You have FDI at $11 billion and 5% of GDP in 2011. I see FDI in Costa Rica at $2-3 billion from multiple sources. However, your $11 billion figure is for the region, not only for Costa Rica, so the numbers are probably right. And, while I see FDI at 6% of GDP in some sources, which isn’t far from your 5%, I’m not exactly following why FDI as a percentage of GDP is an especially important number. I’m more curious about what percentage of total investments dollars are of foreign origin. An IMF report tells me that 40% in Costa Rica are, though I don’t know how total investments are calculated. It’s hard for me to believe that the IMF is counting family lending, but maybe it is.

Besides this, the real question your post raises is to what extent Intel’s investment in Costa Rica was and is beneficial. I suspect there were and are some benefits, not only direct ones, but also spillover benefits. (These BTW strike me as the important ones.) However, there is the nagging question that maybe Intel closed its manufacturing operations when its tax breaks expired, with the result that Costa Rica could have either taken a net loss or at least not gained as much as some believe.

Absent convincing data either way, I’m afraid that I take the lazy middling position. Getting some of this FDI into the country has to be good, but becoming dependent upon it has to be bad. Worse, I doubt that splitting the difference is the answer. Each instance of FDI probably has to be evaluated on its own merits or lack thereof.

During this period, FDI in the region increased from less than US$1.3 billion in 1996,
close to 1.6% of the region’s GDP, to US$4.6 billion in 1998, reaching US$11 billion in 2011,
approximately 5% of GDP.

Because FDI includes technology and know-how as well as foreign capital, it came to be
seen during this stage as an engine of growth, almost guaranteed to boost the host country’s
development. Knowledge spillovers and backward and forward linkages between foreign and
domestic firms were expected to bring productivity gains, technology transfers, new processes,
improved managerial skills and know-how, employee training, international production
networks, and access to markets.

Foreign investment, by complementing domestic savings,
could create employment, help diversify exports, foster linkages, transform the production
structure, and upgrade the technology of the production processes, fueling growth that, in turn,
would foster development.

Though Central America is small, it is by no means homogeneous. Costa Rica, reacted at
an early stage to the limits of the textile and clothing industries, and emerged as the leader in product
diversification, attracting firms in intermediate- and high-technology sectors. In Panama, the
Canal has served as a platform for the flow of FDI, particularly in financial services. El Salvador
and Guatemala aim to diversify their investments by attracting business services, while Honduras and Nicaragua continue to attract firms in low-skill manufacturing.

But the impact of FDI on Central American, in fact on the host economies in general, is
difficult to assess. Indeed, the empirical evidence for FDI generating the expected positive effects
is ambiguous at both the micro and macro levels.

Some policy makers argue that FDI can play an important role in
accelerating their countries’ development efforts by bringing in capital and technology. Others
view multinational corporations as monopolistic entities that grow through the exploitation of their competitive advantage in technology, bringing economic dislocation and dependence,
exploiting natural resources, and threatening local culture and sovereignty.

I have checked all over, and as best as I can determine, FDI only contributes between 15% and 40% (depending upon how it’s defined and calculated) to the country’s investments.

Whatever the true amount, we know that a good chunk of FDI is going to foreigner-to-foreigner real estate deals that hardly help Ticos, another good chunk of it is invested in free trade zones that require those outside the zones to subsidize, and a large recent chunk of it has been made by telecom multinationals who plan to take profits (and thus investment dollars) that used to remain in Costa Rica home with them.

The IMF also reports that Costa Rica is already so dependent on FDI from the US that it’s vulnerable to setbacks based upon what happens in the US, without of course having any voice in how the US economy is run.

I understand that FDI is sometimes beneficial and I don’t want to dismiss it as completely unhelpful. However, I have a hard time finding evidence for blanket claims like yours. If you have a source or two that help substantiate your claim, please post it or them.

I started offshore operations in many different countries and all of them had a quasi goverment organization dedicated to the promotion and advancement of attracting foreign companies. They handled all negotiations for infrastructure, buildings, labor, utilities, and taxes. All were negotiated up front and all were agreed to in contracts that were in force for 10 to 20 years. That way there are no hidden costs and the government cannot just chage things when they have economic problems. That is the only way any company would consider locating here. They have to eliminate or greatly reduce the risk of their cost structure changing in a 10+ year economic cycle.