Intel Is At Home in Costa
Rica - For Now
By Alex Leff , GlobalPost
Computer chipmaking giant Intel started the year off like several
other big-name companies: taking stock, crunching numbers and,
ultimately, scheduling painful cutbacks to cope with the global
downturn. In January, amid plummeting computer demand,
California-based Intel announced as many as 6,000 layoffs and five
plant closures by year's end.
That made some Costa Ricans gasp — but so far, the 10-year-old Intel
plant here has been spared. According to Karla Blanco, Intel Costa
Rica's corporate affairs manager, "there has been no notice about
reducing (staff here)."
But the spate of downsizing has raised questions about what would
happen if Intel were to pull the plug in Costa Rica. When Intel
arrived in 1998, the economy went from relying on cash crops such as
coffee and bananas to relying on cash chips made by a leading
manufacturer. Now, Intel's processors make up a whopping 20 percent
of Costa Rican exports.
"Hopefully, that won't happen," said Julio Acosta, senior advisor of
business consulting firm Infinitum and former managing director of
the Costa Rican Investment Promotion Agency (CINDE), contemplating a
possible closure of the Intel plant.
In addition to vanishing export revenue and gross domestic product
contributions of between 3 percent and 5 percent, he stressed the
importance of the company's specialized personnel, which according
to Blanco is at least 95 percent Tico (Costa Rican). The
3,200-staff, 52-hectare assembly and test operation are located in
the northwestern outskirts of the capital. The plant has endured
some recent belt-tightening — including a freeze on salary
increases, restrictions on trips abroad and limited electricity use
in the office — but has so far escaped layoffs.
Acosta said the plant's staff make up about 0.3 percent of the
nation's workforce. "It may not seem that much as a percentage, but
it becomes very important when you look at the quality of
employment. Most are either professionals or technicians, in a very
sophisticated line of work, with credit cards, a car or home loan to
pay for," he said. "Having unemployment at that level is something
no country wants to afford."
Acosta's verdict: "The effect on a small economy like Costa Rica
would be devastating."
Luis Mesalles, president of the economic think tank Academia de
Centroamerica, agreed. "If Intel leaves, exports drop dramatically,
the economy stops receiving its contribution to gross domestic
product, and more than 3,000 people with higher-than-average
salaries, and all the indirect employees, are left unemployed," he
said.
But Mesalles is also concerned about how Intel's hypothetical flight
would scar Costa Rica's image. "Thanks to the image Intel has, other
companies have come to invest in this country," he said. "They have
invested in quality, high technology, not just chips, but medical
equipment too, and it's come partly because Intel put us on the
map."
Procter & Gamble entered Costa Rica one year after Intel opened shop
here. Other businesses that have outsourced or relocated operations
here include Amazon, Firestone and the medical group St. Jude.
Costa Rica ranked 59th on the latest Global Competitive Index, a
widely-watched list compiled by the World Economic Forum, placing
the country among the top seven Latin American and Caribbean
economies. The ranking places Costa Rica four slots ahead of where
it was last year.
And if foreign investment figures are any indication, little Costa
Rica has shown beauty queen potential. Foreign direct investment
here surged to $2 billion last year from $861 million in 2005. Given
the global economic crisis, some of that investment may fade: Last
month the Central Bank predicted 2009 foreign inflow will be $1.33
billion, a 33 percent drop from 2008 and back below investment
levels of three years ago.
Intel has been the cause of much of that increase, providing
"probably the largest investment in Costa Rica so far," according to
Acosta, the 2000 CINDE chief.
When the Santa Clara, Calif.-based corporation announced plans for a
Costa Rica plant in November 1996, the initial investment was set at
$115 million, Blanco said. "Today we're investing more than $800
million," she said.
The plant's importance to the Tico economy is undeniable, but how
valuable is Costa Rica to Intel? Blanco says the company asks a
similar question when evaluating any plant site. "The process of
selecting a plant (site) or expanding a plant is continuous, because
(the corporate heads) are continuously evaluating us," she said,
listing such factors as production and electricity costs.
But free zone tax incentives matter too, she said, explaining that
Costa Rica stood out in Latin America for that reason, and now the
country receives 75 percent of the company's global invoices. Blanco
believes it's "vital" for Costa Rica to upgrade its free zone law to
keep a competitive edge.
With sales thinning — Intel Costa Rica's exports dropped from $2.46
billion in 2007 to $2.07 billion in 2008 — a tightening of the belt
usually follows. But the corporate affairs manager is optimistic for
a rebound by the second half of the year.
Acosta, who took over as director of the investment promotion agency
just two years after the chip-maker came, seemed as though he
couldn't bare to entertain the thought of Intel going. He
reminisced, "It was a real surprise for everyone that a big company
like Intel would set eyes on a little country like Costa Rica."
The country could be in for a real shock if the company should ever
turn its gaze away. |
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