The Private Sector as Supporter of Aid for Trade
Article 2: CINDE: Supporter of Development12 One of the most interesting and successful experiments performed by the private sector in the field of aid for trade is the case of the Costa Rican Investment Promotion Agency (CINDE). Its origin traces back to 1982, when as a result of the political and military conflicts in Central America, the Central American Common Market (CACM)—main destination of Costa Rican exports—dropped dramatically. During the first two years of the 1980’s, exports from Costa Rica to Central America fell from $280 million to $160 million. This crisis showed the vulnerability of Costa Rican poorly diversified export supply, to regional market’s ups and downs, both in terms of products and of destination. The country had an idle productive capacity and needed to re-route its productive structure and its exports to third markets. This meant the country’s serious, determined insertion into the world market. The original idea was developed by the Director of USAID in Costa Rica, Daniel Chaij, who endeavored to create “a private organization to foster investment in export projects”13. Chaij found in Richard Beck, Costa Rican entrepreneur, the perfect counterpart. They put the idea into practice and traveled to Washington to seek funding to create the organization. That effort was supported by the Reagan Administration, who approved a contribution of US$11 million for the project as part of the CBI Program. Beck then led a group of Costa Rican entrepreneurs and prominent business personalities at the first meeting of the Board of Directors of CINDE. That meeting counted on the participation of representatives of the industrial and agricultural sectors together with renowned politicians and academicians, who were the “supporters” of the idea. When the organization was duly structured, personnel from Costa Rica were selected to be trained in Ireland, country that stood out for its efforts in the promotion of investment and foreign trade. The initial goal of the organization was to enhance the image of the country to attract investment from the USA and to have new companies established in the country to export to third markets in view of the fact that the domestic market had shrunk and the Central American market had collapsed in terms of consumption. As regards domestic issues, CINDE focused on detecting the main obstacles that affected productive units both at microeconomic level (funding, organization, human resources, technology, capacity and marketing) and at macroeconomic level (legislative, financial, currency and administrative problems). The result was a sui generis organization, where the private sector encouraged export supply and promoted exports and investment, with a strong political support of the government. Its programs were addressed directly to small companies, cooperatives, women groups, young people, productive organizations and the public sector. Speaking in terms of percentages, 62% of the funds were used for programs with a strong social content such as cooperatives and private non-profit organizations, and 38% were earmarked for programs oriented to developing production, investment and exports. As a result of a successful strategy to promote exports and to attract investment implemented during the last governments, with a strong support from CINDE, exports in Costa Rica have shown a significant dynamism during the last decades, with an average growth of 15% during 1990-2000 as compared to only 4% in the previous decade. In nominal terms, exports rose from US$1,000 million in 1980 to US$1,450 million in 1990 and to over US$ 8,200 million in 2006 (See Annex, Figure 9A) In parallel to this growth, Costa Rican economy underwent a structural change rooted in the diversification of supply and in the promotion of the country as target of investment and tourism. At present, traditional export products, such as banana and coffee, have continued to grow in volume and value, however, they have passed from representing 60% of the exports to less than 20%; while high-tech exports represent one fourth of the total exports and tourism has become the main source of foreign currency. The services sector has increased its share in the GNP to a 50%. The net accumulated result of this effort is that nowadays, Costa Rica is a small and open economy, with a recent history of success in social and economic aspects in the Latin American Region. This relative success has been supported by a sustained growth over 4% during the last ten years in the export sector as main driver of the economy. CINDE’s efforts have been acknowledged internationally. The Economic Commission for Latin America and the Caribbean (ECLAC or “CEPAL” by its Spanish acronym) (2003) has stated, “without any doubt, CINDE, with limited resources and tons of creativity has been able to assimilate successful experiences and has positively contributed to the modernization and development of Costa Rica”. The World Bank (2000) has underlined, “CINDE’s activity has generated a change in the country’s foreign commerce structure in conjunction with the establishment of investment incentives”. In addition, the United Nations Conference of Trade and Development (UNCTAD) recognized and granted CINDE the classification of “Advanced Investment Promotion Agency” in its 2002 World Investment Report.
This section is based on an interview given by Richard Beck to the authors on August 13, 2007. Richard Beck’s words at the MBA (MAEX) Graduation Ceremony, at INCAE on May 2002.
Published on Sep 14, 2007
this report was prepared by the integration and trade sector (int) as a contribution to the regional meeting on mobilizing aid for trade: la...