TBY talks to Luis Guillermo Solís Rivera, President of Costa Rica, on strategies for increasing FDI, tackling the fiscal deficit, and accession to the OECD.

Luis Guillermo Solís Rivera
Luis Guillermo Solís Rivera studied history at the University of Costa Rica and completed his master’s in Latin American studies at Tulane University. For 30 years, he has held academic positions, both at the University of Costa Rica and the National University. He was an official at the Ministry of Foreign Affairs between 1986 and 1990 and worked closely in the formulation and negotiation of the peace process for Central America. He worked for the Latin American Faculty of Social Sciences, the Ibero-American Secretariat, and the Foundation of External Services for Peace and Democracy (Fundapem). From 1994 to 1998, he was Ambassador of Costa Rica for Central American Affairs and Director of Foreign Policy.

FDI in Costa Rica increased to USD2.8 billion in 2015. What is your outlook for 2016, and what are you doing to increase this figure?

The investment numbers have been steadily climbing in Costa Rica at a rate of around 14% per year, as has been the case for the last three years. This is important because it indicates that the strategy of promoting investment is successful. I travel and meet with many other leaders in Silicon Valley, New York, Chicago, and cities in Europe where we meet with people that culminates in more reposed and strategically orientated work of our investment promotion industry, CINDE, develops, as well as the work that Procomer, our export promotion agency. Word-of-mouth reference accounts for about 50% of all investments that we receive in Costa Rica. One of the things we do is invite those interested in working in and investing in Costa Rica to come and talk with people who are already working here, to give them a more accurate sense of what their investment would bring.

Are there any particular countries or regions from which you are trying to increase foreign investment?

We are looking at the whole world. Costa Rica is one of the most open economies in the world, with access through FTAs or relations to 2.5 billion people, which is a significant number. We do this on a general and a global basis because of the geographical closeness and because of our traditional linkages in the past, whereby most of our investments came from the US and Western Europe. However, we have seen other strategically important investments coming from China, Korea, and Australia. Our overall strategy remains broadly focused.

What is being done on to address the fiscal deficit, and what is the significance of the reform in the accession of Costa Rica to the Pacific Alliance and the OECD?

During the political campaign we made it clear that this would be the core issue of our administration. The fiscal deficit went from 2% to 6% in less than a decade, and 15 years later we are introducing reforms. We have divided the reforms into nine bills for income and expenditures, four of which have already been approved. Costa Rica wants high-standard services but does not want to pay for them, which negatively affects our accession to the Pacific Alliance and the OECD because if we do not have financial sustainability we cannot make the most of the advantages an FTA has to offer, nor can we compensate for the negative effects that these agreements can have upon certain sectors of the economy, particularly agriculture. Our unemployment rate is around 9%, and if we are not careful this could increase. We need to reform to be successful. In a general sense, the organization is happy and advances have been significant, and there are areas in which Costa Rica provides more than would be expected from a country of our size, such as our clean energy proficiency.

What are your priorities in the region?

Central America and the Caribbean is an easy area for us to relate to. The immediate region is almost an extension of our local markets. Obviously, the US and Europe are significant markets; over 50% of what we import and export comes from and goes to the US. We are probably the largest partner of the EU in Central America, which is significant in terms of our exports too. We are also active in Latin America beyond the greater Caribbean area. Our relations with Chile and Peru are significant, and the likelihood of an agreement between Costa Rica and the Pacific Alliance is still there, though this is a decision that will have to be made after we solve the deficit. We are interested in pursuing trade relations with Asia and expanding on our agreements there.