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DIPLOMATICA|TRADE WINDS Costa Rica: Canada’s primary partner in Central America By: Luis Carlos Delgado Murillo Strategically located in Central America, Costa Rica offers investment opportunities for companies interested in broadening their horizons and settling themselves in a country that — with its strong democratic institutions and its efforts to achieve sustainable inclusive growth — represents a success story and a valued partner and friend for Canada. Costa Rica shifted its development model in the early 1990s, to focus on opening up its economy. Since then, it has accomplished consistent growth of its exports and a diversification of its export products and destinations. Exports have grown at an average annual rate of 8 percent since 2001. While the traditional agriculture exports (bananas, coffee, sugar and beef) are still important, the country has been very successful in diversifying its production and export trade toward higher valueadded goods and services (notably high tech) and niche sectors (eco-tourism). Currently, Costa Rica exports more than 4,000 different products to 153 destination countries, and exports and imports represent 90 percent of our GDP. In the last 10 years, the country has achieved a consistent growth in foreign direct investment (FDI), which has become a significant complement to domestic savings. Total FDI inflows have grown an average of 10.2 percent every year since 2000. Currently, more than 200 multinational companies are operating in Costa Rica. The country has had success in attracting foreign companies in innovative industries such as services, advanced manufacturing and medical devices. The number of companies in the advanced manufacturing sector is 83 percent higher than in 2000, 288 percent higher for the medical devices industry, and 1,800 percent higher for the services industry. 30 Costa Rica has added high-tech manufacturing to traditional exports, such as coffee from Orosi Valley plantations. What attracts these companies to invest in Costa Rica? FDI Intelligence has selected San José as one of the 10 best cities for future foreign direct investment due to its competitive advantage in promoting business establishment and growth. The country’s political, social, and economic evolution set it apart from the rest of the region. Due to the country’s commitment to social inclusion, Costa Rica is considered one of the countries with the best human development performance. It started in 1870, when Costa Rica made education free and mandatory, which has allowed us to have one of the best education systems worldwide and a qualified workforce. According to the Global Competitiveness Report 2010-2011, Costa Rica ranks first in net primary education enrolment rate, and our education system is the highest ranked in Latin America. The country has a strong and worldrenowned tradition of, and commitment to, democracy, stability and human rights. Costa Rica has been the most stable democracy in the developing world, with no breakdowns since 1948, when it abolished its army. Consequently, Costa Rica is among the top-ranked countries in the Political Stability and Absence of Violence Index in Latin America (World Bank, 2008) and is the safest country in Central America and Latin America (Latin Security Index 2009). It also offers a high quality of life to its residents: San José ranks fourth among Dirk van der Made the cities in Latin America for the best quality of life. As well, Costa Rica has a strong commitment to environmental protection, ranking No. 3 in the world in environmental performance (Environmental Performance Index, 2010). In 51,000 square kilometres (0.03 percent of the planet's whole surface), Costa Rica has 91,000 animal and plant species, equivalent to 4.5 percent of the species identified so far in the whole world. In 1970, the country decided to create a national parks system, of which 25.5 percent is now under a variety of preservation regimes. Thanks to this natural richness and environmental stewardship, the country is one of the top destinations in the world, especially for ecotourism. Annually, we receive more than 100,000 Canadian tourists, and we have more than 13,000 Canadian residents. Because of its strategic position, Costa Rica is a platform to North America, and to the rest of the world. Companies established in Costa Rica have exceptional access to the world’s greatest markets, accounting for 2.3 billion people and more than 68 percent of worldwide GDP. We also have free trade agreements with nearly all of our relevant commercial partners, including Canada, the United States, the European Union and China. Due to its low prices for Internet access, its positive press liberty and its percentage of high-tech products, the World Economic Forum ranked Costa Rica third in Latin America in technological competitiveness. Currently, Costa Rica is Canada’s most important commercial partner in Central America. In 2001, we signed a free trade agreement which has allowed the commercial flow to increase more than 40 percent, reaching US$529 million in 2010. However, we are now looking to add more activities and look forward to a relationship with more opportunities in both directions. While Canada and Costa Rica already share a good relationship and many common values, during my term of duties I would like to help strengthen ties between the two countries. Luis Carlos Delgado Murillo is ambassador of Costa Rica to Canada. Reach him at embcr@costaricaembassy.com or 613-562-2855. FALL 2011 | OCT-NOV-DEC
It’s time for cross-border recalibration By Derek H. Burney CanadA-U.S. Relations|DIPLOMATICA diplomat and international canada Long line-ups and cumbersome reporting requirements, all in the name of enhanced security, have undermined the quality and quantity of Canada and U.S. trade, writes Derek Burney. The joint action plan on perimeter security and economic competitiveness announced with much fanfare by Prime Minister Stephen Harper and President Barack Obama in February was a refreshing step in the right direction. The concept is compelling in principle. The question is: Will it produce yet another spasm of communiqué massage offering the promise of relief but with little lasting effect? Or will it deliver actual benefits in terms of enhanced security and improved border access? There is some merit to the effort itself because, for Canada, constructive engagement with the U.S. can be more rewarding than neglect. While it is more than timely to reconsider and recalibrate North America’s mutually dependent economic and security environment, the proof, as the saying goes, will be in the pudding. For the better part of the decade since 9/11, the bilateral relationship between Canada and the U.S. languished more or less on idle, reflecting a lack of common resolve, a dearth of ideas and a diminution of mutual respect. Meanwhile, U.S. security concerns introduced a plethora of new inspection and monitoring procedures and fees at our shared border which violated the spirit of NAFTA undertakings and hobbled the efficiency of cross-border trade in goods and services. The Canadian Chamber of Commerce estimated that these new provisions added an average of $800 in cost to autos produced in North America, parts and sub-assemblies of which cross the border several times. Long line-ups and cumbersome reporting requirements — all in the name of enhanced security — undermined the quality and the quantity of trade, as well as the competitive positions of North American companies facing rising pressures from rapidly growing Asian economies. Negatively affected as well was the 40 percent of bilateral trade that is based on intra-firm value chains where products are assembled from components from various North American suppliers. Efficient trade flows were hampered further by duplicative but separate regulatory regimes, divergent standards and inspection routines that often defied rational explanation. All served to compound border administration. As a recent study by the Canadian Federation of Independent Business (CFIB) confirmed, the cost of understanding and coping with thousands of regulations and paperwork requirements prevented many small and medium-sized Canadian firms from attempting to serve other markets, notably the one on our southern border. John Noble, president of the Ottawabased Canadian International Council, and Michael Hart, Simon Reisman Professor of Trade Policy at Carleton University's Norman Paterson School of International Affairs, estimated that in 2003, Canadian border officials were charged with ensuring compliance with almost 100 statutory instruments on behalf of dozens of federal departments and agencies. Their U.S. counterparts administered roughly 400. Patrick Grady 1 has observed that the number of U.S. agents at the border increased six-fold from 340 in 2001 to 1,845 in October 2009. (The food industry is rife with incompatible grading, inspection and packaging requirements that hobble trade. Some, on beef for example, are blatantly protectionist and have nothing to do with food safety.) The Beyond the Border Working Group (BBWG), led by senior officials, is expected to report annually to the leaders on the implementation of its work plan and the mandate is to be reviewed after three years. [It] is joined at the hip by the creation of a regulatory cooperation council (RCC) with a two-year mandate to improve regulatory cooperation and adopt more compatible approaches that, in turn, are meant to drive greater efficiency and fuel prosperity for both countries. This is a tall hill to climb and one that has frustrated many initiatives in the past. Much [bilateral trade] is based on “value chains.” This is especially true of the automobile, telecommunications and aerospace industries. Yet integrative trade is hampered by needlessly divergent standards and inspection procedures from different jurisdictions compounded by 31 istock
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