MGT411 ALU Corporate Social Responsibility And Business In Costa Rica Note what some of the initiatives in Costa Rica are for being more socially and environmentally responsible. It’s only two paragraph based in the article attached. Business in Costa Rica: Trends and Issues
Lisa Kahle-Piasecki
Tiffin University
Costa Rica, a Central American country historically known for its coffee and banana exports, has a
growing industry based on technology and ecotourism. While the country has enjoyed a steady increase
in tourists largely from the United States, Nicaragua and Canada, U.S. companies have also discovered
Costa Rica as a country with emerging opportunities. With United States businesses increasingly opening
operations in Costa Rica, there are management concerns to plan for when conducting business in Costa
Rica. This paper will explore practical issues for companies or individuals when opening a business or
locating a branch operation in Costa Rica.
INTRODUCTION
The Republic of Costa Rica is a Central American country bordered by Nicaragua to the north and
Panama to the south. It lies between the Caribbean Sea and Pacific Ocean. Costa Ricans, or Ticos, as they
call themselves, have the highest standard of living in Central America with purchasing power per capita
income of about $11,500 U.S. (U.S. Department of State, 2012). Costa Ricans also have a life expectancy
that is higher than the U.S. (Firestone, Miranda, & Soriano, 2010). There are several possible reasons for
this. Costa Rica is a country without a military, primary education is free and compulsory, the health care
system is universal and Ticos are said to lead a generally stress-free life (Firestone, Miranda, & Soriano,
2010).
Costa Rica was historically known for its coffee and bananas, but pineapples have surpassed coffee as
the number two agricultural export (U.S. Department of State, 2012). The number one export is
microchips and due largely to Intel’s microprocessor facility near San Jose. This accounts for almost 20%
of all exports and 4.9% of Costa Rica’s gross national product (GlobeAware, 2010). With their high
literacy rate of 95% (Central Intelligence Agency, 2012), political and social stability, high quality of life,
and low levels of corruption (Rodriguez-Clare, 2001), businesses may find it attractive to locate here.
Additionally, Costa Rica’s nature and wildlife is extensive, so businesses related to ecotourism and the
environment have a growing tourist market.
CULTURE AND DEMOGRAPHICS
Costa Rica has a population of around 4.6 million people (Central Intelligence Agency, 2012) with
about 1.4 million people living in the capital city of San Jose. Of this population, 98% classify themselves
as white or mestizo, which is a mix of Spanish and African roots, and 2% as black or indigenous
(GlobeAware, 2010). While Spanish is the official language, English is frequently spoken, particularly in
the resort areas and larger cities.
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Most Costa Ricans, 76%, are of the Roman Catholic Religion (Central Intelligence Agency, 2012)
and conservative with traditional roles for men and women (GlobeAware, 2010). Women and blacks were
given the right to vote in 1949, the same year the army was dismantled, giving Costa Rica the distinction
of the only country that does not have an army (GlobeAware, 2010).
FOREIGN INVESTMENT
Costa Rica’s investment climate is considered favorable, leading to high foreign direct investment
that is actively sought and led by two Costa Rican agencies, the Foreign Trade Promotion Corporation
(PROCOMER) and the Costa Rican Investment and Development Board (CINDE; U.S. Department of
State, 2011). In terms of ease of doing business, Costa Rica’s economy is ranked 110 on an index from 1
to 185 (World Bank, 2012). A high ranking, with one being the highest, on the ease of doing business
index, means the regulatory environment is more conducive to the starting and operation of a local firm.
During the last 20 years, a growing number of multinational companies have established
manufacturing plants in the country, leading to the development of a technology and knowledge-driven
industry (Rodriguez-Clare, 2001). In 1995, U.S. based company, Ameritage Carrying Case, established a
second production facility offshore in Costa Rica rather than in Asia, based on the Central American
nation’s skilled workforce, English language knowledge, geographical proximity and time zone alignment
with the North American market and stable political environment (Music Trades, 2011). Other
manufacturing facilities include electronic sector companies such as Intel, Hewlett Packard, IBM, Remec,
Conair, and Sensortronics, and medical devices sector companies Abbott and Baxter.
Much of the shift in the country’s main exports from agriculture to microprocessors is the result of
Intel’s decision in 1996 to build a major manufacturing plant in Costa Rica. Intel’s initial investment of
$300 million put Costa Rica on the map as an attractive location for other technology firms (Nelson,
2008). The attraction of Intel to Costa Rica was largely due to then Costa Rican President Jose Maria
Figueres’ concentrated efforts to incorporate Costa Rica into the global economy by attracting hightechnology investment (Nelson, 2008). This investment has become a well-known example of a “best
practice” to follow in attracting foreign direct investment (FDI) to promote national development. After
Intel’s initial investment, other investors from nontraditional sectors, such as medical devices, were also
attracted to Costa Rica (Nelson, 2008).
Costa Rican exports continue to show positive growth. In November 2012, exports increased to $10.4
billion from $9.7 billion in 2011, representing an 8.2% increase (Arias, 2012). This increase exceeded the
annual goal by over 7%. While the majority of exports go to the U.S. – 38.9% – exports to the European
Free Trade Association (EFTA) and European Union (EU) are increasing. Exports to EFTA increased by
95.2% and exports to the EU increased by 8.7%. The increase of exports to EFTA is in agriculture and
medical devices but exports to the EU are fueled by growth in products like integrated circuits (Arias,
2012).
Although the exports of products have increased, the Costa Rican economy is undergoing a profound
and rapid transformation in which services are playing an increasing key role (Gonzalez, 2012). Exports
of services such as finance, information technology development and support and customer service have
more than doubled in the past decade representing 32% of total exports in 2011 (Gonzalez, 2012).
The FDI in the services sector, has grown each year on average 6.5%, and increased from 27.2% in
2000, to 54.4% in 2011 (Gonzalez, 2012). Some of this increase is attributed to multinational companies
such as Amazon, IBM, and Proctor and Gamble (Gonzalez, 2012). Increasingly, India is locating service
operations in Costa Rica in the information management and knowledge management areas.
Costa Rica has exceeded a record for the third year in a row in high technology FDI. Forty new high
technology investment projects decided to establish operations in Costa Rica in services, life sciences,
advanced manufacturing and clean technology sectors (Costa Rican Investment Promotion Agency,
2012). The 2012 figures show a new record for Costa Rica and represent over a 17% increase in FDI from
2011 (Costa Rican Investment Promotion Agency, 2012).
Journal of Applied Business and Economics vol. 15(2) 2013
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ECOTOURISM
Ecotourism, defined as “tourism intended to promote ecological awareness and to limit damage to the
environment” (Agnes, et.al., 2002), started in Costa Rica in the 1980’s and boomed in the 1990’s. During
this time, Costa Rica gained a reputation as an ecotourism destination. In 1999, Costa Rica had 940,000
tourists annually and by 2011, that number rose and broke a record of 2.2 million visitors annually mostly
from the U.S., Nicaragua and Canada (Costa Rica Tourism Board, 2011; Norman, 2011). While the
ecotourism or sustainable tourism industry has provided needed jobs and income for many Costa Ricans,
it also has some disadvantages, such as increasing the numbers of tourists, which leads to more building,
and development of infrastructure. More building and development can lead to the destruction of
important habitats for wildlife and fauna. Additionally, Costa Rica must fund more personnel to enforce
laws that exist to protect the environment. As the reputation as an ecotourism destination grew, the
country had a reason to preserve their forests and began instituting laws and regulations to protect
wildlife.
Costa Rica is considered a leader among Latin American countries in the design and development of
a system of payment for environmental services (Russo & Candela, 2006). Costa Rica provides financial
compensation to landowners for the ecosystem services provided by their forested lands. The payment for
environmental services (PES) program started in 1996, and has received credit for helping to reverse the
country’s deforestation rate and for enhancing Costa Rica’s image as a green country (Johns, 2012).
Since 1997, the PES program has been providing payments to more than 4,400 farmers and forest owners
for reforestation, forest conservation, and sustainable forest management activities (Russo & Candela,
2006).
At one time, Costa Rica had one of the highest deforestation rates in the world (Johns, 2012). Land
was cleared for agricultural and cattle ranching and other areas of development. This rampant
development is the focus of the well-known novel, La Loca de Gandoca, or The Madwoman of Gandoca
(Rossi, 1992/2006). In this fiction story, based on an actual case, the main character narrates the events
that led to an environmental and legal case in which residents of a remote place in Limon the Caribbean
province in Costa Rica, try to save a wildlife refuge from commercialization and eventual destruction.
The destruction of the refuge for tourist and residential development, was heavily criticized by some
for uncontrolled development. Since that time, multinational companies in the tourism and hospitality
industry have located in Costa Rica and have found it beneficial to publicize and promote efforts to be
socially responsible (U.S. Department of State, 2011). Even companies outside of the tourism area such
as U.S.-based multinational Intel, pursue efforts to be socially responsible. Intel was a finalist for the U.S.
State Department’s Award for Corporate Excellence in 2009 and 2010 because of its outstanding
corporate social responsibility program in Costa Rica (U.S. Department of State, 2011).
Marriot Corporation, a Fortune 1000 company, currently has six properties in Costa Rica. Marriott
seeks to “take responsibility for the environmental impact of our business operations” (Marriott, 2012,
“Environment”) by focusing on five key elements of environmental responsibility; (1) energy, water,
waste and carbon, (2) supply chain, (3) green hotels, (4) engaging guests and associates, and (5)
conservation. The location in Los Suenos, Costa Rica is known for its sustainable practices. Some
environmental initiatives at the location include; bar soap that is discarded in the guest rooms is donated
to a local tour company to wash horses, the golf course has trees that are designed to be environmentally
friendly, and the hotel associates weekly participate in beach cleaning (Marriott, n.d.).
Boutique hotels and resort hotels also publicize and promote their socially responsible practices.
Family-owned hotel, El Establo, located in the cloud forest of Monteverde, has a commitment to the
environment and sustainable responsible practices. The property participates in certification for
sustainable tourism (CST) that measures a property’s impact on one or more of the following;
environment, community, cultural-heritage, or the local economy (Certification for Sustainable Tourism,
2012). At El Establo, when entering and exiting a guest room, electricity is turned on and off with the
door key. In order to lock a guest room door, a key must be removed from a panel on the wall, which will
automatically turn off all lights in the guest room.
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The CST program was developed by the Sustainability Programs Department of the Costa Rica
Tourist Board and the Costa Rica National Accreditation Commission and designed to differentiate
businesses of the tourism sector. The program is regulated by the Costa Rican National Accreditation
Commission (Certification for Sustainable Tourism, 2012).
MANAGEMENT ISSUES
In a relatively short period of time, Costa Rica has established a reputation as a global provider of
information and communication technology products and services (Mata, Matarrita, & Pinto, 2012). The
growth in this industry has led to a growing demand and shortage of Costa Ricans that are qualified to
work in the country’s computer industries. Mata, Matarrita, & Pinto (2012) found that the growth for
occupations in the industry is high and there are more positions available than employees to fill them.
With more U.S. multinational companies considering Costa Rica as an area to establish operations,
issues for training U.S. employees to go abroad should be a priority. Today’s business climate is one of
fierce competition. Employees of large, global and multifunction organizations as well as small
businesses are faced with increasing professional workloads and risks brought on in part by globalization
(DeLong, Gabarro, & Lees, 2008).
When establishing an operation in another country, companies should consider preparing an
employee for the transfer by first determining their existing global and cultural awareness, preparing them
for the specific country assignment through language training, explaining practical information on the
country such as expected living conditions, housing, mail, transportation, electricity, and technology
issues, and perhaps one of the most significant job-related issues is to pair them with a global mentor, an
individual already living in the country who can assist the employee with the informal and formal needs
of the job in order to increase the chances of success for the expatriate.
Between 16 and 40% of U.S. international workers fail to complete their international assignments
(Human Capital Institute, 2006). Of those who do complete the assignments, between 30 and 50% are
considered ineffective or marginally effective. Current estimates show U.S. companies spend
approximately $2 billion per year related to failed or ineffective overseas workers (Human Capital
Institute, 2006).
GLOBAL AWARENESS
Corporations understand that to survive in today’s competitive business environment, they must move
in the global marketplace and prepare their managers for international assignments (Swain, 2007). In
addition to managers having an understanding of the possible language differences; daily living
conditions, such as transportation, technology and housing, managers must have global capabilities with a
global mindset to be effective (Swain, 2007). Javidan, Teagarden, & Bowen (2010) found that global
leaders need a global mindset to succeed overseas. This mindset comprises three areas of capital;
intellectual, psychological and social. The intellectual capital comprises the general knowledge and
capacity to learn, it is the global business savvy, cognitive complexity, and cosmopolitan outlook. The
psychological capital is a manager’s openness to differences and capacity for change, it includes a passion
for diversity, thirst for adventure, and self-assurance. The social capital is the ability to build trusting
relationships with and among people who are different from you. This is the intercultural empathy,
interpersonal impact, and diplomacy of an individual (Javidan, Teagarden, & Bowen, 2010).
Global Mentoring
Global mentoring programs are becoming more important as workers are asked to take international
assignments (Human Capital Institute, 2006). Mentoring can be a very effective performance intervention
to use with employees (Horvath, Wasko, & Bradley, 2008; Kahle-Piasecki, 2011; Kram, 1985; Murray,
2006; Nancherla, 2008). In a survey of Fortune 1000 firms, Kahle-Piasecki (2011) found that mentoring
programs are increasingly offered in companies as a way to transfer knowledge and develop future
Journal of Applied Business and Economics vol. 15(2) 2013
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leaders. One new form of mentoring that could be useful for a business in today’s climate of global
competitiveness is electronic or e-mentoring. Although Kahle-Piasecki (2011) found that only a small
number of Fortune 1000 companies are using e-mentoring, with the increasing importance of technology
in the workplace including social networks, online collaboration and mobile applications, global ementoring could be very significant in developing a successful transition for a foreign assignment. Global
e-mentoring can be defined as the virtual pairing of a more experienced individual with a less experienced
individual in a relationship that crosses cultural and geographic boundaries and is formed and maintained
initially through the use of digital tools. For this purpose, global e-mentoring can pair a potential
expatriate, the mentee or less-experienced individual, with a more experienced individual who is an
established resident of the future country – the mentor.
In order for this type of relationship to be effective, mentors need to possess a very good
understanding of the local culture (Elkin & Elkin, 2008). Also, the key to success in a mentoring program
is the monitoring and programming elements (Doles, 2008). Assigning a manager to facilitate, monitor
and evaluate the program will help develop and maintain the relationship (Cole, 2004).
CONCLUSION
Costa Rica is a country that has growing opportunities for FDI specifically in the areas of technology
and ecotourism. During the last several decades, U.S. technology, electronic, and medical service
companies as well as other countries and industries have begun establishing operations in Costa Rica.
This has resulted in a shortage of Costa Rican workers with the necessary knowledge and skills to work in
the technology industry (Mata, Matarrita, & Pinto, 2012). With the recent location of U.S. companies in
the country, managers should consider training planned expatriates to work abroad by developing and
encouraging a global awareness and pairing the employee with a mentor who is a resident in the future
country assignment. The training of future expatriates to have a global awareness by pairing them with a
global e-mentor, for example, will result in lower costs of sending employees abroad, higher performance
productivity, and more effective business operations.
REFERENCES
Agnes, M. et. al. (Ed.). (2002). Webster’s new world college dictionary (4th ed.). Cleveland: Wiley
Publishing, Inc.
Arias, L. (2012, December 20). Costa Rican exports surpass annual goal. TicoTimes, Retrieved from
http://www.ticotimes.net/Current-Edition/News-Briefs/Costa-Rican-exports-surpass-annualgoal_Thursday-December-20-2012
Central Intelligence Agency. (December 5, 2012). Costa Rica, The World Factbook. Retrieved from
https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html
Certification for Sustainable Tourism. (2012). Sustainable tourism CST: Certification for sustainable
tourism in Costa Rica. Retrieved from http://www.turismo-sostenible.co.cr/en
Cole, A. (2004). Exploring the relationship between human resource development functions and the
mentoring process: A qualitative study. (Doctoral dissertation, Barry University, 2004). UMI No.
3143321.
Costa Rican Investment Promotion Agency. (2012, December 12). Costa Rica exceeds record for the third
consecutive year in high technology foreign direct investment. Retrieved from
http://www.cinde.org/en/news/18-news/326-costa-rica-exceeds-record-for-the-third-consecutive-year-inhigh-technology-foreign-direct-investment-
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