San Jose is Costa Rica’s capital and the largest metropolitan city. It is the seat of national government, the focal point of political and economic activity, and the major transportation hub of Costa Rica. The population of San Jose is 346,000.
The majority of the IT activity and free trade zones in Costa Rica takes place in the San Jose metropolitan area and the adjacent cities located in the provinces of Cartago, Heredia, and Alajuela.
This destination has been able to attract FDI in IT-enabled services because of the country’s location; the legacy of past investments in human capital and infrastructure, a stable political system, attractive tax and tariff conditions in the Free Zones (FZs) combined with pro-active foreign investment promotion through CINDE (foreign investment promotion agency).
San Jose has a strategic location, as a bridge between the United States and Latin America, as well as the Atlantic and the Pacific. Proximity to the United States reduces the delivery time for goods exported to the United States, and it is a strategic asset for near-shoring of IT-enabled services, especially given similar time zones.
San Jose is known for its labor force, its business environment and the lifestyle it offers resident executives and investors. The city’s strategic location, political stability, and business incentives, have all contributed to millions of dollars in investment from multinational companies such as Intel, Hewlett-Packard, and ArtinSof.
Intel has the most significant technology park in San José. Intel’s decision to build a microchip assembly and testing facility in San José played a huge role in the magnitude and nature of foreign investment flows to Costa Rica, as it put the country on the map for transnational corporations in the high-tech sector.
San José is among the least expensive cost-of -living cities in the world and second only to Quito, Ecuador in the Americas. San José's prices are the second lowest among the cities of the Americas; the cost of goods and services is among the lowest in the world. San Jose's cost of living ranks close to the middle when compared to 118 cities worldwide. The cost of living in Guatemala City or Pamama City is about 14 percent higher than in San José.
In 2009, 29 foreign companies entered or enhanced operations in the country, accounting for more than $304 million in investment and creating 5,729 jobs, according to the CINDE.
Costa Rica is the safest place in Central and South America for multinational companies to conduct business. Foreign investors remain attracted by Costa Rica’s political stability and high education levels. Costa Rica's major economic resources are its fertile land and frequent rainfall, its well-educated population, and its location in the Central American isthmus, which provides easy access to North and South American markets and direct ocean access to the European and Asian continents.
After experiencing positive growth over the previous several years, the Costa Rican economy shrank slightly in 2009 (-2.5 percent) due to the global economic crisis. The economy has experienced a rebound in 2010 with a 3.6 percent GDP growth rate. Costa Rica enjoys the region’s highest standard of living, with a per capita income of about U.S. $10,569 (2010 est., PPP), and an unemployment rate of 6.7 percent.
According to AACCLA (Association of American Chambers of Commerce in Latin America), Costa Rica's labor force has been rated as the most productive and fast learning in Latin America. Costa Rica’s workforce is also extremely well trained and IT-proficient. Education is mandatory and free until the ninth grade, and strongly emphasizes computer and technology skills. The result is that Costa Rica has one of the highest literacy rates in the American continent (95.8 percent), and is a great value proposition for IT outsourcing firms. A considerable number of people have some knowledge of English, a result of the introduction of foreign language instruction in primary schools in 1994 and the prevalence of English-speaking tourists.
Costa Rica also provides stability- economic, political and with respect to capital-labor relations, again mostly due to the social democratic model and strong institutions developed in the past. Costa Rica's main universities are the University of Costa Rica, in San Jose and the National University of Costa Rica, in Heredia. Costa Rica also has several private universities.
To attract more foreign companies to invest in Costa Rica, Foreign Trade Promotion Office (PROCOMER) of the country organized the “Costa Rica Investment World,” an international investment promotion fair, in April 2010 in San Jose. The event attracted more than 105 foreign investors and provided networking and education through a series of panels focused on Costa Rica’s investment environment and target sectors.
Despite its many advantages, Costa Rica is not a perfect sourcing destination. One criticism is that its workforce (2.1 million) is too small for the multinational IT and BPO market it’s targeting. San Jose with a population of 346,000 is the only city in Costa Rica that can support a decent-sized outsourcing operation, as compared to other cities none of which have populations over 70,000. “It’s a small country and that doesn’t work well for a growing company,” Mario Chaves, CEO of Avantica Technologies, an IT services provider, was quoted as saying “We didn’t want to rely on our ability to grow only in Costa Rica, so we looked at outside locations.” His company Avantica currently has around 200 employees. He’s looking to hire another 200, which he admits is difficult in Costa Rica. “Not that it can’t be done.
Intel’s operation has around 4,000 workers in Costa Rica, HP has 6,500 and Procter & Gamble has 1,350 – but you need those kind of hefty resources to attract that talent,” he had said.