Why Costa Rica will LOSE if the CAFTA/TLC Referendum fails….

In the last two weeks, two important events have occurred that are linked to the future of investment, and expecially the Call Center Industry in Costa Rica.

  • The Legislature announced that there would be a nationwide referendum on the TLC, as CAFTA is called here in Costa Rica.
  • The Entire Country went dark for three hours last week when one of ICE’s (The Costa Rican Telephone and Electrical Monopoly), Electrical Stations blew up. This in turn exposed major problems with the Costa Rican Electrical Grid.
  • The Country has been forced into three hour a day forced rolling blackouts for the last week.

The Referendum was a sign of failure on the part of Oscar Arias, the Costa Rican President to get the TLC through the legislature. Massive street demonstrations, led by the ICE Union and other Unionist were giving the legislators cold feet, and TLC opponents renewed hopes for defeating the treaty.

The Massive Power failure and fiasco that has followed has now put ICE on the defensive, and caused many who supported them and their anti Free Market Stance, to rethink their feelings. You dont realize how badly a monopoly sucks until it fails spectacularly. The arrogance that followed the failure:

  1. Demanding a Rate Hike of an average of 23% to make up for poor planning (And some speculate, to fund additional raises for ICE employees).
  2. When failing to get the rate hike approved, using it to hold the entire country hostage with rolling blackouts…

Were more reason to erode ICE support among the population.
I have written a number of articles on the Call Center business, including one that will appear next month in Central America Today. With the exception of bold visionaries like Rogelio Douglas, whose Admire Americas has opened the first call center on the English Rich Caribean Coast of Costa Rica, Call Centers in the Central Valley, are all competing for the same stagnant pool of English Speaking Talent. Add to this complexities in doing business, extremely high taxes for those who dont qualify for Free Zone status, and the ICE Monopoly, and you have a very volatile market for Call Centers, one that is being challenged by new Call Center Clusters in Guatemala, where I helped to found a new center last year, El Salvador, Panama and Honduras, where I am helping to develop what promises to be one of the most sophisticated Contact Centers in the Region for the Karims Group.

If the TLC fails, Costa Rica will be left with an aging monopoly that once led the region in every statistic that counts, but which is now finding itself behind in technology, (ICE just approved GPRS Internet, and has NO prepaid Cellular Service), availability of services, (New GSM Phone Lines will not be available until August of this year), innovation, and redundancy…. The Country will also be the only one in the REGION without competition in the Telephony Marketplace, or for that matter, any part of the public sector.

Costa Rica has failed miserably to take advantage of the lead they had when I established the first call center in Central America in 1994. While other countries have invested in Infrastructure, opened up their telecommunications markets and focused on developing strong English Language Bases of Employees. Costa Rica has arrogantly held on to a reputation that they no longer deserve. Visit any other capital in the region, and you will feel the progressive Energy. In Guatemala, millions are being invested into creating Call Center friendly parks and infrastructure. In Honduras, companies like Karims are working closely with the Honduran Government to define a new industry.

CAFTA is an important key to the future of Costa Rica. Without it, Costa Rica may see itself losing more and more of its key technology businesses, to other, more aggressive and progressive neighbors.

In the Utopia Group, we are looking at the REGION as our opportunity, Costa Rica just does not seem as promising as it once was.

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The Business Adventures of an Expat Call Center Guru in Costa Rica