Micro-chip Mirage Conceals Downturn

By Néfer Muñoz, IPS, 17 December 1999

SAN JOSE, Dec 17 (IPS) - Costa Rica's export boom - its best trade balance in 40 years - looks like an industrial miracle, but economists say it is a mirage that masks the difficult situation confronting the nation's small and medium-sized businesses.

Costa Rica's 1999 exports grew more than 20 percent compared to 1998, with sales topping 6.65 billion dollars. But the other side of the coin reveals that agricultural, textile and food exports were stagnant or declined.

Economists attribute the situation to the electronic circuit phenomenon, which have been manufactured in Costa Rica since 1998 by the world's micro-chip giant, the Intel Corporation.

"The country is unbalanced. On one side are the rapidly growing large corporations in the free zone, but on the other are most of the small companies, which face enormous problems," said Marco Vinicio Ruiz, president of Costa Rica's Chamber of Industries.

In October 1996, Intel Corporation, the world's principal micro- processor manufacturer, announced that Costa Rica would be one of its production headquarters. It invested 500 million dollars to build its factories and now employs more than 2,000 people.

But once the euphoria of the multi-million-dollar investment wore off, experts pointed out that beyond the initial injection of capital and the hiring of personnel, few of the benefits remain in the country and most of the production inputs come from overseas.

"This year the gross domestic product (GDP) of Costa Rica grew eight percent, and 50 percent of it was due to the performance of the micro-chip sector," reported Ruiz.

Intel-produced micro-chips have already displaced the country's traditional primary exports, and now represent 38 percent of total foreign sales in 1999.

"This has led to a break with the tradition of recent decades when the nation's major exports were bananas and coffee," said Antonio Burgu‚s, president of the Chamber of Exporters.

Thanks to the increased export totals, and the fact that imports did not surpass 6.45 billion dollars, 1999 will be the first year in the last 40 that Costa Rica will close the year with a surplus trade balance.

"Due to the upturn in exports, Costa Rica has become the principal exporter per capita in Latin America, beating Trinidad and Tobago and Chile," affirmed foreign trade minister Samuel Guzowsky.

Though he did not cite foreign trade totals from the two other countries, Guzowsky reported that Costa Rica's exports per capita will top 2,000 dollars this year.

But the numbers do not reflect that the bonanza is concentrated in the hands of large companies and foreign industries based in Costa Rica.

And while the micro-chip market grew more than 200 percent in 1999, Costa Rica's livestock and fishing industries plummeted nearly 60 percent, agriculture dropped 13 percent, textiles fell 3.3 percent and the food industry shrunk by 1.5 percent.

If the corporations, like Intel, located in the free zones are not included in the equation, Costa Rica's employment rate fell 1.3 percent.

"What the country needs is a policy that supports the growth of small and medium-sized companies, as well as small and medium- sized industries," Ruiz said.

The Chamber of Industries president's call to action has been seconded by representatives from various economic sectors, who demand better treatment through funding and support policies.

The Chamber of Exporters' Burgu‚s emphasised that Costa Rica must concentrate on a strategy that allows its export sector to consolidate in the coming years as the nation prepares to face the challenges of regional and global integration.

Exporters indicated that Costa Rica should provide more incentives for its existing companies, encouraging them to join in export operations. Their goal is to raise the current total of 2,430 exporting businesses to 4,000 by 2005.

If such measures are not implemented, Costa Rica will continue with its boom that looks like a miracle, but will suffer the consequences of the reality behind the mirage, affirmed analysts. (END/IPS/tra-so/nms/ag/ld/99)