Course Code: MGN514A Course Title: International Environment and Management

Course Instructor: Maninder Singh

Academic Task No.: 1 Academic Task Title: Case Study

Date of Allotment: 16.08.19 Date of submission: 22.08.19

Student’s Roll no:RK1638A27, RK1638A58, RK1638A59 Student’s Reg. no:11613569,

11603480, 11607179

Evaluation Parameters​:

Learning Outcomes: Costa Rica’s International Business Policies and its evolution from
Agricultural products to manufactured goods.

Declaration:
​I declare that this Assignment is my individual work. I have not copied it from any other student‟s work
or from any other source except where due acknowledgement is made explicitly in the text, nor has any
part been written for me by any other person.
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Introduction:

Costa Rica is a rugged, rainforested Central American country with coastlines on the Caribbean
and Pacific. Though its capital, San Jose, is home to cultural institutions like the Pre-Columbian
Gold Museum, Costa Rica is known for its beaches, volcanoes, and biodiversity. Roughly a
quarter of its area is made up of protected jungle, teeming with wildlife including spider
monkeys and quetzal birds. It has an estimated population of 4.7 million with a per capita GDP
of $11,630.67 and a per capita income of $16,100.
In 2017 Costa Rica exported $10.8B, making it the 80th largest exporter in the world. During
the last five years the exports of Costa Rica have decreased at an annualized rate of -15.1%, from
$24.6 Billion in 2012 to $10.8 Billion in 2017. The most recent exports are led by bananas which
represent 16.2% of the total exports of Costa Rica, followed by tropical fruits, which account for
14.2%.

Trade Evolution in Costa Rica:

Costa Rica is one of the most politically stable countries in Latin America. Its economy
continues to benefit from economic growth and high commodity prices. While traditional
agricultural exports of bananas, coffee, sugar and beef continue to be an important source of
income, Costa Rica’s economy has been broadened in recent years through a combination of
global high-tech corporations, pharmaceuticals, financial outsourcing, software development and
ecotourism. Costa Rica has attracted one of the highest levels of foreign direct investment per
capita in Latin America.
For Costa Rica, it’s convenient to trace policy evolution through four historical periods, each
characterized by particular strategies of international trade and factor mobility:
• Late 1800s–1960: Liberal trade—a policy calling for minimal government interference in trade
and investment.
• 1960–1982: Import substitution—a policy calling for the local production of goods and services
that would otherwise be imported.
• 1983–early 1990s: Liberalization of imports, export promotion, and incentives for most types
of foreign investments.
• Early 1990s–present: Strategic trade policy (or industrial policy) calling for the production of
specific types of products and openness to imports.
CACM Market:

Central American Common Market (CACM), association of five Central American nations that
was formed to facilitate regional economic development through free trade and economic
integration. Established by the General Treaty on Central American Economic Integration signed
by Guatemala, Honduras, El Salvador and Nicaragua in December 1960, its membership
expanded to include Costa Rica in July 1962. The CACM is headquartered in Guatemala City.
The CACM was formed in response to the need of member countries to cooperate with each
other to attract industrial capital and diversify their economies. By the late 1960s the CACM had
made considerable progress in expanding commerce and manufacturing in the region. Many
trade barriers between its member states were eliminated or reduced, and between 1961 and 1968
trade among them increased to a figure seven times its previous level.  
 
 
**​EPZ: ​Export processing zones are areas within developing countries that offer incentives and
a barrier-free environment to promote economic growth by attracting foreign investment for
export-oriented production.

CINDE( Costa Rican Investment Promotion Agency):

CINDE played a major role in the development of Costa Rican trade and helped its new
stabilised government in its economy after the civil wars that sank its trades through many wrong
decisive policies. In 1989, it brought 35 companies mainly textile and footwear manufacturers by
attracting them with the country’s large amount of inexpensive labor. CINDE’s officials were
beginning to worry about two potential problems facing its ambitious new initiatives:
1. Costa Rica could not remain cost-competitive in the type of products exported from the EPZ
because other countries (mainly Mexico) were benefiting from even lower U.S. tariffs.
2. Costa Rica’s highly skilled and educated workforce was being underutilized by the types of
industries attracted to the EPZ.
CINDE decided to work with the Costa Rican government to identify and attract investors who
matched up better with Costa Rican resources.

CINDE additionally employed the Foreign Investment consulting service (FIAS) of the planet
Banks’ International Finance Corporation to check whether or not and the way to draw in firms
in these industries. FIAS all over that attracting the proper range of the proper firms was well at
intervals Costa Rica’s reach, and advised areas at intervals this choice of targeted industries, like
power technologies that best match with the country’s main advantage—a labor pool that was
well educated in relevance its price. It additionally counseled that officers target firms that
supported the physical science and pc industries, like plastics and shaping. Finally, FIAS noted
that Costa Rica required to boost English people proficiency of its technicians and engineers and
therefore the protection of holding rights. In response, Costa Rica place English language skills
during a revised information for coaching mid-level technicians and discovered
Spanish-language training for the personnel brought in by foreign investors.
By the beginning of the 21st century companies like Boston Scientific, BridgeStone, Intel, P&G
and HP has production facilities in Costa Rica.And investments like Abbott Labs, Allergan,
Amazon and IBM have flown in extensive amount of trade and cash flow.
Greatest Strengths of Costa Rica for Attracting Investors:

● Low Cost educated working force.

● Highly trade centered government policies.
● Production facilities.
● One of the most stabilised countries of Central America.
● Its geographical position allows easy access to export and import facilities.