CINDE Continues to Attract Foreign Companies to Costa Rica

2023 brought significant change to Costa Rica's foreign investment attraction model. Starting in the final quarter of last year, the country's foreign investment attraction model now consists of two investment promotion agencies (IPAs): CINDE, a private IPA with 42 years of experience; and PROCOMER, a non-state public IPA with less than one year of experience. 

A couple of weeks ago, CINDE reported that during 2023, it was successful in attracting 34 new foreign companies and confirming another 84 new reinvestment projects from foreign companies previously attracted by CINDE and already operating in the country. In total, since 2016, CINDE reports 118 new projects that demonstrate an average annual growth rate of 17%, which represents an important achievement and a record for the agency's management:

Source: CINDE, March 2024

Likewise, PROCOMER announced a total of 59 new investment projects in 2023, representing a growth of 64% compared to the 36 projects announced in 2022. However, this comparison is incorrect: In 2022, 101 new projects were confirmed. New projects are defined as the algebraic sum of the number of new name companies and new reinvestment or expansion projects from already established companies. 

The publication does not indicate the number of new companies attracted by PROCOMER. This is one of the most relevant indicators on an investment promotion agency’s management, as the continuous arrival of new companies allows for creating a growing base of installed companies, which sends a signal of reliability to other foreign companies that are considering opening operations in Costa Rica. This demonstration – or signaling effect – also contributes to improving new job creation and increasing external flows that finance the country's current account deficit.

How Does CINDE Continue to Be So Successful in its Management? 

Using historical data from the agency, it has been possible to calculate the evolution of CINDE's learning curve in attracting and retaining foreign investment in Costa Rica. This is a simple way to evaluate the agency's best practices, according to the International Trade Centre (ITC).

A learning curve describes the degree of success achieved during learning over time and represents increases in productivity (understood as the relationship between the quantity of input per unit of output) resulting from a better way of doing things – that is, the "know-how" of workers and managers when leveraging a technology. Know-how is realized via processes, skills, and abilities. Broadly speaking, learning is achieved through experience and applied research. Experience is a vehicle for learning that enhances skills through the continued repetition of tasks and techniques performed by individuals or groups over time.

Source: Self-Prepared based on data from CINDE (2023)

Source: Self-Prepared based on data from CINDE (2023)

In both curves, it is evident that CINDE has increased its productivity in terms of the quantity of new projects attracted to the country per agency employee, becoming more efficient in the use of its resources each year. Twenty years ago, each employee contributed an average of 0.39 new projects. In 2022, this indicator rose to 2.32 new projects per employee, representing an average annual growth of 10% since 2003. 

Additionally, CINDE has improved the use of its adjusted budget over time. In 2003, $160,000 was spent on each new attracted project. Twenty years later, this figure has decreased by 75% – to $40,000 per new project attracted to Costa Rica.

The data clearly shows that this private agency's experience represents a strong component of its success, and it is expected, for the benefit of the entire country, that this success will continue over time. The current government should draw lessons from this data to substantially improve its performance. The first lesson learned should reflect a popular saying in Costa Rica: "It's one thing to see it coming, but another to dance with it" (una cosa es verla venir, y otra bailar con ella in Spanish).