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Regional Dialogue on Promoting Services Development and Trade in Latin America and the Caribbean

The Case of Services in Costa Rica: Improving the competiveness and insertion in Global Value Chains

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12−13 November 2013 Room Raul Prebish, ECLAC, Santiago

• Mr. Francisco Monge

Deputy Director General of Foreign Trade, Ministry of Trade of Costa Rica

The Case of Services in Costa Rica: Improving the competiveness and insertion in Global Value Chains

Francisco Monge, Deputy Director General

Ministry of Foreign Trade Costa Rica

Services: an opportunity for development

The unbundling of global production has created an

• pportunity for countries to drive development focusing
• n the tasks in which they have comparative advantages.

Two types of services that are important:

Services that are tradable inputs in GVCs

R&D, design, marketing, sales, business and IT processes.

Services that enhance the competitiveness of countries in GVCs

Transportation, logistics, communications, financial, etc.

Services integrated in GVCs

The evolution of service exports in Costa Rica

Source: Constructed by COMEX with data from BCCR

Costa Rica: Service Exports (1999-2012) Costa Rica: Composition of service exports (2000-2012)

1,000 2,000 3,000 4,000 5,000 6,000 2000 2002 2004 2006 2008 2010 2012

US$ milliones Viajes Informática e información Otros servicios empresariales Transportes Los demás 1,952.3 5,482.6

1,000 2,000 3,000 4,000 5,000 6,000 2000 2002 2004 2006 2008 2010 2012

US$ millions

Tourism Business services Other Transportation IT based

The evolution of service exports in Costa Rica

*Data from the Central Bank of Costa Rica (BCCR).

Costa Rica: Share of exports integrated in GDP by sector (2000- 2012)

1.6% 8.8% 5.7% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

2000 2002 2004 2006 2008 2010 2012

% PIB

Computer, information services and other business services Agriculture

Costa Rica´s upgrading path in offshore services

KPO

General Business Activities Industry Specific Activities

Value Added

Broad Spectrum

(ITO, BPO & KPO)

d

$638.2

$223.4 $186 $140.8

Call & Contact Centers Call Centers IT Back Office

$51.3

$66.1

$84.5

10,472 6,034

BPO

7,753 6,106

792 1,123 890

6

ITO

Breakdown of Costa Rica´s participation in

• ffshore services, 2011

2 4 6 8 10 12 14

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Number

• f

Companies

Year

• f

Establishment

BPO ITO Broad Spectrum Services (ITO-BPO-KPO) KPO Ver cals

First Stage

(13 companies Eg. Western Union, Equifax, P&G, Sykes)

Second Stage

(60 companies Eg. Convergys, Teleperformance, AvVenta, Amba Reserach, HP, Intel, IBM))

The evolution of facilitating services

Facilitating services

High quality and low cost facilitating services are critical to competitiveness in GVCs. In Costa Rica the opening

• f the telecommunication

and the insurance markets in 2009 enhanced competitiveness and the facilitated insertion in GVCs

10

BEFORE AFTER

Monopoly market. Competitive market (119 companies). 7,4% of GDP in 2007. 9,1% of GDP in 2011 and 2012. Limited FDI (only cable internet). US$913,4 million in FDI recieved in 2011, 2012 and the first half of 2013. Long wiating list for land lines and cel phones (1 year, with 150 requests in celphones). A phone line can be obtained in minutes. 34,4% of population has cell phone in 2007. 116% of population has cell phone in 2012. 13% of households have internet access in 2007. 47% of households have internet access in 2012. 9% of (non-wireless) internet connections were over 2Mb/s in 2007. 53%

• f

(non-wireless) internet connections were over 2Mb/s in 2012.

Libe Liberaliz alization tion of

• f

te telec lecom

• mmu

munic nicatio tions ns ma market et

11

BEFORE AFTER

Only 1 insurer in 2008 12 insurers in 2013 147 types of policies offered in 2009 442 types of policies offered in 2013 $612 million in total received insurance premiums in 2008 $929 million in total received insurance premiums in 2012 $83 million in personal premius received in 2008 $187 million in personal preiums received in 2012 4,3 million policyholders in 2010 5 million policyholders in 2012

Libe Liberaliz alization tion of

• f

insu insuran ance ce ma market ets

Success factors and priorities for the future

Cos Costa ta Rica Rica´s s po poli licies cies to to fos

• ste

ter r se service vices s in and in and for

• r GV

GVCs Cs

• Attraction of FDI
• Interagency execution

Strategic vision - proactive and coordinated approach

• Political and economic stability
• Export processing zone regime

Sound business environment

• Quality of educational system - 1st in LA (WEF)
• Cost competitive

Educated work force

• Middle of the Americas
• Proximity to US time zones

Privileged geographical location

• WTO + 14 PTAs
• TiSA negotiations
• Liberalization commitments stemming

from CAFTA-DR

Deep trade integration

Policies

• licies mo

moving ving for

• rwar

ard

Continued attraction of FDI in strategic niches Strengthening human capital Further liberalization of facilitating service markets TiSA Need for international investment agreement

The Case of Services in Costa Rica: Improving the competiveness and insertion in Global Value Chains

Francisco Monge, Deputy Director

Ministry of Foreign Trade Costa Rica