COSTA RICAINVESTMENT REPORTby ADAM BRUNS2 MAY 2019 SITE SELECTIONCOSTA RICAINVESTMENT REPORT:INTRODUCTIONIn an April 2019 update, the World Bank observed that Costa Rica now has become an upper middle-income country based on steady economic growth over 25 years. “Th is growth resulted from an outward-oriented strategy, based on the openness to foreign investment and gradual trade liberalization,” the World Bank reported. Costa Rica’s GDP per capita has tripled since 1960, and grew an average of 4.5% each year between 2000 and 2013, compared to the regional average of 3.8%.One of the main drivers has been a parallel escalation of value found by corporate investors, and value-add by the Costa Rican workforce. Th at´s why companies begin by assessing the deployment of certain processes and end up integrating end-to-end solutions in this single site. Amazon, Intel and P&G are among the multinationals fitting that description, and now employ thousands in Costa Rica. More than 300 high-tech multinationals operate in the land of pura vida.Costa Rica has made the global top 5 and been ranked No. 1 in the Americas for number of jobs created per 1 million people. It’s a preferred top 10 destination for knowledge-intensive services including cloud computing and cybersecurity, but also digital creative such as AR and VR. FDI inflows have grown by an average of 10.3% every year since 2003.Ready for a ChallengeTh e World Bank also noted Costa Rica has the lowest poverty rate in Latin America and the Caribbean, while being the only tropical country in the world that has reversed deforestation. Th e country appears to be one of those magical places where companies, communities and the environment can thrive simultaneously and interdependently. But it’s not magic. It’s hard work. And rather than rest easy like its huge numbers of tourists, the country aims to reach the next level through strategies that leverage its dynamic scale to provide a collaborative environment for client-centered solutions, becoming in ideal testing ground.At the heart of the Americas, Costa Rica is a clear platform for FDI. Its openness to trade is reflected in a robust list of free trade agreements that provide preferential access to two-thirds of the world´s markets including the U.S., China and the EU. But its sustainable development leadership globally is increasingly an element which is driving several of the world´s leading companies, including RE100´s and CE100´s, to see Costa Rica as their partner for success. Th e country produces 99% of its energy from renewable sources and during 2018, it ran 300 straight days on clean energy alone.Th e larger goal? To not only reduce traffic congestion, but to decarbonize the transportation system, with a goal of leaving fossil fuels entirely behind by 2050. A National Decarbonization Plan calls for electric passenger and freight trains in service by 2022. Costa Rican First Lady Claudia Dobles, an architect and urban planner by profession who was recently recognized among Fortune´s Top 15 world greatest leaders, is leading the charge.KNOWLEDGE SITE SELECTION MAY 2019 3Costa Rica is increasingly known not only for its free zones, but its Blue Zone — a designation conferred by demographers on six world regions known for human longevity. In Costa Rica, that zone is found on the Nicoya peninsula in the province of Guanacaste, where Chanel, among others, is taking advantage of what the BBC calls the region’s “amazing biodiversity, commitment to sustainability and high-tech uptake.”Costa Rica’s National Plan of Science and Technology 2015-2021 focuses on the seven critical areas of earth & space science; nanotechnology and new materials; biotech; natural resources; clean tech; digital tech and health, with goals that include increasing to 50% the percentage of firms with innovation activities and incentivizing private investment in R&D, as well as matchmaking between researchers and private firms.People Are the ReasonCosta Ricans already are known for delivering services abroad in 13 languages. But the Costa Rican government announced a strategy in 2018 to make Costa Rica a truly bilingual country, setting English as a national priority. Building on a globally respected education system that includes 62 universities and 223 technical high schools, the initiative has a strong chance of achieving its goal quickly and eff ectively.An outside perspective always helps. Just ask the Copenhagen Institute of Interaction Design (CIID).“We have chosen Costa Rica as the first location for the Interaction Design Programme outside of Denmark because the country is home to a staggering 6 percent of the world’s biodiversity,” said CIID. Co-Founder and Director Simona Maschi says CIID has evolved from creating innovation for people to where “we now stand for life-centered innovation — human beings, but also plants and animals. In this transition, we have explored Costa Rica as a natural second home after Copenhagen.”Th ey’re not the only ones who feel at home in Costa Rica. As the nation’s ambitious, visionary plans come to fruition with the same diverse and robust results as its flora, fauna and enterprises, Costa Rica may well find its next level among the elite and model nations of the world. Costa Rica is a fantastic option because of the agility of the country — 5 million people, a progressive government, and dedicated to achieving sustainability in the widest sense. Th ey are proactive, creative, ready to take risks and super-engaged.” — Simona Maschi, Co-Founder and Director, Copenhagen Institute of Interaction Designsta Costa Rica is a fantastic option because of the Costa Rica’s future workforce is set to be one of the most educated in Latin America and globallyNote: Numbers inside bars shows global ranking, out of 140 countries. Source: Source: World Economic Forum, Executive Opinion Survey. The Global Competitiveness Report 2018.6 MAY 2019 SITE SELECTIONWhen a company has a 13% share of a $689 billion market, by any definition it’s a healthy chunk of change. To be precise: $90 billion and change.Two years ago, that was Western Union’s share of the global remittances market, whereby individuals move money between countries and currencies. Latin American countries historically have been among the most active remittance recipients, which was part of the reason Western Union (WU) decided 21 years ago to launch a Latin American Regional Operations Center (LAROC). Th e choice came down to two countries.“We almost chose Panama as the site for LAROC over Costa Rica,” said Dan Marostica, global head of Consumer Protection Compliance and the very first LAROC site leader, as recounted in a December 2017 blog by Jacqueline Molnar, chief compliance officer/board chair, Western Union Foundation. But Costa Rican President Jose María Figueres signed a letter stating that any site Western Union established would be a free trade zone, thus making LAROC the first service-free trade zone in Costa Rica. “In April 1998, at a formal gathering of Western Union executives and Government officials at the Casa Presidencial, President Figueres announced that Western Union would establish an operating center in Costa Rica,” Molnar wrote.Today that center in San José has grown from 30 employees to a Global Shared Services Center of Excellence, with 1,400 employees and plans to hire more. Overseeing the operation is Erick Van der Laat, vice president of accounting and controller, and Western Union’s regional director of operations for Latin America. He came to WU 11 years ago after helping P&G expand in Costa Rica and then working in international corporate auditing for KPMG in South Florida.But like many who have spent time in Costa Rica, he wanted to come back. He’d married a Costa Rican, and they wanted to settle there. He joined WU at a time when the operation was transitioning from a 35-person contact COSTA RICAINVESTMENT REPORT:CORPORATE SERVICESTHE MONEY Western Union knows the value of Costa Rican talent in adding value to global services. SITE SELECTION MAY 2019 7center to a full-fledged 700-employee global services center.“When I joined, it was to bring accounting and finance functions to Costa Rica,” Van der Laat says, led by transaction settlement tasks from the United States. “At the same time, we had other organizations growing, such as credit and collections and compliance,” he says, as keeping the global money transfer business free of fraudsters and criminals was taking on increasing importance. A sister site sprang up in Lithuania, and the Costa Rica site quickly grew to employ 1,300. Some local leaders worried when the site then outsourced many of its call center jobs, bringing payroll back to around 800.But Van der Laat says counting jobs was an “incorrect” measure of success. A better metric, he says, was “the opportunity to bring in higher-responsibility, higher-level jobs to the center.” Before another two years had gone by, the site again had grown to 1,300 employees.Robotic Process Automation (RPA) Development Adds Value Without Subtracting JobsWhen the LAROC first opened, it was amid a services boom that also featured big investments from such companies as Intel and P&G, all drawn initially by Costa Rica’s cost-competitive labor force.“The arbitrage was huge. The savings were huge,” Van der Laat says. That advantage still exists, but to everyone’s benefit, Costa Rica today is beyond low-cost to deliver a boutique, productive and high-performance solution. For Western Union, around five years ago, that important value-add took the form of increased digital services that went beyond the company’s 500,000 retail agent locations globally.“We created a team in Costa Rica that would help us understand how to identify customer behaviors so we can strengthen the logic of our risk engine,” he says. “Many other things have happened. But that was one of the greatest evolution points of our history. We moved from back office to front-facing revenue generation. It was not the dollars we were saving, but the intelligence we were gaining.”Another turning point came three years ago, when WU started implementing lean practices, all focused on pleasing the customer at the same time as the team is learning from that customer. The center isn’t just delivering on its KPIs, but learning from customer behavior in order to innovate.“We can only make innovation occur with the most talented individuals, and the most engaged workforce,” says Van der Laat. “We invest in our talent, in having a safe and amiable environment.”The Costa Rican center is also developing RPA, but rather than inciting fear for employees’ jobs, “they are only helping us do more and greater things,” he says. “Now we have over 90 robots executing around 50 different processes for functions around the world, saving us around 17,000 hours of non-value-added tasks per month. It has not resulted in anyone being separated from their jobs, and we’ve seen an improvement of work-life balance for our employees.” It also increased retention, with attrition dropping from around 30% four years ago to around 13% today thanks to strategic automation and better onboarding practices for new employees, who often come to the company straight out of Costa Rica’s esteemed high schools. Connecting better with the new talent has also meant refreshing WU leaders’ ideas — something the collaborative business environment and open demeanor of Costa Rica only encourages.A new onboarding concept, created in Costa Rica with collaboration from Lithuania, has been shared with other locations in Mexico and Argentina, and has spawned engagement committees on topics ranging from organizing special events to, following Intel’s model nearby, which has also established a data science team — a perfect example of benefiting from Costa Rica’s strong knowledge services cluster. And it’s all happened at normal wage levels.The CINDE Job Fair over 14 years has brought together more than 100,000 people to match the country’s best companies with the best Costa Rican talent.Erick Van der Laat8 MAY 2019 SITE SELECTION“The other thing I find interesting and beneficial is they can use the technology better than anyone else,” Van der Laat says of the young newcomers. “Sometimes, we just let them create.”Talent Comes From a Unique Education EcosystemCosta Ricans are know for their wit, creative and innovative drive, and WU has certainly leveraged this, gaining rewards for company and employees alike. This valuable skill in the knowledge economy being taken into account for their next expansion, as the company recently announced plans to strengthen LAROC by hiring for 200 more positions in 2019. Some of the hiring process was carried out during a Job Fair in February, organized by CINDE - The Costa Rican Investment Promotion Agency.“The diversity and richness of Costa Rican human talent have been a key element in the consolidation of the regional operations center of Western Union in Costa Rica, 20 years after its establishment,” said Roberto Golcher, regional manager of talent acquisition for WU’s Latin America division. “For Western Union, CINDE Job Fair is the platform that connects our collaborators and leaders with the greatest diversity of talent in Costa Rica.”Van der Laat reminds us where that talent comes from.“Something every single Costa Rican is very proud of is the fact that there is no army in the country,” he says, noting the precedent set by Costa Rican President José Figueres Ferrer in 1948 when he ceremonially broke a mallet to officially end the military and devote all those funds to education and health care instead. “With education, it’s not only free, but mandatory. Every single kid has the obligation to go to school. The strongest universities in Costa Rica are almost free … In Costa Rica a lot of people go to university. It’s very accessible and affordable.” And it often follows attendance at a technical high school with a focus on accounting, IT or customer service.The young Costa Rican, Van der Laat says, “is highly educated, and eager to grow and continually learn. It’s up to us to keep them motivated and challenged. The talent is different here. When I walk the floors here and in other locations when I travel, it’s a different dynamic. There is more cooperation, a greater desire to fix issues and discuss the relevant topics. That is not always happening every place.”Time to Be HumanNor is gender equality, which Van der Laat is proud to say is nearly achieved with a 50/50 split at LAROC, part of an awareness of women’s leadership potential that goes all the way to the top in Costa Rica.At LAROC, Van der Laat says he sees the last vestiges of the old “machoistic” society falling away, as he sees women routinely exceeding expectations, growing stronger and more assertive in their roles, and moving up the ladder without preference or favoritism. “By them sharing that on a daily basis, along with the other 80,000 people employed in the shared services business, I think this is how we are impacting society,” he says. “Because we will no longer accept the disparity as something that is okay. Instead we are raising our voices and demanding equality.”Van der Laat says the differences between Americans and Costa Ricans are striking.“For Costa Ricans it’s very important to know the people you are working with,” he says. “When you try to do a happy hour after work, it’s very forced in the U.S. — it’s almost like a meeting ... In Costa Rica, people want a relationship. Right off the bat, that creates a very different dynamic. You’re not working with a stranger.“It triggers a whole different culture,” he continues. “A former U.S. colleague saw me taking one-hour breaks for lunch and said, ‘Isn’t that wasted time?’ ‘No, it’s recharging,’ I said. I disconnect from my job. We can get beyond just talking about the weather, because I know what you like to do on the weekends, how your mom is doing, how the fishing was.“It’s a very different dynamic,” he says, “which I have not observed anywhere else in the world.” Western Union started operations in Costa Rica in 1998 with 35 employees, employs 1,385 employees today and aims to hire 200 more in 2019.Next >