Rica called INCAE. This university is currently ranked as second leading business school in Latin America and has done pioneering investigations about the factors that determine Costa Rica’s competitiveness and the best strategies to take advantage of them.

Conducting Business Indicators

The following information and graphs list the overall “Ease of Doing Business” rank in Costa Rica during 2008 as indicated by key indicators for each topic and benchmark against regional and high-income economy (OECD).

Starting a Business

The challenges of launching a business are shown. Included are: the number of steps entrepreneurs can expect to go through to launch, the time it takes on average, and the cost and minimum capital required as a percentage of gross national income (GNI) per capita.

Dealing with Construction Permits

The procedures, time, and costs to build a warehouse are included, including obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections.

Employing Workers

The difficulties that employers face in hiring and firing workers are shown. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the three indices.

Registering Property

The ease with which businesses can secure rights to property is shown. Included are the number of steps, time, and cost involved in registering property.

Getting Credit

Measures on credit information sharing and the legal rights of borrowers and lenders are shown. The Legal Rights Index ranges from 0-10, with higher scores indicating that those laws are better designed to expand access to credit.

The Credit Information Index measures the scope, access and quality of credit information available through public registries or private bureaus. It ranges from 0-6, with higher values indicating that more credit information is available from a public registry or private bureau.

Protecting Investors

This indicator describes three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index), shareholders’ ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection.

Paying Taxes

This data shows the tax that a medium-size company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes. These measures include the number of payments an entrepreneur must make; the number of hours spent preparing, filing, and paying; and the percentage of their profits they must pay in taxes.

Trading Across Borders

The costs and procedures involved in importing and exporting a standardized shipment of goods are detailed under this topic. Every official procedure involved is recorded – starting from the final contractual agreement between the two parties, and ending with the delivery of the goods.

Enforcing Contracts

The ease or difficulty of enforcing commercial contracts is measured. This is determined by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment.

Closing a Business

The time and cost required to resolve bankruptcies is shown. The data identifies weaknesses in existing bankruptcy law and the main procedural and administrative bottlenecks in the bankruptcy process. The recovery rate, expressed in terms of how many cents on the dollar claimants recover from the insolvent firm, is also shown.

Graphs and information provided by the World Bank Group and the Investment Promotion Agency of Costa Rica.

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Written by Tom Rosenberger. With more than 25 years of homebuilding experience, 15 of which have been in Costa Rica, construction consultant Tom Rosenberger knows the ins and outs of building and remodeling a home in the Central Valley area of Costa Rica.

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.