How Costa Rica Reinvented Itself as the Tech Epicenter of Central America

With education as a priority and tax incentives to entice tech-centric companies into its territory, Costa Rica is well on its way to becoming one of the technological hubs for Latin America. Craig Dempsey looks at how it got there.

Costa Rica

From coffee and tourism to innovation and technology, Costa Rica keeps reinventing itself and opening to new economic grounds. Focused in economic growth and development the government has focus their efforts in tech and education for the last years. With a GDP supported strongly by the Service Sector, Costa Rica has taken advantage of their bilingual and well-prepared workforce to welcome foreign tech companies and investors to the region.

It has been fascinating to watch one of the most exotic tourist destinations in the world become the actual epicenter of technology. Yet there are some important facts you might find interesting to understand how Costa Rica has emerge as a tech hub in the region and Latin America.

Government Tech Agenda

Intel opened the biggest microchip factory in the region in 1997, with an initial investment of US$800 million, putting Costa Rica on the map for hundreds of tech companies around the world. Over the years, the company has made big changes, from closing the factory to setting up a research and development center in the country, focused specially in digital technologies.

Over the past two decades the country has dedicated 0.47% of their GDP to science and technology development according to Ricyt (Red de indicadores de ciencia y technología) and has gradually increased the investment for infrastructure and human resources towards innovation and technology.

But the government isn’t just investing its efforts into the development of the private sector. Last year, the government presented its Digital Transformation Strategy 2018-2022. This strategy has six strategic pillars that aim to transform the public institutions’ use of technology in order to boost the country’s economic development and quality of life

Growth on Several Fronts

Since 1948, with the abolition of the army, public funds have been directed towards education, making Costa Rica one of the most literate countries in Latin America, with the fourth-highest rate of English speaking in Central America. Schools have multi-language programs for French, Portuguese and Mandarin.

According to the World Bank Group, between 2000 and 2016 Costa Rica incrementally registered over 7,028 new businesses. Over the same time, the country exported US$900 million in ‘high technology’ export products according to the high technology exports indicator for World Bank Group.

With a population of five million inhabitants and 51,000 square kilometers, the number of companies in the country has reached over 546 IT companies, 3,447 manufacturing (including medical components), and performed 12,281 various commercial activities by 2018. This activity generated over 300,000 jobs, according to the National Institute of Statistics and Census.

Technology Parks: Good Ground for Investment

One of the most important contributors to Costa Rica’s increased number of companies, professionals and development activities in the tech sector is its renowned technology parks. These parks are industrial spaces that provide multiple services for the establishment of tech companies and have tax benefits that make investment in these areas more attractive.

Top companies such as Vmware, IBM, HP, Microsoft, Amazon, Mckinsey, Sykes, DXC technology, Concentrix, Tek Experts, Experian, Procter & Gamble and others are located and working now from these industrial parks. Office rentals, data centers, high speed internet services, facilities, and wellness centers are part of the package these companies have access to at industrial parks such as American Free Zone, UltraPark I and Ultrapark II, and Global Park, to mention a few.

Another key driver of technology growth in Costa Rica comes from the health sector. The country holds eight of the key worldwide medical devices companies. Thanks to the continued growth of professionals in science and technology, large health companies have found Costa Rica to be a center for manufacturing, IT and BPS operations such as Medical, Microvention-Terumo, Hologic and Phillips, GSK and Pfizer.

Tech-savvy Young Professionals

Technology has been considered an integral part of education in Costa Rica since 1987. Now, with basic technological exposure implemented in schools, the government is pivoting towards a focus on preparing its citizens for tech-focussed jobs. And the private sector is backing this focus.

In 2017, Jorge Sequeira, Managing Director of Costa Rican Investment Promotion Agency (CINDE), said: “The fourth industrial revolution in which we are immersed has led us to a reality of artificial intelligence, autonomous vehicles, big data, materials science, quantum computing, synthetic biology and many other emerging technologies that are changing the way we live and work. This demands great challenges for all countries. The automation of jobs is for example part it. In Costa Rica, it will not be the exception. There will be an impact and therefore, as a country we have to define a clear path that allows us to prepare our human talent with that vision of the future and technological change, so that, we can take advantage of the new context and not be affected by it”.

Costa Rica started an economic transformation and sparked the interest of young professionals in the country towards technology and innovation. This has been evident in the growth of engineering experts in recent years. According to Diario El Financiero, from years 2000-2015, the number of graduates in technology and exact science increased from 26,469 to 104,280. Which means that Costa Rica is able to provide bilingual and qualified labor hand prepared in the country if needed for most of the international companies.

The graph below, taken from a report on the evolution of education in Costa Rica shows in Spanish the steep incline of graduates in basic sciences and engineering in 2015 compared to previous periods.

Report of State of the Nation Chapter 5th, Education

Fintech Potential

Many countries in Latin America disposed towards digital revolutions are seeing an increase in financial technology or ‘fintech’ startups. According to Finnovista, Costa Rica is topping rankings in Central America as the country with the most potential for fintech growth.

Since 2017, Costa Rica has experienced a 400% growth rate in fintech start-ups. Reportedly, the presence of foreign technology companies operating in areas like the technology parks mentioned above has contributed to the country’s propensity for this growth by developing significant numbers of qualified human resources.

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Strategic Location

With less than 200km between the Pacific and Atlantic Oceans, Costa Rica has two main ports that move thousands of products to and from the country, including medical supplies, manufacturing and agricultural goods.

The new container port, owner by the Netherland company APM Terminals, opened operations in Costa Rica on February 2019. With this new port operation, the terminal is moving Costa Rica towards being number one for connectivity.

Morten H. Engelstoft, CEO of APM Terminals, explained at the time: “at APM Terminals, we partner with governments to become the best port operator in the world and Moín is a great example. Without any doubt, we are inaugurating today a new era in international and intra-regional trade in Central America.”

The Central American Country to Watch

There’s no doubt Costa Rica is a developing, young and strategic economy, that offers more than beautiful landscapes and tourist destinations. The Central American country offers the perfect conditions for large technology companies to develop new businesses. It is pro-business, and welcomes expats and investors looking to incorporate a company in Costa Rica and create new opportunities for the region.

With education as a priority and tax incentives to entice tech-centric companies into its territory, Costa Rica is well on its way to becoming a technological hub for Latin America.

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2 comments

  1.    Reply

    Great article. Just a small correction, Costa Rica has the fourth-highest rate of English speaking in Latin America, not Central America. Regards

  2.    Reply

    Hi Craig, very good article on Costa Rica’s reinvention. I have worked in the industry, out of Costa Rica, since 2002 and can provide first hand account.

    Please let me know if you would like a contributor.

    Best regards!