Around the world, on both local and national scales, investment in digital spaces is considered a bit of a hallmark of growth. Unfortunately, the term “digital” often has a bit of a nebulous definition, as it can refer to just about anything that’s using software and hardware to solve problems. How does Costa Rica fit into this developing landscape though – and does it have anything to offer in competition against digital goliaths like the United States and Japan?

Digital Frontiers

The World Economic Forum (WEF) seems to have a particular obsession with the digital environment in Latin America, one that reveals a certain underconfidence in the region’s aspirations toward a hi-tech future. For one, and despite an assurance that Latin America is stocked with “entrepreneurial masterminds”, an article from back in 2018 revealed that education standards may actually be too low for digital industries to develop. The number of young people in the region with digital skills was estimated at 30%.

In a world based almost entirely around the internet, databases, and tech treasures like the blockchain, digital skills are not just desirable but essential for a country to compete in any number of industries. Interestingly, in 2022, the WEF suggested that fresh digital frontiers could help Latin American countries deal with old bugbears like pollution and health inequality. As an example, a “digital transformation” could produce more efficient transport routes, making medicine more accessible and driving down toxic emissions.

It’s this kind of scenario that digital technologies are adept at solving, essentially allowing less economically developed countries to skip decades of industrial change and come out the other side as a modern powerhouse. Due to its geographical location, Costa Rica may be uniquely positioned to take advantage of this digital future, via something called nearshoring. In brief, this type of outsourcing would use supply chains in Costa Rica to serve nearby countries such as the United States.

“Deep Tech”

Across the world, Ireland has experienced substantial growth in something similar, namely, IT nearshoring. Just as Intel has an assembly plant in San Antonio de Belén, Ireland has received direct investment from more than 1,000 tech companies, including Google, Facebook, IBM, Paypal, and Uber. However, by far Ireland’s biggest foreign friend is the global biotech sector. At present, the North Atlantic nation is the home of GlaxoSmithKline, Pfizer, and Novartis, which has actually been present in Ireland since the 50s.

Why Ireland? The country has the highest participation in education among 18-year-olds in Europe, the youngest population on the continent, and a low corporate tax rate. Local tech companies also benefit from millions of Euros in funding from the Irish government. All of these factors combined make Ireland one of the most attractive places for digital development in the world. Business Insider reports that “deep tech”, i.e. robotics and AI, has made Ireland its home recently too.

Of course, there’s more to the tech industry than medicine and computer chips. Ireland has attracted significant interest from web-based enterprises as well, especially those involved in sportsbooks. The gambling.com website notes that there are plenty of new betting sites serving Ireland, with significant names BetVictor, Tote, and LeoVegas are just a few of the big-name bookies enjoying some kind of presence in the country. This type of business is much smaller than pharma but online casinos are expected to contribute US $12.18m to the Irish economy by 2027.

Public Debt

Costa Rica already shows signs of following the nearshoring example set by Ireland. For instance, World Atlas figures claim that the country’s education spending is 2% higher than the world average while the OECD notes that 35% of the country’s exports are medical in nature. The worry is that Costa Rica’s growth, which has seen a 60% increase in GDP over the past twenty years, is being hampered by the size of its public debt. The previous source places this figure at 70% of Costa Rica’s GDP. Ultimately, this means that future growth will be far more sluggish.

Additional figures from the OECD anticipate a 2.3% increase in GDP in 2023, followed by a slightly healthier 3.7% in 2024. The good news is that inflation topped out in August of last year, which allows for more positive GDP predictions toward the end of the current decade. It’s perhaps fair to say that Costa Rica’s current debt quagmire is more of a temporary scenario than a permanent one but it will curtail public spending in the coming months, something that can be investment poison.

Source: Pexels.

So, let’s look at the industries currently propping up Costa Rica’s GDP, the ones that could become ripe for a digital takeover in the future. One of them might seem obvious – tourism. The Arenal Volcano, Manuel Antonio National Park, and the cloud forests near Monteverde are all well-known magnets for foreign spending. The country presents a bit of a tropical paradise to visitors from more northern climes. It’s still a relatively new piece of Costa Rica’s economic puzzle as well, taking off in the 1980s.

Precision Farming

As hinted at earlier with Intel’s factory and medical exports, manufacturing forms a large part of Costa Rica’s industrial output. The German corporation Zollner Elektronik occupies the city of Cartago, producing circuit boards for the global market. Zollner generally operates as a partner or supply chain provider, rather than producing any products with its own name, but its reach is enormous. The company has interests in transport, healthcare, aerospace, telecoms, and more general product testing. Continuing in a similar vein, Boston Scientific has recently expanded its presence in Cartago too.

Finally, while it pales in comparison to the equivalent industries in Brazil, Chile, and Colombia, Costa Rica also produces a large amount of food from agriculture. The World Atlas states that 14% of the country’s workers are engaged in some form of farming, using 10% of its land. Interestingly, agriculture is considered one of the industries that could benefit from digital technology – somewhat ironically, given its association with manual labor. For example, precision farming could give farmers up-to-the-minute data on crop yields.

Overall, Costa Rica is perhaps slightly behind the curve in digital development, largely due to the need to improve education while reducing the national debt. As demonstrated though, there’s still plenty to be optimistic about in the country’s future.