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

This presentation is reproduced by the UNCTAD secretariat in the form and language in which it has been received. The views expressed are those of the author and do not necessarily reflect the view of the United Nations.

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

opportunity for countries to drive development focusing

on 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)

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2002 2004 2006 2008 2010 2012

US$

mill

ion

es

Viajes Informática e información

Otros servicios empresariales Transportes

Los demás

1,952.3

5,482.6

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2002 2004 2006 2008 2010 2012

US$

mill

ion

s

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

% P

IB

Computer, information services and other business services Agriculture

Costa Rica´s upgrading path

in offshore services

KPO

General Business Activities Industry Specific Activities

Va

lue

Ad

de

d

Broad Spectrum

(ITO, BPO & KPO)

d

$638.2

$223.4

$186

$140.8

Cal

l & C

on

tact

C

en

ters

C

all C

en

ters

IT

Bac

k O

ffic

e

$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

offshore services, 2011

0

2

4

6

8

10

12

14

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

NumberofCompan

ies

YearofEstablishment

BPO ITO BroadSpectrumServices(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 of 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% of (non-wireless) internet connections were over 2Mb/s in 2012.

Liberalization of

telecommunications market

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

Liberalization of

insurance markets

Success

factors

and

priorities

for the

future

Costa Rica´s policies to foster

services in and for GVCs

• 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 moving forward

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