Foreign Direct Investment (FDI) reached new highs of $574.5 million in Costa Rica in 2012 compared to $470.2 million in 2011.

Attracting 40 new, high technology projects to Costa Rica which are employing approximately 8,236 people is certainly a feat to be proud of however, there are some warning bells going off…

Although 951 of those jobs are in advanced manufacturing, the majority of these jobs (5,099) are in the more mobile services sector and it’s these kinds of positions that are the first to be moved when a better deal comes along and it should be noted that there is a scarcity of skilled labour in the Central American region.




47% of employers in Panama said they have difficulties in filling jobs with the right people. In Guatemala this percentage is 36%, and in Costa Rica it is 35%.

For 10 – 15 years Costa Rica has been an attractive and affordable offshore or outsourcing location but it would appear to me that both the Costa Rica government, their agencies and Costa Rican workers have become somewhat arrogant and complacent.

Most people like to think that Costa Rica is attractive because of the quality of the workforce but, it’s been my experience – and the experience of the vast majority of friends and business associates – that this quality of labour is very much overblown.

The main reason companies from the U.S. move to Costa Rica is because Costa Rica remains more affordable than the U.S., it is definitely in a more convenient time zone than the Far East and other “offshore” locations and, it just happens to be a very nice place to visit for both business and pleasure.

But as Costa Rica becomes a less affordable place to do business, we are seeing companies who have made the decision to pack up and leave.

1. On the 13th February 2013 Hewlett-Packard’s (HP) Human Resources Manager María Luisa González confirmed that HP has decided to gradually move their English language call center operations in Costa Rica to Bangalore, India.
   
   
   
   
   González explained that HP was hoping to relocate the 400 employees who are part of the unit to be moved to India. The other 200 employees in that unit who provide Spanish and Portuguese professional services is to be maintained.
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   When asked why Human Resources Manager María Luisa González explained that they were following a global restructuring plan announced by the CEO of HP Meg Whitman in May of 2012.
   
   
   
   
   González also added that: “For us, it has significant meaning because it is the way to start a process of evolution of our workforce, in accompaniment to the country, not only as a company but also as a country, understand that the workforce of Costa Rica must raise their qualifications and knowledge and generate more technicians and more engineers.”

2. Earlier this year Tele Tech an outsourcing call centre company based in the U.S. also fired a number of their employees in Costa Rica.
3. Maderin Eco a subsidiary of Faber Castell will also have closed down their Costa Rica operations by the end of November 2013 which will result in the loss of 120 jobs because of the “… continued and increasing difficulties with wood supply competitive costs.”
4. A textile company called Confecciones Jinete – which manufactures men’s underwear under the Jockey brand name – is also closing with the loss of 500 jobs.

   Miguel Schyfter, Presidente of the Asociación Nacional de Exportadores de la Industria Textil (Aneit) explained that “the main reason for the exit of Jinete is the impact of the decline in the value of the dollar, while local production costs rise…”

Like politicians, many business leaders say one thing and mean another so what is the real reason behind HP’s decision to move their English language call center operations in Costa Rica to Bangalore, India?

At 4.55% in 2012 inflation in Costa Rica is one of the lowest in the region however while we continue to read ridiculous stories of outrageous government spending and pure waste, we are also facing new corporation taxes, stricter enforcement and collection of property taxes and luxury property taxes and numerous price increases with the cost of water increasing by 64%, electricity by up to 13% (depending on the provider), the urban buses by 10% and education has increased by 10%.




(Our registered VIP members can right click and save the Excel spreadsheet for Costa Rica’s Electricity Prices for 2013 here. These lists show the prices for electricity provided by ICE, CNFL, JASEC, ESPH, CoopeGuanacaste, CoopeLesca, CoopeSantos and CoopeAlfaro.)

Median Salary By Industry in Costa Rica and Bangalore, India.

Now compared to the average Tico family, these increases hardly impact the quality of life for the average expat retiree who earns far more but, the bottom line is obviously crucially important for any business who might be considering a move to Costa Rica to save money…




So with these various increases, the overall cost of doing business in Costa Rica has obviously become less attractive than it was in the past and what about salaries which make up a huge percentage of the overall cost of doing business?




HP still has thousands of employees in Costa Rica but the company is “transitioning” their English speaking operations to Bangalore, India – a country with a population of over 1.2 billion – where there are many people who speak better English than most Costa Ricans.

So What’s The Difference In Salaries Between
Costa Rica and Bangalore, India?

In comparing the “Median Salary By Job” between Bangalore, India and Costa Rica using the data from PayScale.com we see the following information for the Software Development, Information Technology, Financial Services and Telecommunications sectors:

In real simple terms, if the data from Payscale.com is 100% accurate, when we compare the the salaries in Costa Rica for those four major industries to the salaries in Bangalore, the salaries in Costa Rica are 93% higher than they are in India.




But that wouldn’t have anything to do with the fact that a huge business like HP would close down certain operations in Costa Rica and hire people in India, would it?

With huge multinational companies like Procter & Gamble hiring another 500 new employees in Costa Rica and 13,000 people showing up at a recent job fair, there is still a lot of positive business news to report.

Having said that, with the recent news of these different companies leaving Costa Rica, the warning bells are ringing and now is the time for the government to refocus their efforts on the education and training of our young people for both foreign and domestic employers, to try and cut costs – especially energy costs – and re-evaluate how we can remain competitive as an offshore destination or, we will see more companies leaving this rich coast…

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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.