Hi Ibexx, Article...Intel factory to change Costa Rican economy...
Nando Times
SAN JOSE, Costa Rica (February 27, 1998 00:42 a.m. EST nando.net) -- It's not often that a single factory can reshape a nation's economy. But a few miles from Costa Rica's capital, San Jose, on fields that once grew coffee, the final touches are being applied to a plant that will do just that.
Intel, the microprocessor maker, is to open the plant -- an assembly and test site for its Pentium II processor -- next month. By the end of the year, the Pentium II will be Costa Rica's biggest export, earning more foreign currency than anything except tourism.
Output is expected to be worth $700 million this year. If all goes according to Intel's plans, a second assembly plant, already begun, will open in November, followed by two more on the 145-acre site. In all, up to $500 million is likely to be invested.
Within two years exports are predicted to reach $3 billion, eclipsing the revenues from traditional crops such as bananas and coffee.
Other electronics companies, such as DSC Communications, a maker of telephone switching equipment, and Motorola, already operate in Costa Rica. But Intel's arrival is the biggest reward yet for the country's policy of trying to move on from the low-skill environment of the traditional offshore assembly plant -- the maquilas -- that have swarmed to Central America, lured by tax breaks and cheap labor.
"We are pitching for the higher end of the market," says Enrique Egloff, director of the Costa Rican Investment and Trade Development Board. Unable to compete with its neighbors for low-cost labor, Costa Rica is instead seeking to make a competitive advantage of its well-educated workforce, the fruits of its stability and social investment.
Danilo Arias, Intel's director of public affairs in Costa Rica, says: "Intel cannot go to a country where it cannot find adequate human resources. You can go to the cheapest place in the world, but if you can't find anyone to run your plant, what is the point?"
He says Costa Rica excelled compared with other countries such as Brazil, Mexico and Chile. Egloff says Intel was impressed with the nation's political stability and with the commitment from the government.
President Jose Mara Figueres took a personal interest, even to the extent of taking the controls of his helicopter to fly Intel executives around the country. Intel has made links with universities and technological institutes to encourage courses to be matched with skills it needs -- setting out a "career road map," according to Arias. "The company is pretty satisfied with the results so far."
The impact of Intel has already been felt in Costa Rica's booming construction sector, which grew 16.4 percent in 1997, compared with 3.2 percent for the whole economy. The plant already provides 850 jobs and the workforce is expected to grow to 3,500 eventually.
Intel will act as a magnet, says Egloff, bringing further investors to create a cluster of high-technology exporting companies and suppliers. Photocircuits, a U.S. producer of integrated circuit cards, this month announced an initial investment of up to $8 million, creating 320 jobs.
There remains the question of how well placed Costa Rican companies are to capitalize on these opportunities. Intel is starting to build a local supplier base, says Arias. But Helio Fallas, an economist and former planning minister, says there has to be attention paid to how best develop domestic industries so that they can benefit from such big exporters.
"The challenge is how to link the external sector with the rest of the economy. It has to be achieved through government policy together with the private sector," he says.
And Egloff recognizes the need for improvements to Costa Rica's infrastructure. Miguel Lora, an economist with the Center for Financial Studies in San Jose, says the limited capacity of airports, ports and roads is a bottleneck that risks putting limits on growth.
"In spite of having high export potential, we cannot develop it quickly. The cost of transport is very high because of inefficiencies," he says. "One of the major tasks for the new administration is the concession of public works.
"Furthermore, while the state has few resources to invest, there are constitutional restrictions on private companies running facilities such as ports. There has to be a very strong will to make the necessary changes within the legislative assembly," says Lora.
But he says the influx of foreign investment has forced the state to become more efficient speeding up its hitherto slow process of reforms. Meanwhile, Intel says the first processors off its new production lines will be ready for shipping by April 17 -- one month after the plant opens.
"When Intel started thinking about site selection, Costa Rica was probably bottom of the list," admits Arias. "Most obviously, it is a very small country. The analogy was made that it would be like putting a whale in a goldfish bowl. But the country proved to Intel that small is beautiful."
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Regards, Michael |
