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Learn about the synthetic textile cluster in El Salvador

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Contact the Central American Group if you want to establish a textile manufacturing operation in one of our free trade zones in El Salvador.

The synthetic textile sector in El Salvador is vibrant and developed.

Patricia Figueroa
Executive Director
Textile, Apparel, and Free Trade Association of El Salvador
direccion@camtex.com.sv

The Central American Group: Welcome to another episode of the Central American Group podcasts. We record these on topics related to economic issues in Costa Rica, El Salvador, and the rest of the Central American region as a whole. Today we’re fortunate to have Patricia Figueroa with us. She is the executive director of the Textile, Apparel, and Free Trade Zone Association of El Salvador. Among other things, we will discuss the synthetic textile cluster in El Salvador.

Good morning, Patricia. How are you?

Patricia Figueroa: Good morning, Steve. I’m doing fine. Thank you very much for hosting me.

The Central American Group: Well, it’s our pleasure. Maybe you could start by telling us a little about yourself and the organization you represent.

Patricia Figueroa: Yes, indeed. I have been heading this association for the past ten years. Our chamber is made up of about 100 members that represent the full segment of the Textile, Apparel, and Free Trade Zone Industry of El Salvador. Throughout my career, I have been engaged in economic development, mainly in government and the private sector, in different positions, but always focusing on promoting exports and investment in my country in various capacities.

The Central American Group: Well, thanks a lot for that synopsis. Let’s start with the questions. I want to ask first why companies should consider investing in Textile, Apparel, and Free Zones in El Salvador. What are the advantages of the synthetic textile cluster in El Salvador?

Patricia Figueroa: I would like to start by saying that our sector has a substantial weight and plays an essential role in our economy. It’s one of the pillars of the Salvadoran economy, and it has a great deal of importance in the economic arena.

Our sector has contributed, on average, to about 40% of the country’s total exports for the past ten years. So, we have been leading export development in El Salvador. Only last year, we exported a significant amount more than in 2021. So, the sector has maintained a steady weight in the economy, and we look forward to the opportunity to continue this growth. In addition to that, it translates into the direct employment generation of about 85,000 jobs, which is substantial.

Why invest in the sector, and why invest in El Salvador? I would like to say this is not only because of the weight and maturity of the industry but also because I would highlight the fact that our industry operates within the framework of the DR-CAFTA agreement. So that’s the framework that we use. In parallel, we have a very competitive and sound business environment.

Several pieces of legislation favor the attraction of foreign direct investment. These laws include the one that governs free trade zones.   We also have a beneficial commercialization law, the International Services Law, and a variety of legislation in the area of the use of renewable energy.

So thus, I would say that there is a framework of legislation that favors and that is very attractive for supporting foreign direct investment. I think that beginning with the free trade agreement, the DR- CAFTA accord has really made us one of the most critical sectors in the region.

Another aspect that I would like to highlight is that because of the industry’s maturity, we comply with many regulations that are immersed in the DR-CAFTA agreement.

Our industry has one of the highest compliance standards in areas such as labor law, social responsibility, and sustainability. Additionally, now we are in the best position to be able to trace our products.

Product traceability is one of the elements that many overseas investors, particularly in the US, are looking at now. Because we work with industry, we aim tirelessly to comply with all the areas of the best environmental practices working hand in hand with our US customers and their local plants. So, there is a lot of compliance and a lot of innovation in this area.

To finalize this brief synopsis, I would say that the speed to market, the geographic location where we are really positioning our industry, and the region, the Central American region, and also particularly El Salvador, is a close-by, near option, and partner to do business with.

The Central American Group: Thank you for that information. I would like to know, and I’m sure our listeners would like to know, what is the textile industry in El Salvador composed of? Also, tell us about the synthetic textile cluster in El Salvador.

Patricia Figueroa: Yes, let me start by saying that our industry’s success is vertically integrated, the rule of origin yarn forward. It allows us to deliver full package options to our most demanding clients.

In the country, we basically have two very important clusters. One is the cotton cluster, and the other one is the synthetic textile cluster in El Salvador. The cotton cluster was the first cluster developed in El Salvador and, at the moment, is the one that generates the most employment in the sector. It focuses on producing intimate apparel, dresses, skirts, towels, sweaters, and socks, among other items. Our manufacturing bases can deliver label, package, pack, and package dormant, whatever our customers indicate they want. The second cluster was born out of a very targeted strategy.

After the DR-CAFTA was enacted, the US and Central American producers joined hands to build this integrated production platform. This was particularly true in the synthetic textile cluster in El Salvador. This has allowed us to remain very competitive. So, as I mentioned, we have two very different clusters. We are one of the most important providers of fabrics to the rest of Central America.

Not only do we maintain the 10th position in terms of supplying the US with fabric, but we are also one of the leading producers of apparel goods that are delivered to the United States. 

We are also an essential and critical player in delivering yarn and fabrics to the rest of Central America. The companies in the synthetic textile cluster in El Salvador manufacture value-added products, particularly in athletics and high-performance workout wear. El Salvador also specializes in a lot of the short production in niche value-added areas, like high-end yoga attire. So, there is a variety of production. We believe there is an excellent opportunity to be part of the textile supply chain and diversify the existing production base in El Salvador.

The Central American Group: What are the advantages of the synthetic textile cluster in El Salvador?

Patricia Figueroa: One of the main factors is that it is vertically integrated from yarn forward. Because of this, you can get your production from the yarn to the apparel. The manufactured items can be delivered quickly with a lot of the technology and capacity that has been developed.

We have very important US. Companies in El Salvador, such as Unifi Central America, and regional players that are not necessarily from the US. This would include the Pettenati company. This firm is one of the leading high-performance fabric producers. The fact is that this synthetic textile cluster in El Salvador has also invested a lot in the design of fibers, high performance, and other innovative products.

I believe that we are also close to each other in great geographic proximity is also a positive factor. Most companies in the synthetic cluster are very close to each other. So this allows products to move from place to place quickly and within a very short distance. There is a lot of interaction among the players. As I said, when you look at the current situation and all the nearshoring and friendshoring, it is vital to trace your product and have production closer to consumers’ borders to strengthen the Western hemisphere supply chain.

I think El Salvador is in the best position to deliver those products.

The Central American Group: One of the biggest challenges that the textile industry in El Salvador faces today?

Patricia Figueroa: One of the biggest challenges we have is that we definitely need to be able to attract more foreign investment. I think this is an excellent opportunity to invite the companies we need to further diversify our production base.

We have a solid production base, focusing on a synthetic textile cluster in El Salvador. We also do high-performance and activewear. But there are other possibilities. There are other niche opportunities for companies looking at this country that can benefit from all the conditions in El Salvador. So I think maximizing this opportunity is of great importance.

The challenge definitely, I think, is how do we continue to grow. I believe this is an excellent opportunity to invite companies to look at El Salvador and the kind of companies we have here.

The Central American Group: Well, from the perspective of the Central American Group, we get a lot of inquiries for people looking to have textile products made. Hopefully, that’ll continue, and the clusters you mentioned here will continue to grow. What’s the outlook for the industry five years from now?

Patricia Figueroa: Let’s say we envision ourselves as a leader. Our vision is to consolidate this platform as a leader of high-value-added products with a more diversified base. We do see the industry growing. I mean, there has never been a better momentum.

After the DR-CAFTA’s signing with all its beneficial conditions, we have a great partnership with the US. Because of this, we are continuously strengthening the synthetics textile cluster in El Salvador. So, I believe that we will see steady growth in our industry. We see our industry as being able to grow in exports. We envision significant growth in the sector, particularly as we take advantage of this enormous opportunity.

We are constantly working towards this objective. Our partners in US organizations, the national council of textiles, the AFA, and others are really involved in this. As we continue to strengthen those partnerships and take advantage of the current momentum, I think we will see much growth in El Salvador in the next five years.

The Central American Group: Well, that’s great. As I mentioned, many people are making inquiries about the textile sector in El Salvador. And I’m sure some of those people will listen to this podcast. So if somebody wants to get in touch with you to find out more, how can they do that?

Patricia Figueroa: Most definitely, they can contact us through our email. It’s direccion@camtex.com.sv. We will be glad to answer any inquiries or work with the people to help them understand the conditions in our El Salvador textile industry.

The Central American Group: And if it’s okay with you in the text that is below the podcast player, I’d like to put a link to your LinkedIn profile if you have one. Would that be okay?

Patricia Figueroa: I don’t have one updated. That’s terrible. I will update it, and I will definitely give it to you.

The Central American Group: Okay, thank you very much. That’ll facilitate people contacting you. Well, I want to thank you for joining us today. It’s very interesting, and we know that the future is going to be bright for the textile and apparel industry in El Salvador. Thank you very much for joining us.

Patricia Figueroa: You’re welcome, Steven. It’s my pleasure.

 


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synthetic textile cluster in el salvador

The Medical Device Cluster in Costa Rica: A Conversation with Federico Rivera

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Contact the Central American Group if you want to establish a manufacturing facility in the medical device cluster in Costa Rica.

The Medical Device Cluster in Costa Rica with Federico Rivera

Federico Rivera
VP of Operations 
Orbicor Technologies
federicor@unnomed.com

The Central American Group: Hello. Welcome to another installation of the podcasts that the Central American Group does. The purpose of these recordings is to have conversations with people with various expertise in doing business in Central America. Today we have Federico Rivera with us. And Federico is the head of an organization that has to do with the medical device cluster in Costa Rica. But I’ll let Federico introduce himself and tell us about his organization.

Hello, Federico, how are you today?

Federico Rivera: I’m doing just great, Steve. I’m happy to be here. And hello to all the people listening to your interesting podcasts.

The Central American Group: Could you tell us a little bit about yourself and the Medical Device Cluster in Costa Rica?

Federico Rivera: Yes, well, a little bit back.  My professional life started as an electrical engineer in Costa Rica, and life took me to various jobs until I did ten years of semiconductor work with intel here in town in Costa Rica. But that was in itself a big learning experience, not only for me but for many professionals that came about and were able to work for this huge company with a worldwide presence. And that opened up many possibilities for me as a professional and for the country. But then, on the side, medical devices were developing, and some of that, again, because of the country’s high capabilities from a technical standpoint. So that in itself fueled up to be right now, the biggest exporting sector in the country. The medical device cluster in Costa Rica represents about 36% of the country’s exports. That’s where I am right now. I’ve worked with various medical device companies over the last few years, and it’s amazing. My career, although technical in the background, has grown through different individual contributor roles, up to top management positions in various companies in the medical device cluster in Costa Rica.

The Central American Group: That’s interesting. Just a little background on the medical device sector in Costa Rica. After Mexico. Costa Rica is the largest exporter of medical devices in Latin America. And that being the case, what kind of companies make up the medical device cluster in Costa Rica?

Federico Rivera: Well, the medical device sector is composed all the way from huge or very large and, say, leaders in their business. Among the medical device companies, we have brands like Boston Scientific and Hologic. We have Edwards Life Sciences and many others that are top-level companies here. There is also a huge base nowadays of suppliers in the medical device cluster in Costa Rica. These companies may do parts, subcomponents, processes, or transformations in some of the materials to supply these companies. So, the sector has grown tremendously, and it’s composed right now of over 90 companies of those types.

The Central American Group: You’ve got several big names, and you’ve just mentioned that a supplier base is developing in Costa Rica like any other place. I would assume there are gaps in the supplier base. What kind of companies aren’t there that you would like to see there as suppliers?

Federico Rivera: I think more and more that gap is being closed. The country’s big drive is to make the local supply of many components or services the sector demands. So over time, what has happened is that most of these big companies in the medical device cluster in Costa Rica come with a process that was already established in a different location. And that means that also the supplier base was from outside. But over time, various other companies using the same suppliers resulted in those looking for their nesting here in Costa Rica. But note also that, but the country in itself. Its local industry has picked up the pace and has started to do programs and fuel up being able to do supply chains internally. Not from companies that come or came with these other big manufacturers, but as local people or local industries say, for example, plastics or precision machining that we’re already present here just now serving and catering for the medical device cluster and with the standards and quality requirements that regulated industry needs.

The Central American Group: Now, for those areas where you’re still looking to get additional suppliers in and preferably domestic suppliers to help the local economy, what’s needed to motivate entrepreneurs and entrepreneurs?

Federico Rivera: That’s a great question because we all want this to grow more because we feel it’s a very socially responsible sector. Most companies that come are very social, environmental, and governance oriented. Products and philosophies are all from corporate organizations that are mature. So, people get the right compensation, people get the right service, people are promoted, and people get incentives to grow. What is missing, though, is the ability to help entrepreneurs or startups succeed. And I specifically talk about governance from the central government to enable these startups in the medical device cluster in Costa Rica to have access to venture capital or angel funds that will help them out during the earlier years of startups to become strong enough to be sustainable and economically feasible. Knowledge is here. We have great knowledge from professionals in all fields. But of course, all that is STEM-related technical side is very strong, but also on the administrative or financial services and such. We have a great pace also happening there. So that the human capabilities are there. It’s more of the business side of the medical device cluster in Costa Rica that needs to mature a little more, and the government right now is centered around that.

The Central American Group: When talking to people that have an interest in Costa Rica, one of the things that we at the Central American Group do is communicate to those individuals that the workforce in Costa Rica is formidable in terms of education and training. Can you comment a little bit on the workforce that you’ve encountered in your activities in your country?

Federico Rivera: Sure. I’m going to start with the first layer, which is the more manual type of work. And we have industries that are fully automated, robotics and what have you, as well as optic systems and inspection, et cetera, all the way to very manual assembly, very demanding on the ability itself of the craftsmanship of the person. It’s a huge area of need, but basically, people do like the fact that the companies back up their professional work with possibilities of development for themselves. So, it’s an opportunity for them to have a stable job with good benefits and being in the right environment but also the possibility to grow further, so that’s entry-level, the operator level has that, and they are very committed to work. Now the next level, let’s call it the administrative level and middle management, and all that there is composed of a very strong professional base of different trades, many of them from the, as I was saying before, technical side, but many of them also from the administrative side. Logistics, supply chain management, EHMS, human resources, of course, you name it. And that group also benefits from the fact that incentives are helping them grow are there.

Federico Rivera: Most companies, I cannot say one that doesn’t have that as part of their compensation package has that as part of the integration because they see workers as a very important means of getting good results. So that is for them. And then you get the third layer which is top management, they call it business leaders, senior executive leaders, directors, VP, etc. And whatever the other organization set up and they basically get exposed to worldwide management, worldwide interaction with all their plans depending on the company, of course, but then they get exposure, and their leadership is tested in a worldwide environment. So, I think all three levels definitely have their challenges to afford or to look forward to, but they also have their benefits. So I think it works really fine in the medical device cluster in Costa Rica.

The Central American Group: Okay, as far as the organization that you lead that represents the medical device cluster in Costa Rica, what are some of the things that the organization has achieved thus far?

Federico Rivera: Well, first of all, we have gone through a two-year journey, coming to our third year now in grouping the medical device sector actors. So, we started off as a small group of companies at the time that wanted to create synergy from a sector from a country standpoint. Meaning many of the companies that are here are definitely competing against the market outside of our borders. But here, we need the same services from infrastructure, government laws, educational focus, universities, technical schools, you name it. All the fields are common ground. So, through the help of our investment and promotion agency, CINDE, has done a great job for us and for the sector. Over the last few years, the group has been created, and we have established a force that picks up more advocates daily.  The Medical Device Cluster in Costa Rica synergizes in creating the right environment for this sector to grow. Including what we were talking about, the entrepreneurs, and bringing the funding providers to the table to talk and create a holistic medical device sector within Costa Rica.

The Central American Group: I know that you have events and other plans in the future, can you name them for us and give us a chance to know what kind of initiatives you’re involved in?

Federico Rivera: Yes, sure. So as a sector, as the medical device cluster in Costa Rica, we’re seeking precisely the country’s growth. We go in not thinking of what’s in for me as a company, but what’s for us as a country, as a sector within the country.  We realized that although we are the biggest exporter in the country right now, we hit $5.2 billion last year, and this year is going to be even higher. So, although that is growing, we definitely want that to continue, not only to continue as the manufacturing sector of medical devices but as an entity that can definitely incentivize and create a system necessary for research and development within the country. Costa Rica’s Health System has a good name, a great name, not only within Latin America but worldwide, and is positioned at number 33. So, we have a great base of knowledge. From a practitioner of medicine standpoint, what we now have is the ability to turn that into a foundry and an opportunity for the development of life sciences within Costa Rica with the knowledge that we already have and with the industry that we already have present in the medical device cluster in Costa Rica.

The Central American Group: Well, that’s extremely interesting. It’s exciting to see how the Costa Rican medical device cluster has grown in a relatively short amount of time. One of the things that we experience when we produce and publish these podcasts is that listeners come back to us with questions. We seek to be able to handle those questions in the best possible way. We like to create an environment in which they can contact the interviewees that we have so that they can go directly to the source of information. If somebody wants to ask a question directly about the Costa Rican medical device cluster, how can they contact you, Federico?

Federico Rivera: Sure. As an organization, we have set up some initial systems. Our communication platform is being modified, so I will definitely like to share it with you when it is up and running. But for now, I am available as a point of contact.

My email is federicor@unnomed.com. I have no problem receiving all questions and inquiries that listeners may have to talk further or explore opportunities. But when we have this new communication platform up and running in a few weeks, I will share it with you so that it can also be shared with your listeners.

The Central American Group: And another thing we’ll do, with your permission, of course, is in the transcript that’s going to be below the audio box that plays the podcast. We can put a link to your LinkedIn profile. Would that be okay?

Federico Rivera: That will be just fine. Absolutely happy to help anyone that needs our support and anything related. Absolutely.

The Central American Group: Well, thanks a lot for joining me today. We appreciate your taking the time to tell us about the exciting things happening in the Costa Rican medical device cluster.

Federico Rivera: Thank you for being here and sharing information about our history and our path forward. Thank you very much.


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cleam rpp, design in Costa Rica

Clean Room Design in Costa Rica with Ingenya’s Jorge Munoz

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Contact the Central American Group if you are looking to establish a manufacturing facility in Costa Rica at the Green Park Free Zone.

Clean room design in Costa Rica with Jorge Muñoz

Ingenya
Jorge Muñoz, partner
jmunoz@ingenya.co.cr
ekalnins@ingenya.co.cr

The Central American Group: Hello and welcome to another installation of the Central American Group’s series of podcasts about doing business in Costa Rica, El Salvador, and the rest of the region. Today we are lucky to have with us a gentleman by the name of Jorge Muñoz. Jorge is with a company that’s located in Costa Rica. It’s called Ingenya and specializes in clean room design in Costa Rica. He’s going to tell us a little bit about himself and about his company. Hello Jorge. How are you doing today?

Jorge Muñoz: Hi. Fine, thank you. First of all, I would like to say that I’m an architect. I have 35 years of experience in the field and 25 years of experience in Ingenya as a partner. We founded the company 25 years ago and, basically, we started working in some industrial facilities in clean room design in Costa Rica in 2000. And then we started doing increasingly more industrial facilities related to the food and micro-components industry. After this, we migrated and added it to the industrial facilities menu. We added the clean room design in Costa Rica and now we have about forty-five clean rooms in our curriculum. We’re also doing some pharmaceutical facilities work right now.

The Central American Group: Well, that’s interesting, but one of the things that I’ve also heard that you are quite prolific in is designing life sciences facilities. Can you tell us a little bit about that?

Jorge Muñoz: Yes, that’s what I was saying. Regarding the medical devices and clean rooms dedicated to that industry and also pharmaceutical, it’s quite challenging because we have to coordinate the different trades involved in the design of clean rooms in Costa Rica. Also, we have to be very careful, to include an architect and to include those activities or those spaces in the program of the facility. So, we kind of integrate all the things that are needed to support the equipment requirements and the dock work requirements and the low return locations. This also determines the position of the furniture’s location in the business and things like that. So as an architect, it’s kind of a discipline that requires a lot of programming and coordination between all the people that are involved in the clean room design process in Costa Rica.

The Central American Group: How does the experience in the market lead you to specialize in designing for the life sciences sector in Costa Rica as well as other high-tech industries?

Jorge Muñoz: There has been a lot of work-related to this because of our free trade agreements and our free trade zones in Costa Rica. They provide a good environment for the development of these types of companies. So, we started working first with a micro-component company that is located here since 2000. We developed a test lab in Mexico and then we performed a lot of projects here in Costa Rica for them until the present. We continue to with them and also, we started beginning in 2008 in the medical devices industry in Cosa Rica and continue to work in this sector until the present. We continue to work in clean room design in Costa Rica related to these kinds of projects. And as I said, we have completed between 45 to 50 clean rooms designed in our company. When I say clean rooms for manufacturing clients, this usually means that a company sometimes needs one or two or three big clean rooms in their facility. There is, for example, in the pharmaceutical field, the need for smaller clean rooms, but those are very small. So, the need is usually for one. But anyway, the market has been evolving in this direction and there are big companies that are here that need their suppliers located to be here in Costa Rica.

So, they need them to be in Costa Rica also. We are right now signing a lot of other projects for suppliers to medical device manufacturers in Costa Rica. That’s the evolution of the market at present.

The Central American Group: One of the things that I’ve always wondered, I’m not involved in designing or constructing anything related to this sector, but I know that there are several distinct types and classes of clean designs in Costa Rica. Can you tell us a little bit about that?

Jorge Muñoz: Yes, this is pretty fascinating, the way you have to design the various stages of operational requirements. You have to perform, especially in the pharmaceutical industry, you have to put in the layout the different transfers, material transfers with the different specifications. There’s a way in and there’s a way out. The way you manage the waste in those operational areas, the way the people go in and go out. There’s a different procedure for the incoming of people and the way out. The gowning process is a very complex activity, and the degree process is also a complex activity. So, the way you get dressed, the way you wash your hands, the type of towels that you have to use, where to put a wastebasket, et cetera. It’s part of the challenge there. Also, the way you manage the different classes is important. There are, let’s say, five different classes of clean rooms involved in this process. And sometimes it depends on the product that you are going to produce. Also, it determines the classes required and the different layers of requirements or procedures that you have to perform as an employee. So, it’s very interesting.

Also, this involves the type of equipment, the type of materials, stainless steel, and things like that have to be used at a certain point without any other material. And these kinds of things are very fascinating. Also, the way you manage, for example, the layering of different garments. It’s also an interesting flow that you have to perform or design there. These things make it kind of a challenging situation.

The Central American Group: What kind of support beyond clean room design in Costa Rica for life science facilities do you provide? What additional sectors do you work in?

Jorge Muñoz: As we were saying, Ingenya is a company that has all the trades in-house. This includes the main trades, the main design trades to be precise. So, we have to coordinate between the, of course, architecture that mainly has the primary interaction with the client. But also, from the very beginning of the project, from the conceptual design, we have to coordinate our design with the mechanical engineers in terms of the sizing of the different rooms. This process will determine the sizing of the different support areas for equipment, location and ductwork, and things like that. Normally there are some, of course, there are some standard dimensions, but we have to coordinate with our clients to determine the way they will locate the equipment and the dog works and the different catwalks and things like that for maintenance. This is also the case for the moving of equipment. But this is part of our support. And of course, along with the mechanical design, there’s an electrical design, there’s a control design, there’s a BMS design, and BAS. So, this is kind of a continuous interaction between the different trades, and this is part of our support that goes beyond clean room design in Costa Rica.

The Central American Group: Can you give us a couple of examples of projects that you’ve worked on?

Jorge Muñoz: Yes. For example, there’s a good client of ours, which is Boston Scientific. We’ve been working with them since 2009, and we’ve been supplying them with our support since then. And we have done a lot of retrofits in the factories and also some expansions for them. And the other one could be Baxter or Bayer or clients like that, for which we’ve been doing some projects for them.

The Central American Group: Well, Jorge, this has been a very interesting discussion. I know that given the prominence of the life science and medical device sectors in Costa Rica, clean room design in Cosa Rica is necessary. And what I’d like to do now is many times people listen to our podcasts, and after hearing what our guests have to say, they have questions that they’d like to ask our speakers. How might somebody contact you if they have a question about clean room design in Costa Rica?

Jorge Muñoz: There are different channels, of course. Our website is one, and they can give us a call. We are always open to any additional project. And, of course, there are other channels. For example, Green Park Free Zone is one of our strategic partners in this sector, which is our site is www in Kenya. That’s Ingenya in English with a Y. My email address is jmunoz@ingenya.co.cr. That’s the way they communicate with us, or through Green Park, of course, which is, as I said, a good partner of those strategic partners.

The Central American Group: What I’ll do to make things easy for people is I will you have a LinkedIn profile, I would assume, as well, right?

Jorge Muñoz: Yes.

The Central American Group: Well, I’ll leave a link on the transcript section of the podcast to your LinkedIn page, and I’ll put a link to your website and list your email address so that everybody will have the information that they’re ready to be able to use to get in contact with you should they have any questions or any need for clean room design in Costa Rica.

Jorge Muñoz: Okay, great.

The Central American Group: Well, thank you very much for joining me today. I hope you have a very nice rest of the day, and it’s been a pleasure speaking with you.

Jorge Muñoz: Thank you very much.


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Huge job creation in the Northern Triangle

HUGE job creation in the Northern Triangle

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Contact the Central American Group if you are looking to establish a manufacturing facility in one of The Central American Group’s free zones in the region. 

HUGE job creation in the Northern Triangle

Think Huge
Greg Huger, Executive Director
ghuger@think-huge.org

The Central American Group: Hello. Welcome to another installation of the Central American Group’s podcasts. In these discussions, we speak with experts who have various programs and knowledge and expertise in business in Central America. Today we have a gentleman with us from an organization called Think HUGE. His name is Greg Huger. Greg, maybe you can tell us what the acronym means and a little bit about yourself and the organization that you represent?

Gregory Huger: Well, thank you very much, Steve, I’m delighted to be with you and your audience. Huge stands for Honduras, USA, Guatemala, and El Salvador. What it is, it’s a nonprofit 501 C-6 business association registered in Washington. DC, with the objective of facilitating and making investments, private investments, in those four countries for massive job creation. That’s the focal point of HUGE and our longer name is Think HUGE. As for myself, I have a career in the private sector where I was with John Deere, UNICAL, and Bechtel, almost all the time in developing countries and challenging ones at that. And then the other half of my career with USAID and the Peace Corps. And so, I am now delighted to be associated with the fine people of HUGE.

The Central American Group: And we were talking a little bit before we started about the participants in HUGE. Could you tell us a little bit about the organization that makes it up and what they do?

Gregory Huger: Absolutely Steve. HUGE was founded by a group of business leaders from the four countries. They had known each other through business and a little bit of social contact, mainly business contacts over the years. And they realized that the four countries are suffering from a common problem and that is the desperately low standard of living for the common people in the northern triangle, Guatemala, El Salvador, and Honduras, which forces them to make that difficult journey up to the US looking for the American dream.

On the one hand, they’re driven by poverty. Also, they’re driven also by family reunification. Twenty-two percent of the Salvadoran population now lives in the US. So, it’s a little bit less for the other two. That’s another piece, and by the violence and difficult environment in which they live in their home countries. Because of these conditions, the business leaders who got together and founded HUGE in December of 2020 realized that one of the things that they were doing that helps contribute to the solution to that common problem with their countries and the people in them is to provide well-paid jobs with good working conditions and benefits and support to the families and communities in which the workers live.  This is so that they can find the American dream in Guatemala, Honduras, and El Salvador without having to go through the process of going up to the US and making it across the border.

So that was why they did it. And the objective, the idea was it is to have six from each of the Central American countries and then they upped the number of potential members from six to twelve in the United States. So, total this is a total of 30 members of whom we now have 20.

The Central American Group: That’s interesting. More specifically, you got into it a little bit, but more specifically, can you name some of the organization’s other goals, and what’s the formula that you use to achieve them?

Gregory Huger: Yeah, we’re trying to create a better image based on the reality of the private sector in the Northern Triangle and the US private sector as it works with them. There are bad apples and stories of bad things being done actually in all four countries but vary significantly over people’s impression of the Northern Triangle. And so, one of the objectives is to significantly expand responsible, noncorrupt, sustainable, and profitable businesses to instigate huge job creation in the Northern Triangle. Doing this and engaging as citizens in the public discussion to push for policies that benefit the whole country and all its people is one way to improve the image of the private sector in the area.

Another is to make investments in and push strategic regional infrastructure projects. And those would be transportation projects. So, this would include roads, airports, upgrading seaports, and border crossings.  It would involve telecommunications, G Five, in particular, US G Five.  Also, very importantly, energy. The countries need to have abundant, competitively priced, clean energy to be attractive and competitive and to have huge job creation in the Northern Triangle in the overall near-term situation. And we can get into this later on. We are involved with some pretty significant energy projects and the third goal is to increasingly make this group a point of reference in Washington on our issue, which is a private investment for huge job creation in the Northern Triangle.

So those are some of the broader goals that the organization has. And the formula that we have going to your question is we work in clusters. So, taking founding members who are in the same business and having them work together to define the art of the possible in terms of our mission, investment, jobs, and social sustainability. We started with the low-hanging fruit in the region and that is the textile and garment industry.  We have six of our 20 members who are big players in that sector.  These are companies like Parkdale Mills in the United States, Fruit of the Loom, Sandmar Intradecco and then some of the key players in the region like Architects or Caracol Knits in Honduras. They are working together and making investments to make that industry very competitive and successful in terms of our mission of facilitating huge job creation in the Northern Triangle. One of the things that they are doing is that they are investing over $550,000,000 in new projects now in the yarn spinning business. So that the yarn that is used in producing garments in Central America in the Northern Triangle comes from yarn-producing factories there and is of US origin.

This means that the yarn is covered under the Central American Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) for duty-free entry into the United States.  They’re using US cotton and their joint production between US and Northern Triangle companies to produce the yarn that goes into garments that are sold in the world market. 

Working with clusters to draw on the knowledge and capability of our members is a key part of it. Another example is an infrastructure group within our membership. They’re looking at projects to create huge job opportunities in the Northern Triangle. One is one of the projects that we’re working on is building a road in Guatemala that would bypass a very difficult part of the Pan American Highway. It would offer a significant improvement on road transportation there. That’s one project that’s interesting because it’s an example of a fully private project. It’s designed, built, and owned by private interests as opposed to public or even a public-private partnership. And so, we’re also working in the infrastructure area in energy. One of our founding members is in a joint venture with the US company is setting up a system for bringing compressed, not liquefied natural gas, from Louisiana on very large ships in which the hole will be filled with containers full of cylinders of compressed natural gas.

And above deck US, coming to Honduras to convert power plants that are now and have been burning heavy fuel oil to natural gas. And so, you get a lower cost, cleaner, reliable source of energy. That is a technology that can be moved to the location of the power plant that’s being converted, or if you were to build it from scratch, a new one for natural gas use. So that is an example of a major project that we’re doing. It will bring significantly bring down the cost of energy of electric power in Honduras. Another is a very large new project in Honduras that’s pump storage. It will generate 1200 megawatts of power in its initial stage and eventually go up to 3600. This is very low-cost production and alternative energy that’s totally clean because you’re pumping water from below to above and then driving turbines, very large turbines in a shaft that can produce the electricity. Without getting into all the technical details of it, that’s the kind of project that we’re working in to generate huge employment in the Northern Triangle We’re looking also at other opportunities, particularly in the context of connecting the three countries linked with the United States as an integrated platform for production.

In the nearshoring context, we’re looking at the possible creation of a logistics and manufacturing hub in the corridor between Puerto Val Barrios and Puerto Penas in Honduras. And also a project that’s been around for a long time, but looking at the Dry Canal and Alexeiko that goes from eastern El Salvador up to Porto Cortez and would be thus plugged into that corridor. So that would be if we can work through how to do it, that would be a way to link the three countries, El Salvador, Guatemala, and Honduras. And because it’s a logistics hub, ports will have an airport linking the three of them with the United States and also link the Caribbean Atlantic with the Pacific side in El Salvador. So those are the kinds of things that our logistics and infrastructure clusters are working on. The energy projects that I mentioned are actual projects that we’ve taken on doing the corridors and the dry canal. We have not yet taken them out. We’re looking seriously at how to do it and with whom to partner and how to make that happen because that would really be a very significant asset to the region in taking advantage of the current situation in the world to make the Northern Triangle of Central America a really important manufacturing and logistics hub linked to the United States market.

I think that some of the issues with China late becoming apparent of late really push companies in that direction. So the supply chain problems and logistics problems became very evident in the covet period when you’re 2 hours by air and a short distance by sea from the US. You don’t have those. The environmental degradation caused by shipping the product from China or anywhere else in East Asia to the United States burning what they do burn, which is very polluting fuel compared to the short hop from the Northern Triangle to West Coast or East Coast. If done environmentally and logistically and financially beneficial, then another factor that we think is going to be driving the opportunity for the Northern Triangle to become a major manufacturing logistics hub is the demographics. The aging of the population of China due to the one-child policy that they’ve had for 30 years will is cutting into and will significantly cut into their labor force and their ability to be a major source of supply for so many things in the world as the world market grows. So we see in all that a real opportunity for the Northern Triangle linked with the United States to become not just for a little while, but in a very important way for a very long time, a really important manufacturing and logistics hub that would generate very good jobs and a very good standard of living for the people involved in four countries.

But very importantly, in the Northern Triangle.

The Central American Group: You’ve outlined pretty extensively the kind of relationships you have with private sector entities. Do you ever get involved with the governments of the region and to what extent?

Gregory Huger: If so, well, as I said, Huge is a private sector organization. It was a decision that the founders made upfront not to request or receive funding from any of the governments. We’re also not a lobbying organization. What we are is businesspeople that have been doing profitable, honest business in the region for a very long time and expanding that, as we’ve been discussing. Consequently, we have a pretty good idea of some of the things that could be done by governments, any of the four, to enhance the opportunities that we’re building. So, we have ongoing conversations with the US. Government. We’ve been very close to the Under Secretary of State who’s got a real interest in the region and has been open to hearing what our businesspeople have to say about what it would take and what the US can do to develop the external environment, industry or other industries in the context of the Northern Triangle in the US. We have those kinds of conversations on an ongoing basis, sharing at the request of the US government the experience and the ideas that the business people have.

We also are in the process now of working with a Central American university called INCAE, which is a major business school that’s been in operating for a long time now in Costa Rica. So, they’re a very respected, capable,  and a neutral player in the discussion of economic opportunity. They are working in conjunction with us, but they’re really doing it to analyze what are the things that the business community and the data indicate could be done to maximize the opportunity for huge job creation in the Northern Triangle linked with the United States to develop economically and to create the opportunity for the people that you and I have been talking about. So that’ll be another link with the governments. We will be able to refer to the INCAE study and objectively discuss the benefits of doing some of the things that would come from that in terms of if this were to happen. We would be able to mobilize this much investment in this kind of business to create this kind of opportunity. So that would be the relationship that we have with the governments as an apolitical organization.

The Central American Group: How do you see HUGE’s relationship with civil society organizations in the countries that it has interactions with?

Gregory Huger: Well, I take it in two pieces. One is the business associations in each of the countries, all four of the countries have civil society organizations that know a lot about our subject in their context. In fact, many of our members are officers in those organizations or will be. There are also excellent think tanks in the region, so Fusades in El Salvador, one in Guatemala, and others. Then ones like the Center for Strategic and International Studies in the United States. So, there’s a network of think tanks and foundations that are important civil society players. There are also universities and non-governmental organizations that are involved with our subject and have developed, many of them, a very deep knowledge of how to do this successfully and with a sustainable, positive, long-term impact on people in place. We have created a Social Impact Advisory Council and we’re starting with some of our members and some of the people that work on corporate responsibility issues. We are now reaching out to civil society organizations of the kind that I just mentioned and so asking them to join our Advisory Council and to bring to the discussion their knowledge of best practices in the socioeconomic, environmental, ethical, and anti-corruption spaces. Then we would be able, through our council to share best practices as applied in our region in this kind of business with our own members and also with new investors coming into the region who would adhere to these principles and strive to have a positive impact on society and planet but have not done it in the Northern Triangle.

Our people have been doing it for a very long time and in collaboration with civil society through our advisory council, who will be able to help in a very hands-on way to new investors focusing on how to do effect huge job creation in the Northern Triangle.

The Central American Group: Well, Greg, we’ve covered a lot of ground here. One thing that’s common is our receipt of questions from listeners to our podcast. And what we like to do is include the contact information for the folks that we speak with. So, if one of our listeners or more have questions for you, how might they go about getting in contact with you so that they can ask them?

Gregory Huger: Delighted. My email is the best way ghuger@thinkhuge.org.

The Central American Group: Thank you. And we’ll have that in the transcript that we placed below the recording. Additionally, if it’s okay with you, we can put a link to your LinkedIn profile and your website.

Gregory Huger: Very good. I appreciate that.

The Central American Group: Thanks for joining me today. We at the Central American Group wish you great luck in everything that you’re doing in Central America.

Gregory Huger: Steve, thank you very much and I wish you all the best too, and to your audience. Thank you. Have a good evening. Bye.


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free trade zone regime in costa rica

Learn about the Free Trade Zone Regime in Costa Rica with Carlos Camacho of Arias Law

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Contact the Central American Group if you are looking to establish a manufacturing facility in the Green Park Free Zone in Costa Rica.

The Central American Group: Welcome to another installation of the Central American Group’s series of podcasts. In these recordings, we speak to experts in various fields of business in Central America, most specifically in Costa Rica and El Salvador. Today, we are very fortunate to have Carlos Camacho with us. Carlos is a partner in one of the leading law firms in Central America called Arias Law Firm. We’ll be discussing the Free Trade Zone Regime in Costa Rica.

Carlos, welcome to our podcast. Tell us a little bit about yourself.

Carlos Camacho: Thanks, Steven. It’s great to be here. As I said, we are a Central American law firm with over 80 years of experience working with foreign direct investment. We have offices in El Salvador, Guatemala, Honduras, Costa Rica, and Panama. Our main focus is working with companies in setting up their operations in any of these countries. I’m based in Costa Rica specifically. What I have been doing for most of my career is helping investors navigate the regulatory climate and successfully set up their shop in Costa Rica.

The Central American Group: Okay, that’s very interesting. Thank you for that summary. Today, the subject of the podcast is something that we as the Central American group always get questions about when we’re talking to prospective tenants of the Green Park Free Trade Zone. That, of course, is the Free Trade Zone Regime in Costa Rica. Costa Rica is very well known for foreign direct investment attraction over the last three decades. This success is because of the free trade zone regime program. Can you explain what it is and who can benefit from it?

Carlos Camacho: Of course, I agree. The free trade zone regime is the cornerstone of Costa Rica’s foreign direct investment strategy. The free zone regime is composed of a set of incentives that the Costa Rican government has created to attract companies that are willing to commit to a certain level of investment and the creation of employment in Costa Rica. These companies need to come from specific sectors.

Costa Rica has tailored what it has defined as strategic activities that are the ones that are eligible for these tax holidays. The most common and the most relevant are services and manufacturing. Within manufacturing and services, there are another set of subdivisions that are mainly focused to attract medical device companies and software development services, shared service centers, and anything else to do with research and development, specifically in the medical device industry. It’s very important to understand that Costa Rica has made significant efforts to create a hub of companies that have created an ecosystem where we have a large manufacturing medical device manufacturing companies to smaller and medium-sized companies that have become part of a supply chain environment. The free trade zone in Costa Rica, as such, basically provides incentives such as reduced income tax or zero income tax.

The regime provides for no importation taxes for raw materials, and no importation taxes for equipment. So, let’s say where you are a manufacturing company, anything that you bring into the country for the operation, once you have complied with the application, will be tax-exempt. Then anything that a company manufactures here in Costa Rica, we export on the exportation and the games that are produced for that activity in Costa Rica are taxes are very reduced income tax of only 6%. If you make a larger investment over $10 million, then that reduction goes to 0%. So, 0% income tax.

Very important to note is that there is an application for the free trade zone regime in Costa Rica that needs to be completed where the applicant must state what the investment commitment will be for the project. It has to be over a minimum of $150,000 in fixed assets, and then you have to make a commitment to employment. Basically, there is nothing set in the law, but you need to show that you’re going to have enough employment for the project to be attractive to the Costa Rican government.

And that’s what makes the mechanism very attractive for free trade zone companies. I would say the last advantage of the free zone regime in Costa Rica is that there is no withholding tax and there is no tax on remittances. So, the company that’s set up here in Costa Rica will be able to repatriate as dividends the funds that the holding company initially invested without having to pay any withholding taxes.

 

The Central American Group: You referred to an application that’s needed to gain Costa Rican free trade regime status. When companies are going through the process of doing that application, what are the things that they should look for?

Carlos Camacho: Yes, that’s a great question. The government has made the process fairly straightforward. It’s an electronic application that you submit through Procomer, which is the tax and fiscal authority. You will include information such as the location of the activity, the site where the company is going to be operating, the investment commitment, and a description of the services or manufacturing process that the company is going to be undertaking. Although the filing of the application is straightforward, you do need to be very careful in the preparation of the business plan and in the commitments that you strategically need to include in the application. The law provides three years to the companies to meet those commitments that they have made on investment and unemployment. So, it is very important that companies seek legal and expert advice on how to prepare applications. The Applications Usually the process usually takes between four to five months, and it’s divided into four distinct stages. The first stage is the technical review by Performer, then a legal review by the Ministry of Foreign Trade. Third is the signing process. The application needs to be authorized and signed by the Ministry of Foreign Trade and then by the President of Costa Rica.

Finally, the fourth step process works fairly smoothly, but there is the need to follow up and keep providing additional information whenever the authority requires it, especially when describing an elaborated manufacturing process or a service process that needs to be clarified.

The Central American Group: You mentioned the timeline and how long it takes to go through the entire process. From the time you submit to the time you receive the green light for your foreign trade zone regime application, are there ways that that application process might be delayed, and what are they?

Carlos Camacho: Yes. Usually, the whole time for setting up a free trade zone regime in Costa Rica is five to six months. The first month is more of incorporating a local entity and preparing the application. The delays can come from the final stages of the process. The signature process sometimes takes a while, depending on the availability of the Minister and the President, and the customs authority that is sometimes required to make an inspection of the site. Or there might be a heavy workload and might take longer than we usually expect, but I would say that normally we can expect the entire process to be completed within five to six months. Although the delays are expected, they’re typically not huge delays. The Costa Rican government is very aware that foreign direct investment is very important to the country. Accordingly, they tend to follow the timelines that they have set so that there are no major delays.

The Central American Group: During the time that the government is processing the application, what would you recommend that companies do? How should they use that time?

The Central American Group: Well, that’s a great question, Steve. Basically, what we recommend is updating in parallel order permits that are required, for example, registration before the Social Security Administration to involve the employees, registration before the tax authority, and the attention of the commercial license for the specific site. I would say that a very important task that needs to be front and center of any direct investment for Costa Rica is seeking the location.

The advantage of Costa Rica is that it has several options for industrial parks and office parks, and it’s key to finding the right partner when you’re looking for your site. There are several parks and there are some parks that have considerable experience and are very dedicated to working with companies. Also, if you make the right decision to find a good logistics partner where you set up your operation, the rest of the process may go smoother when you apply for this other purpose.

The Central American Group: Are there any activities that are restricted during the processing of the application?

Carlos Camacho: Yes, there are. You must make sure that you do not start any commercial activity before the free zone authorization is granted. So basically, you cannot engage in invoicing for those commercial activities. What is recommended during this three to five-month period is to start the hiring process, review human resource policies, and do all the housekeeping internally. The training of the human resources is key, and usually, companies do take those three to five months to train the staff in the process that they’re going to be undertaking. And then, of course, there’s time for construction of facilities, building improvements, installation of all the equipment and IT systems, all that is called preoperational work, and all of it is allowed for companies to perform while they’re waiting for the final authorization.

The Central American Group: One thing that is interesting about the free trade zone regime in Costa Rica is that it’s kind of dealt with in two diverse ways. One has to do with an area that’s called the Greater Metropolitan Area, and there is also what is known as the outside of the Greater Metropolitan Area. Can you tell us what that means?

Carlos Camacho: Sure. That’s very important because the law has a sense of trying to encourage companies to seek setting up their operation outside of Metropolitan areas to improve the quality of life of lesser developed areas of the country. However, both areas provide desirable benefits for companies. For example, inside the Metropolitan area, the investment commitment is $150,000 in fixed assets. If you set up inside a free trade zone park, well, if you go outside of the Metropolitan area, then only $100,000 of investment commitment is required to receive the tax benefits. The term of the free trade zone benefits is longer if you set up outside of the Metropolitan area. One of the things that keep companies inside of a GMA is the fact that most universities, most of the current medical device cluster, and the services cluster are in the Metropolitan area. Most of the human resources are still in the Metropolitan area. However, the outside Metropolitan area has become another option because of the increased availability of workers and because there is also new infrastructure outside of the Greater Metropolitan Area that is very attractive for companies.

The Central American Group: For the people that might not be familiar with the way Costa Rica is set up in geographical terms when you refer to the Greater Metropolitan Area, could you give an idea of what it includes, and what communities?

Carlos Camacho: Sure. The Metropolitan area is traditionally known as the San Jose downtown area, Alajuela, Heredia, and Cartago. Of course, there are parts of these four provinces that are out of the Metropolitan Area, but the confluence of these four provinces, which are the ones that hosted the main large, populated cities, is what is called the greater Metropolitan area.

The Central American Group: What happens when companies approach the end of their free trade zone regime program?

Carlos Camacho: Well, that is a great question and something that needs to be determined from the beginning of the term. As we said, the common term for the free trade regime in Costa Rica is eight or ten years, depending on the category and the location of the project. But when you are approaching the end of the term, each company has the possibility to renew the benefits by making a new project or a new significant investment. Usually, the government likes to see a new investment of between 20% and 30% of the total investment that was done during the first years of the free zone term. If you make that commitment, if you create a new project or make a new significant investment, the government will process your application and analyze it and will very likely grant you another eight years. They like the fact that you’re willing to make a new commitment on investment. Another very important thing is you do not need to wait for year seven or eight to start making that investment. If you finish your business plan during the first three years, you meet your initial investment commitment.

And as it happens, often companies realize that they like Costa Rica, that they like the human resources and they want to grow in Costa Rica. So, the law allows them to do what I like to call the “reclocking” of the investment. For instance, if you’re in year four and you want to make another significant investment that goes beyond that 20% of the total investment, you can apply for an extension of your free trade zone in Costa Rica. That means that you can apply for the renewal in year four and then you will get another eight years counted from that year four. So that will extend you up to twelve years if you’re willing to make additional investments while you’re still on your first term.

The Central American Group: So, in manufacturing, for instance, something like adding a production line might be an action that would enable you to continue to use your free zone regime status.

Carlos Camacho: Under the free trade zone regime in Costa Rica anything that will represent an investment in fixed assets will definitely be a good opportunity to reclock.

The Central American Group: I think we’ve covered a lot here. One thing that happens as a result of these podcasts is that when visitors to our website listen to them, they often have questions. What I like to do is ask our guests to give their contact information so that listeners can go directly to them and get access to experts. Can you tell us how somebody with questions about this topic might be able to get into contact with you and your law firm?

Carlos Camacho: Thanks, Steve. Yes, my office email is Carlos.Camacho@ariaslaw.com. Listeners can find more information about our firm and our free trade regime and foreign direct investment practice at www.ariaslaw.com. That’s www.ariaslaw.com.

The Central American Group: Well, Carlos, thanks for joining us today. What you had to present to us was extremely interesting and I know that it’s going to be useful to the listeners. Thank you and have a wonderful day.

 

Carlos Camacho: Thank you for having me. Bye.

 


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cinde in costa rica

A discussion with Cinde in Costa Rica

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Contact the Central American Group if you are looking to establish a manufacturing facility in the Green Park Free Zone in Costa Rica.

The Central American Group: Hello. Welcome to another installment of Central American groups. In these discussions with professionals from various realms, we talk about issues in Costa Rica, El Salvador, and the rest of the region. Today. We’re very fortunate to have with us Karin Lachner. She works for a very well-regarded economic development agency called CINDE in Costa Rica. Hello, Karim. How are you doing today? And please tell us a little bit about yourself and your organization.

Karin Lachner: Hi, Steven. So grateful to be invited here and share a little bit of information about CINDE in Costa Rica. My name is Karen Lachner. I’m the head of marketing and communications for CINDE. Cindy is a private, nonprofit and non-political organization. So, we’re a very rare breed within our kind as an investment promotion agency, which mostly and most of the time are part of the government. In our case, we work very closely with them, but our private nature has enabled us to work on long-term strategies for investment attraction into the country through ten different government administrations.

The Central American Group: Well, one of the things I think that would be very interesting to our listeners is that you recently won a very prestigious award, excuse me, that was given to CINDE in Costa Rica by the UN International Trade Center. And maybe you could tell us a little bit about that? And after that, if you could explain to us what potential investors could expect from your organization in terms of services to help them do their research on Costa Rica, of course.

Karin Lachner: Well, yes, we are very humbled by this recognition that the ITC from the United Nations has given us. I don’t know if some of the listeners are familiar with It, but the ITC is part of the UN. They work hand in hand also with the World Trade Organization. And they focus very much on providing service in a wide area of capabilities, for example, advisory services and capacity building for different countries. This is mostly to be able to leverage a lot of that trade intelligence and enhancement of policies, both to help attract investment into countries as well as create expert capacity. So, a lot has to do with that as well as creating and leveraging the momentum of digital tools to enhance, for example, eCommerce platforms for digital trade as well. So that’s a little bit of their vocational focus if you would call it that. CINDE in Costa Rica has been working hand in hand with them for several years, and we have gone through different evaluations. They have this tool. So, this is not what we would call a fashion contest. It’s actually a very thorough evaluation that we have undergone, and that goes on 225 separate indicators that were evaluated.

So, it’s a thorough process, as I said, and it’s very humbling to have earned 95 points. So, CINDE in Costa Rica is the highest-ranked institution in the world right now out of 85 different agencies that this century has evaluated thus far.

The Central American Group: What are some of the variables specifically that they assess?

Karin Lachner: Yes. Well, they have I would say four main pillars and these, of course, are broken down into more specific areas. But one has to do with the leadership and direction that the institution has. So, they oversee things like the vision and mandate, governance, strategy, planning, and development, as well as implementation or also a lot about risk management, of course, which is a newer or heftier area to assess more. So, with risk management of assessing things such as the Pandemic.

The other pillar has to do with resources and processes. This entails how the organization structures itself and the capacity building of its staff, as well as for example, the financial resources or physical assets or the quality and focus of the services that we provide to investors as well.

The third pillar has to do with products and services delivery. So, the relevance of the portfolio, how we manage and handle client experiences goes way deeper into this, the marketing and promotion of those services as well, how innovative we are able to be in that area, and a lot of the deployment of external communications, country branding and the like. And the final one has to do with measurement and results because of course all of this has to be reflected in solid outcomes.

The way we structure our areas for defining the scope or the quality of measurement of the things that we do. Client satisfaction is a huge thing for us. We measure it in several touchpoints that we have with investors, from initial agendas to our advice, even when we help them create their enabling or PR efforts to go once they do the landing in the country. We measure those through the NPS course, for example. This is part of the tools that they assess on achievement of results.

The Central American Group: Now what does this all mean for investors and how does it affect the site selection process?

Karin Lachner: Well, we had seen CINDE in Costa Rica has a philosophy of being completely client-centric focused and for us, the investing companies come first. Sometimes that means that it gets us into trickier relations even with some government instances. But that’s what we are here for to help investors. We see the site selection processes as just the initial part of our investor relations. At that stage, we help and provide all the data that is necessary with objective information. Of course, sometimes it’s public information, but we help do the number crunching or the tailoring towards the interest of the investor. There’s a lot of data we soak in data and in this day and age ever for so, but the value of it is how we process it and make it a compelling and relevant information gathering for business purposes. That’s how we see it does. And now we have strengthened that area focusing on true investment advisory. We had brought onboard profiles of business analysts, as well. We help companies assess. For example, we go into deeper analysis such as running P and L reports with the information that companies have and input, for example, what it could look like leveraging our free trade zone regime, which is part of the incentives program that Costa Rica We portray this on a five-year time frame or ten-year time frame and understand what your bottom line ROI would be on operations in the country.

So those parts are completely personalized experiences on how we help companies assess that site selection. We do benchmarks as well. We gather information from competing countries or other sites that the company might be assessing and do it objectively as you would with any other. And all our services are completely free of charge. That’s part of the benefit that companies can get, and having the excellence behind it to do that, get data gathering the most professional way.

The Central American Group: That’s very valuable given the description that you’ve just given about some of the services that you provide. I know that if one goes out to private consulting agencies, these are things that can cost upward of $100,000 if you’re paying companies to do that kind of research. What you offer is obviously is incredibly valuable. But beyond crunching numbers, what other things do you do?

Karin Lachner: Well, of course, that’s just the beginning part of it, because once companies are assessing that on paper, it’s not the same as being able to come into the country and look at things by themselves. When they do decide to do that, we provide business agendas with peer companies that are already operating in the country so that they can have peer-to-peer conversations with investing companies and objectively assess that. We even provide meetings with different academia to better understand the talent pools that they’re able to create, the curricula, and the skill sets that we are developing. As for talent building, we seem to have created a very strong network of strategic partners that help both in the understanding of what a landing into the country would be, but also once the decision is made to be able to have the softest lending into the country. We have right now a network of over 83 proven partners from tons of different categories. We have legal advisors, big firms, smaller firms, environmental agencies, which in Costa Rica is a very thorough process because we are very keen on sustainability. We have companies for helping you understand the ways around immigration or tax consultancy, HR and recruitment, even facilities.

We have firms related to architecture or office design, even furnishing. And once you’re operational, we have facility management or cafeteria services. These are all the things that investing companies need, we have that proven network of companies that already have worked with other multinationals and that are our partners to help that process be as streamlined, as self as possible.

The Central American Group: Well, again, these are things that are absolutely essential to being successful and bringing companies to your locale. And one of the things that are a testament to the quality of the work that you have done is that over the past couple of decades, Costa Rica has become the second-largest exporter of medical devices in Latin America. And that’s a pretty impressive accomplishment for a country that’s about the size of Massachusetts. Congratulations on your good work at CINDE in Costa Rica.

Karin Lachner: Thank you. It’s been a very interesting process of capacity building in the country. And if that figure and Medtech is interesting, what is most interesting is to see that we also export more services than goods. If that med-tech figure is relevant, our services, our knowledge-intensive services are in that mix. We’re the highest per capita exporter of knowledge-intensive services in the Americas. And it’s interesting to see because our processes there have also been growing quite a bit. We export cloud computing, cybersecurity more so right now. We have a combination of this creative ecosystem, converging Med-tech, digital tech, and, of course, long-standing industry and smart manufacturing and electronics, which are bread and butter right now. And in trend for maybe not all the good reasons that we would like to, but it’s a global challenge. Costa Rica is putting its part there in exporting electronics as well.

The Central American Group: I have one question that I’m curious about regarding electronics. We know how important microchips are to all the devices that we use on a daily basis. And there’s been a shortage of Silicon chips in the world, and there’s concern that Taiwan is a big producer. And if whatever happened with their security is negative, we’d be in a world of trouble with regard to the availability of chips. I’m just wondering, beyond Intel, are there other companies that are looking at doing that kind of activity in Costa Rica at the moment?

Karin Lachner: Of course, we have well, Intel which has the biggest mega lab of its kind outside of California. We have their R&D center here with over 900 engineers working on the new development of solutions for microprocessors. But we also have other companies and components such as Samtec, the customized electronics as well. Zollner Electronics is a huge German company as well, which provides components and smart components to the auto industry, which are leveraged for the US market. So, Costa Rica is in itself a nearshoring example. For years, it’s just now becoming a hotter topic now that their new nearshoring is taking place. But for us, nearshoring is our bread and butter companies come here to leverage the exports platform that we offer with a broad network of free trade agreements that we offer from here to reach different markets. We have had a free trade agreement with China for the last ten years, which is not new for us, but we also have a free trade agreement with the US and the rest of Central America.  We have one with Europe as well. We know that we are a compact economy and that we are open to trade and that’s what we offered a lot of the partner companies that are investing in the country.

The Central American Group: Now if somebody who is listening wants to get in contact with you to begin the process of exploring Costa Rica, how can individuals listening get in contact with you?

Karin Lachner: I think the best way would be through our website. We have tons of resources with every investing sector of interest we have listed there on our website, the leads, the persons that are in charge of every sector within our organization that are the specialized people for each of the sectors. We have med-tech and smart manufacturing. A very dynamic thing that we’re doing right now is new materials. We’re creating a new project with IDP on a new materials hub for Costa Rica.  We are also leveraging all the biodiversity that is in the country so that we also are working with that health and wellbeing area.

Listeners can find us on www.cinde.org, which is our website, and then for each investing sector or the contact us page, it’s a more traditional and if you can follow us, of course, on different social media as CINDE, the Costa Rican investment promotion agency, we have representation there on LinkedIn and Twitter as well.

The Central American Group: Okay. With your permission, of course. I’d like to be able to in the text below the box where the audio plays on our website, I’d like to put a link to your LinkedIn page. Would that be okay? Because I listeners may wish to contact you directly and that would be a way of doing it as well, I assume.

Karin Lachner: Wonderful. No, we would really appreciate that.

The Central American Group: Well, thanks a lot for accepting the invitation to talk about what you have going in your organization. CINDE in Costa Rica, as well as in your country. We know that things will just get better for you and that you have a great rest of the day and a nice Easter season. You take some time off and enjoy Costa Rica’s beautiful beaches.

Well, thank you. Yes, it’s going to be a lovely few weeks ahead of us, and thanks for the invitation of having us and be able to discuss this and so much more that we can offer to investors.


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El Salvador Aerospace Institute

Meet the El Salvador Aerospace Institute

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The Central American Group: Hello and welcome to another installation in a series of podcasts by the Central American group. In these discussions. We talk with individuals that have expertise in various aspects of doing business in Central America. Today, we are speaking with and welcoming to the podcast Luis Martinez. Luis is the head of the El Salvador Aerospace Institute. Luis, I’d like to ask if you can introduce yourself and tell us a little bit about your organization.

Luis Martinez: Hello, Steve, I appreciate your having invited me to talk with you today. Well, actually, I’m Luis from El Salvador. I am currently serving as president of the El Salvador Aerospace Institute. Basically, in terms of education and experience, my background and professional career have developed in South Korea for over a recent period of 15 years. When I was living overseas, I realized the importance of technology then decided to work in an area related to aerospace.

The Central American Group: Can you expand a little bit on that? In other words, what was the reason for promoting aerospace in El Salvador through the El Salvador Aerospace Institute?

Luis Martinez: Prior to recent times, El Salvador had never before explored this kind of technology. The year 2016 was the first time our organization had the opportunity to introduce some of the previous work that it had done. The work was done in Guadalajara, Mexico. Since we have companies like Aeroman operating in El Salvador, we thought it would be logical to work to expand on this business.

The Central American Group: One of the things that are consistent in aerospace sectors across countries that have specific sector experience is that it’s important to build a workforce that is capable of manufacturing for the industry. Compiling all of the skills required to successfully start and continue an aerospace industry in a country is a must. Can you tell how you’re working to develop young minds to help them to get an aerospace education?

Luis Martinez: That’s a very interesting question. Let me tell you that at the El Salvador Aerospace Institute, we have some team members that are trained in certain aspects of the sector. Some of them received their education, for instance, in the United States and Korea, while others were educated in Europe. They work continuously to motivate activity both in the public and private sectors. For instance, in the case of government, our organization promotes the opportunity to open aerospace technology facilities and also promotes educational opportunities related to the industry

The El Salvador Aerospace Institute also partners with some local universities in our country. Of course, we continuously try to promote and find opportunities for cooperation in training programs. We also engage in some knowledge exchange with different regions and countries. In that way, although we know that it will take time, we can build an aerospace labor force.

The Central American Group: Could you tell us about the business model of the El Salvador Aerospace Institute? How do you work to achieve these things?

Luis Martinez: Yes, we depend upon the participation of the government and the private sector to invest in our business. I mean, by making a combination of that model, we are most likely to obtain benefits and results. Basically, the El Salvador Aerospace Institute is open to cooperation with educational institutions, government, and the private sector, to work together for the development of the industry. Lastly, of course, we cannot forget the public at large because it plays an important role in all of the aspects of our activities.

The Central American Group: One of the things that I read about your organization in the material that you provided me with before the podcast is that the El Salvador Space Institute is interested in R&D that has to do with things like satellites, robotics, A.I., artificial intelligence, 3D printing, and other aerospace technologies. Do you have the resources internally to pursue these different areas of development or will outsourcing somehow be involved?

Luis Martinez: That’s a very interesting question, to be honest. R&D, you know, as a developing economy or developing country, our budget for education or R&D, in this case, is very limited. That is why our organization has entered into partnerships with local universities and the international. We are working with international governments and organizations to support and run projects that are both short and long-term.

The Central American Group: To this point, I would imagine the El Salvador Aerospace Institute is a young organization. In consideration of this, can you tell me some of the notable things that you have achieved?

Luis Martinez: Yes, we have several. Let me explain that. One of our obvious successes as of late is the ability to survive in the midst of the current Covid crisis. Everything in terms of programs is still in place even though we are the first organization involved in aerospace activities in El Salvador. We continue to build our competitiveness through our association with the universities and training programs that partner with our initiatives. The El Salvador Aerospace Institute has also received international recognition from all many governments in support of our effort to introduce space technology in El Salvador. One of the main programs of our organization is related to the development of satellite technology. We are working to develop the country’s first nanosatellite in the country with the full support of the El Salvador Aerospace Institute.

We have received recognition from international bodies. These include the governments of Japan, South Korea, Mexico, Romania, and some other countries for their participation and also the international cooperation for the programs that we are developing.

The Central American Group: You know, I know this may be a little bit difficult to answer, but I would like you to try to answer this if you can. What would you like to see regarding the aerospace industry in El Salvador? What do you think it’s going to look like in the next five to 10 years?

Luis Martinez: Yes. Actually, our first goal is to motivate the younger generation to explore education that is based on technology. We also seek to be one of the top organizations leading the way in the aerospace sector. You know, let’s say, not only regarding national projects but also with respect to regional and international programs. We would like to tackle challenges like, you know, food security in Central America, climate change, and, of course, national security. By 2030, the El Salvador Aerospace Institute looks to develop a strong program for national aerospace and also lead the industry in international terms.

Already we have made great progress as a nation. As you know, one of the main industries at this moment in the case of El Salvador is the idea that we have some of the most important aviation MRO companies from Canada and the US that have invested in the country.

The Central American Group: Well, I think you’ve given us a good overview of what your organization is doing in El Salvador to promote the development of the aerospace industry. With these podcasts, always there are folks that contact us to ask to send questions to our speakers. I’m wondering if you could tell us how people who may have further questions can reach you.

Luis Martinez: All right. So, we have a website currently under development. The URL will be www.esai.sv when it is up and running. Listeners can also find us on LinkedIn.

The Central American Group: OK, well, I want to thank you for joining us today and want to wish you a great amount of luck in the future years developing the El Salvador Aerospace Institute.

Luis Martinez: Thank you for the opportunity to speak to your audience today.

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The medical device manufacturing industry in Costa Rica: A conversation

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Contact the Central American Group if you are looking to establish a facility in the medical device manufacturing industry in Costa Rica.

The Central American Group: Hello and welcome to another episode of the Central American Group’s podcast; we speak with people with expertise in economic and industrial issues occurring in Central America.  In this podcast, we will discuss the medical device manufacturing industry in Costa Rica. Today, we have a couple of very nice ladies from Costa Rica with us. They are from the country’s economic development promotion agency, which is called CINDE. I’ll let you ladies introduce yourself and tell us a bit about your organization.

Carolina Sanchez: Thank you, Steve, and hi, everyone, my name is Carolina Sanchez, and I’m the lead of the Life sciences sector at CINDE.  CINDE is a not-for-profit private organization that supports foreign direct investment into Costa Rica. We were founded in 1982, and since then, we have supported companies establishing successful operations in the country.

Irene Pacheco: Hello, everyone. My name is Irene Pacheco. I’m also part of the life sciences team here at CINDE. As was mentioned, what we focus on is foreign direct investment attraction. Basically, we take companies hand in hand through the whole installation process.

The Central American Group: Ok, so we’re going to talk about the medical device manufacturing industry in Costa Rica, the country’s most prominent production sector. Costa Rica has become a preferred location for medical devices.  As a matter of fact, it’s the second-largest exporter of medical devices in Latin America. What are the reasons behind that?

Carolina Sanchez: Yes, we can mention a lot of different reasons, but maybe we’ll start with our main focus, which is balance. I think that the country has great talent, and that has attracted many companies. You have to understand that this is a highly regulated industry. So, companies are very focused on quality.  That’s why having a strong talent pool is very important for them. Also, we, as a country, have a very stable investment climate. That means a combination of characteristics makes it ideal for investment and medical device manufacturing. It also has to do with the incentives. It has to do with the collaboration that we have between companies and also with a proven track record. And I’m going to pass it to Irene because she can add a little bit of information to that as well

Irene Pacheco: Speaking specifically about the proven track record, this is definitely a key aspect when companies choose to participate in the medical device manufacturing industry in Costa Rica. We have over 80 companies installed in the country. So, this has set a precedent showing the world that we know what we’re doing and that we understand that our talent understands the regulations that the sector requires. We have over 40 thousand people working currently in the Medtech sector.  Another of those areas, important areas, is definitely taking a look at the different clusters that we see all over the world such as Costa Rica, Massachusetts, and California. There is a high concentration of medical device manufacturers. This is definitely not a coincidence.  All of these countries and Costa Rica, in particular, have a set of values and a set of incentives that are important for companies in the world to be able to come and install themselves here locally.

The Central American Group: Could you tell us how the medical device manufacturing industry in Costa Rica has evolved over the last few decades?

Carolina Sanchez: Maybe we can go back a little bit in the history of our country and our development.  Costa Rica for several decades was perfect in agriculture.  In the 1980s, the government focused on a new economic development model, which was based on high-tech exports. With that came the approval of the Free Trade Zone Regime. This created the asset of incentives that offers the companies that establish operations in the country access to tax rates that are differentiated compared to the companies that operate locally.  This was a huge booster for the medical device manufacturing industry in Costa Rica.

In the late 1980s, we started to have the first medical device company locating here, which was Baxter which was located in the first free trade zone in Cartago.  They started growing at the very beginning. At that time, they only did very simple assembly and components. They used to bring the components here and do simple assemblies. With time they started doing extrusion molding and some other more complex processes in Costa Rica. Then we reached a maturity level with some other companies. From the early 2000s up to today, that’s when we have experienced very significant growth. We can talk a lot about our success stories, which are examples of the companies that have grown in Costa Rica. They now have much more mature and complex operations.

Irene Pacheco: Of those examples that Carolina just mentioned, Boston Scientific is one of those companies that was established in the early 2000s. They currently have over 4,500 people working in the medical device manufacturing industry in Costa Rica in two different facilities.  They employ over 250 engineers doing R&D in the country. 

Another example is ICU Medical.  This company has been operating in Costa Rica for over 20 years.  They have consolidated twelve different facilities into one.  They are very vertically integrated and have over 3000 people working for them here in the country. 

The Central American Group: Well, now that you saw the medical device business in Costa Rica progress over the years, did you see an impact, or have you seen an impact in recent months as a result of what’s going on with the virus pandemic that everybody in the world is dealing with now?

Carolina Sanchez: I think these circumstances somehow have impacted the medical devices manufacturing industry in Costa Rica.  You need to understand that we were focusing on continuing operating because hospitals needed the devices and support. So, what we saw at the beginning was a lot of uncertainty. Companies didn’t know what the governments would do in terms of full shutdowns and curfews and all of that. Also, we can say that we have had two different trends during the pandemic. On one hand, we had the devices that were needed in the hospitals, like ventilators and infusion pumps, which were in high demand during the pandemic. But also, we have surgeries, for example, orthopedic, and all of those surgeries that could be postponed also suffer a decrease in demand. So, we have this. I also think it is very positive that we developed a very strong collaboration network during the pandemic between the companies and the government.  Also, CINDE was involved.  In there, we have a working group to discuss the needs of the industry. So, we were sharing real-time information on what would happen.

The Costa Rican government never strongly restricted manufacturing operations so the companies could continue to work.   Actually, we have seen cases in which companies that have different footprints all over the world look to Costa Rica because, in their cases, they have completely shut down some of their operations.  This happened in places like California and other places in Asia. So, the operations here could respond while their other factories were closed. So that was very positive. It is important for me to mention that even though we had no disruptions in the country, we can definitely tell there were disruptions.  This brings me to a phenomenon that is not new.  We are starting to see much more nearshoring.  This is when companies want to have a closer footprint to their customers with the main objective of minimizing risk.  This has definitely put the medical device manufacturing industry in Costa Rica on the map. Many companies are taking a closer look at the country due to the need to be closer to customers and to minimize the risks related to being located across the world in places like Asia. 

The Central American Group: This is a very interesting development for Costa Rica.  We know that companies returning closer to home need to access their markets.  What makes Costa Rica a good place where medical device industry manufacturers can access their buyers?

Irene Pacheco: We’re a very small country, but we’re very open to the economy. Because of that, we cannot depend on what we produce and sell here. We need to open our borders to sell to other countries. That’s what has made Costa Rica very successful. Today, we have 15 free trade agreements that will give the companies that operate in Costa Rica preferential access to those markets. We also have 58 trade partners globally.  This basically translates into companies having the possibility to sell with preferential rates and preferential access to two-thirds of the world’s population.  That has been a very well-received benefit of locating in Costa Rica. Also, Asia has been a market that has gained importance for Costa Rica. The US, of course, continues to be our number one trade partner for natural reasons. We’re very close to them and historically have been one of those destinations to where companies export. But more recently, Asia has been very, very important for the medical device manufacturing industry in Costa Rica.

The Central American Group: I’d like to ask a question that I think the answer is important, that people know. One of the things that Costa Rica has as a competitive advantage is the quality of its labor force. Maybe you can comment a bit about the resources the country allocates to education and what things about the labor force make Costa Rica attractive, especially to medical device companies.

Carolina Sanchez: Well, that’s a very interesting question, and that’s something that it’s always very attractive to companies.  Yes, talent is our main competitive advantage, let’s say.  You have to know that Costa Rica doesn’t have an army. So, all of those resources are allocated to health and education.  

In Costa Rica, education is free and mandatory. Primary and high school education is free and mandatory for everyone. So that means everyone born in Costa Rica should have a good quality education. We also ranked very high in education when compared to other countries in Latin America. Also, talking about the culture, you’ll see it when you come here; we have a very open culture. We’re very curious as Costa Ricans. So, companies sometimes mention that when they have operations in the medical device manufacturing industry in Costa Rica, they sometimes find creative solutions from the people on the production floor.  We are not shy when it comes to talking about new ways of doing things and proposing new things.  Workers are very enthusiastic when companies try to implement changes and things of that nature. So that’s what it’s very unique to our culture.

The Central American Group: We understand that Costa Rica has a very high level of bilingual workers available. Is that the case?

Irene Pacheco: Yes, yes, that’s definitely another key aspect for it, for the direct labor, specifically in the manufacturing companies. This isn’t something that the companies really need at the very beginning for this specific type of labor. But when discussing administrative posts and the positions I mentioned at the beginning.  There are over two hundred and fifty bilingual engineers that Boston Scientific has. Boston has R&D operations in Costa Rica. Right. I just mentioned it because it’s one of those success stories. We are the second-best in English proficiency in Latin America. This definitely makes a difference in manufacturing and the service sector, which is growing and important to the country.

The Central American Group: Another point that I think we would be remiss if we didn’t cover, you know, Costa Rica, in addition to having a good workforce and a bilingual workforce, also has a very attractive program through its free zone entities that are located throughout the country. Could you tell us a little bit about the benefits companies in the medical device manufacturing industry in Costa Rica enjoy when they locate in a free zone?

Carolina Sanchez:  Absolutely. Well, this is the Free Zone Regime we mentioned initially. It is an agreement between the companies that come and invest in the country from the government of Costa Rica so the companies can meet a certain amount of investment and employment. In exchange, they will corporate income tax benefits. That’s the main one is a tax incentive that could range from six percent to six percent to zero percent for a year. So that means that companies that have operations here could benefit from those preferential tax incentives. And there is also a number of incentives that are expired. This is the only one, the corporate income tax. This is the only incentive that will expire after a year. But if the company continues reinvesting in the country, it can restart the system for another six or eight years.  This depends on where they are located. And for the listeners, we will be happy to discuss this if you are interested.  That’s what we do. So, feel free to contact us for further information on the free zone regime.  Now I will ask Irene to discuss the Free Trade Zone Regime benefits that do not expire.

Irene Pacheco: The one that I would mention that’s one of the most important ones is the exemption on all imports and exports. So that basically means that since the day that a company started its operations, it will be able to import all your raw materials tax-free and also be able to export tax-free, as well. So, as I mentioned, this is one of the incentives that do not expire.

The Central American Group: Well, that will motivate companies to come and speak with you about potential situations in which their companies can set up in a free zone. Now to wrap it up, what do you think is unique about Costa Rica and its Medtech industry?

Carolina Sanchez: Well, we have already covered some of the aspects that make us unique, but one that we didn’t mention, and it’s quite important, is that we have a very robust supplier base. We have the OEMs or the original equipment manufacturers, which are the companies that will produce the devices they will see in the hospitals. The Boston Scientifics, the ICU Medical’s, and all of those companies. We also have more than 60 suppliers that can support these companies with different components and different capabilities. For example, we have contract manufacturers, which are companies that can work with a product from prototyping to full development on behalf of the owner of the patents or the developer of the product.  In the medical device manufacturing industry in Costa Rica, we also have companies that provide machining, tooling, extrusion molding, heat treatment, and the required cleaning supplies. So, all of that it’s very important for this industry. You are basically a call away from your suppliers, and that’s very, very important for all of them.

Irene Pacheco: I would definitely want to mention, and we have been talking about this, but the collaborative mindset makes a difference. When you talk to companies in the country, this is one of the key points they mention. Companies understand that working together as partners will definitely strengthen the sector and do even more for all kinds of initiatives. Talent is also one of those initiatives with which they work very with CINDE.   In turn, we also work very closely with academia. So, once they understood that this would benefit each of their interests, they started working together.  Collaboration is one of those key aspects that have made a difference and that also the sector in the country.

The Central American Group: We try to create an environment that provides good information to our listeners.  We have found over time that people who listen to our podcasts inevitably have questions that they like answered in more detail. Could you tell our listeners how they can get in touch with you if they have questions that they want to follow up with you?

Carolina Sanchez: Absolutely. We’re happy to answer all of those questions. The best way to reach out to us will be through our organization’s website. The URL is www.cinde.org. You can actually go to our profiles on LinkedIn and reach out directly to the different emails of the different sectors that we support from here.

The Central American Group: Well, are there any things that you’d like to mention before we close this very interesting session?

Irene Pacheco: Well, from my side, just an invitation. If you are curious about Costa Rica, please reach out to us. We will be happy to discuss your project and how Costa Rica could fit your company well. We love what we do. We love to support companies to establish operations in Costa Rica.  We’ll be happy to hear about your project.

Carolina Sanchez: From my side, I might just add that you can definitely count on us. As we mentioned at the beginning, we are a not-for-profit organization, and we will be happy to provide all the details and customized information needed for the decision-making process. Any interested parties should just feel free to reach out.

The Central American Group: Thank you, ladies. Joining me today, I think everybody is a bit more educated about medical devices in Costa Rica due to this podcast, so thank you.

Carolina Sanchez: Thank you, Steve.

Irene Pacheco: Have a nice day.

The Central American Group: Thank you for listening. Sign up to receive the Central American Group’s quarterly newsletter by visiting www.thecentralamericangroup.com

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Bitcoin in El Salvador

Bitcoin in El Salvador

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Contact the Central American Group to receive information about our free zones in El Salvador and Costa Rica.

The Central American Group: Hello.  Welcome to another episode of Central American group podcasts. In these sessions, we speak with experts that address topics having to do with Central America that is of interest to visitors to the Central American Group’s website. Today we have Alfredo Escalon with us.  He is the CEO of Fisherman Wealth Management, which is a firm in San Salvador, El Salvador.  Today we’re going to talk about Bitcoin in El Salvador. I’d like to welcome you today. Alfredo, could you tell us a little bit about yourself and your company?

Alfredo Escalon: Sure.  Thank you very much. I am the CEO and founder of Fisherman Wealth Management. We started the company 14 years ago with the purpose of helping to educate people regarding the relationship they have with money. Well, we work in the area of finance.  We try to find easier, cheaper, and faster ways for families and businesses to achieve their goals.

The Central American Group: The topic that we’re going to talk about today is one that’s sort of a puzzle to me. I hear about Bitcoin in El Salvador, and I hear about Bitcoin miners, and I also hear that they need ungodly amounts of electricity to mine Bitcoins. Could you give a little bit of an explanation about all of this?

Alfredo Escalon:  In a nutshell, let me tell you what I have learned and what I have found out from all the people that we have asked. The easiest way to explain it is to start with blockchain technology. I think blockchain technology is a platform or a method to, or a system, that will accelerate the digital future. In a nutshell, a blockchain is a decentralized software.  Everybody is an arbiter of the transactions that are being made.  Let me explain by using this example: I pay all my bills all this month, and I make checks.  I pay with credit cards, and I take cash out of the ATM. Once I have all the information of all the transactions, all the people that are involved in those transactions are able to audit them.  That’s mining.  

People that are involved with the transaction have an algorithm to make sure that all the data in that monthly transaction is accurate, and that all the people have the same data.  Nobody can change it once it is a block. When all the parties of a transaction are in accordance with all the information, they make a block. You have an algorithm that is running and checking transactions. That’s called mining in Bitcoin.  

The way to stimulate people to make that audit is to make the community, or in all transactions, pay bitcoins to build a block of information. So that’s mining and that’s why it takes a lot of energy. This is because you have to have a lot of computing power.  Just running an algorithm to check that all the transactions are okay. Once you finish it in a block and is it’s confirmed with all the information. It gives you a quote that is attached to the next block of information. If you want to change that you have to change the next block also.

It’s practically impossible to change the information that is in there instead of having 1/3 reliable source checking for the transactions, the whole community is checking the transactions. This technology can be used in cryptocurrencies.  Additionally, it can be used in the pharmaceutical industry, in medical records, or in the food industry.  Blockchain technology has a lot of different potential applications.

The Central American Group: I’ve heard some people say that blockchain technology in the future may be utilized so that people can vote with security online.

Alfredo Escalon: Of course, it can be used in that way.  If you use this technology, it’s going to be impossible for people to do something illegal in voting.  You are going to be able to vote anytime, from anywhere, and you will be auditing all the votes of all the people. It will be impossible to manipulate the results.

The Central American Group: Hopefully, that’ll be used in the near future for that purpose. Another thing that I hear from people and read is that there’s a concern that using Bitcoin can be effectuated to keep transactions, somewhat secretive.   Given what you just said, with respect to everybody auditing, how can that be the case?

Alfredo Escalon: I think that people don’t understand very well.

I want to recommend a documentary on YouTube that is called Banking on Bitcoin.  There’s the case of a person that was selling Bitcoins early when this was beginning.  He was selling bitcoins to different people.  They paid for them in cash, and he will sell Bitcoins to them. He was like, like an ATM of Bitcoins.  You know, you pay money, and He will give you the Bitcoins. So, a person that was buying bitcoins from him used Bitcoins to buy drugs, to do something illegal.  When the FBI caught this guy that was buying drugs, and all of that, they could trace the transaction all the way to the individual who was selling the bitcoins.  They tried to implicate him in a crime. I think that they arrested him.  When he was put on trial for that, he asserted that he was not responsible for what people are doing, with the money that I changed for them.   He compared this to put the president of Bank of America in jail because someone was taking cash from an ATM and buying drugs.  Whenever you use cash, it’s possible to trace transactions. But with this, it’s not. It’s impossible not to trace it.

The thing is that if I buy a shirt from you, and you sell that shirt for twenty dollars to me, though, in blockchain technology, nobody is going to be in the middle. You know, so nobody can know that, that I bought a shirt from you. And that’s, that’s a misunderstanding that people have. So, it’s more secure.  It is much more secure than cash for sure. And if people want to launder money, I mean, they launder morning dollars right now, what you need is a person, a banker, or someone who is able to put cash into an account to make it legal.

The Central American Group: You know, let’s get a bit into the present situation that is particular to El Salvador. Could you tell us a bit about the recent adoption of Bitcoin in El Salvador as legal tender? Give us some background?

Alfredo Escalon: Yeah. About two weeks ago, the president appeared at the Bitcoin convention in Miami saying that El Salvador will be the first country in the world to accept a Bitcoin as a legal tender.   As I say to all the people, this is like eating a cow you need to see it from three different perspectives. The first one is the way that it’s going to affect people and them in the finance and economics in the daily living of the person that is there. I think that blockchain technology as I told you, is really good because it’s decentralizing a transaction.  This is going to make it cheaper. The second part is economics. You know, how it’s going to affect the country. But in that part, I cannot tell you very well because we haven’t seen the rules that are going to be a part of the law.  We haven’t seen the rules yet on how it’s going to function.  The third issue has to do with the political side of things.  A lot of interests are being pushed whenever this is put up as legal tender. So, there’s are a lot of interests that are colliding to be able to see if it’s a good or a bad thing for the country.

The Central American Group:  What factors made this occur? What was the impetus for the president of the country pushing the economy in this direction?

Alfredo Escalon: I wish that I could answer that.  I can only point to one of the things that he said.  According to him, the remittances that are coming from the United States to Salvadoreans would lose less money due to fees.  Remittances sent to El Salvador represent approximately 25% of the country’s GDP. 

The Central American Group:  So, from your perspective, do you see the adoption of Bitcoin in El Salvador as a positive or negative or maybe a bit of both?

Alfredo Escalon: I think it’s too early to say, however, I like blockchain technology.  I have seen it applied in different industries.  I think it’s the future.  I also think we’re at the end of the industrial era, and we’re running into the digital revolution. This is something that cannot be stopped.  It’s something that is going to be so good that people are going to eventually jump. Everyone is going to end up using some kind of digital monetary system. And as always, the strongest currency is the one that is going to last.

I’m not sure yet how macroeconomics will affect the country.   Seventy percent of the people in El Salvador don’t have a bank account. But only 30% don’t have a smartphone. So, it will be a really easy way to provide financial services to all the people that are not able to have a bank account. So, I think it’s too early to say.  I just can tell you that this initiative has a lot of value.

The Central American Group:  This could have huge, huge ramifications. And I’m looking at this from the perspective of somebody who lives in the United States. If this were to catch on, this would have huge ramifications for the US dollar.

Alfredo Escalon:  Huge.  As I was saying, just imagine if more countries were to move in this direction. Cryptocurrencies are as good as the users that have it. As you know, in El Salvador everybody uses WhatsApp. But in the United States, not everybody uses it. So. everybody uses SMS in the United States. So, I need to have a common platform so that we can communicate so. With this more people will be using Bitcoin and cryptocurrencies, digital wallets, and using blockchain technology. I think they’re not going to be able to stop it.

The Central American Group:  Alfredo, one of the things that that because I’ve never used it and it’s not on my smartphone, how does this work out in practice? We’ve been reading articles about businesses that are on the Salvadoran coast, I guess they call it Bitcoin beach. From what I understand Bitcoin is actually used in small coastal communities in little stores and surf shops.  How does this work?

Alfredo Escalon:  For instance, they sell snow cones at the beach, and they accept Bitcoins.  They are actually working with it because they have used it as a circular economy. What I mean by this is that they have dollars that they put into an ATM machine, and they change it into a wallet.  People always are concerned about the fluctuation of the value of Bitcoin in El Salvador. But as soon as you don’t need to change it again to dollars, it’s irrelevant.   The dollar fluctuates, again, let’s say against gold.  In March of last year, the ounce was valued at US $1300 and now it’s US $1900. So, the ounce of gold against the dollar has changed due to inflation in the United States.  It is going to increase by at least 20%.  This is because they have put 20% more dollars in the street.  They have printed a lot of money.

The Central American Group:  That’s something that has a lot of people very concerned. It probably has to do with what you mentioned about the ounce of gold going up to $600.  People are probably buying gold as a hedge against this inflation that you’re talking about. hat leads me to believe that the value of gold will even go higher in the months to come.

Alfredo Escalon:  Yes, that’s what I think. Let me tell you this, if you are buying things made in the United States, it doesn’t matter if they put more dollars into the economy. But if you’re going to buy a BMW that it’s made in Germany, the price is going to increase.  Because all of them are trading in Bitcoin in El Salvador, it doesn’t matter if it’s more or less.  You are going to get charged, every time that you put dollars into bitcoins, and you’re going to get charged whenever you get bitcoins and try to convert them into dollars.  As more people use Bitcoin and don’t change it, I think the variable part of it won’t matter. This is because you’re using it as a trading mechanism, not only as an investment mechanism.   People are saying that it looked as of people are going to be using losing money. I know a person that bought 2500 bitcoins at US $20. Now he has US $87 million.  He is 29 years old you know.  Experts say that Bitcoin is going to hit the US $100,000 or maybe even US $200,000.  It just makes sense because more people are using it and there are limited amounts of Bitcoins, I mean, you cannot make more Bitcoins.  There are going to be 21 million Bitcoins. and that’s it.  I’m not saying it’s good or it’s bad, these are facts.  If you have some common sense, and if more people are using it, as you can see throughout the since 20o9, till now 11 years. I think that just more people are using it, not less.

The Central American Group – That will probably continue.  I know that I asked this question in a maybe a different way a few minutes ago but I’m going to ask again.   I know that it’s really tough to have a crystal ball but from a macroeconomic perspective. What do you think the effect of Bitcoin will be on El Salvador’s economy?

Alfredo Escalon:  The things that they say like, they are not enough dollars in El Salvador if all the people that hold huge amounts of money in Bitcoins come here to convert them.  Also, there’s going to be, as I told you before, I haven’t seen the regulations that will tell what can do and what you can not do with it.  I think that’s one of the concerns that people have.

The other concern is the relationship that you have with the global bank and the IMF. You know that in the United States you use dollars. I mean there is a lot of power that politics play in the United States. I don’t know what the implications of the relationship, politically speaking, are going to be. That something that gives a lot of concern to a lot of people. If you asked me, I don’t like the way that this has been done. I’m not saying that is good or bad. I’m just saying that I think you would have needed more consultation with the people. I mean President Bukele was saying it on Sunday night or Saturday night, I’m not sure.  On Tuesday, Congress passed the law.  So now we have 90 days to learn everything. I hope it’s a good thing for the country. But I don’t know yet. It’s too early to say,

The Central American Group:  Well, listen, this has been a good introduction to what is going on with Bitcoin in El Salvador, and what you just said, leads me to believe that maybe in a few months, we can get together again.  Maybe some of those questions that are difficult to answer now might be more clearly in focus at that time. What do you think?

Alfredo Escalon: Yeah, I think that by September, we are going to have a better idea of how things will work out. Let me tell you one thing is for sure. One thing that it’s true is that this has made every Salvadorean learn about blockchain, or think about it or ask about it, or at least have a little bit of concern about what the future holds. I think that’s something good, you know.  Before this when people talked about blockchain technology and Bitcoin nobody knew a thing.

The Central American Group:  Listen, we have lots of people that as a follow-up to listening to the podcast, they have questions.  If our listeners want to ask you a question, how could they do that? Do you have an email address that could reach you at?

Alfredo Escalon:  Yeah, sure. We’re on all social media because we have a talk show on the radio about finance. It’s in Spanish.  Also, we have a lot of ways to get in contact with us also, you can write me at alfredo.escalon@fishermanwm.com.  Or you can give us a call or send us a WhatsApp message at 503 2208 9705.

The Central American Group:  Thank you very much. Again, we’re looking forward to having a conversation with you in a few months so that we can see how things are working out.

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establishing a manufacturing facility in Costa Rica

Establishing a Manufacturing Facility in Costa Rica

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Contact the Central American Group if you are looking to establishing a manufacturing facility in Costa Rica.

The Central American Group: Hello.  Welcome to another installation of the Central American Group’s podcasts. These are discussions that we have with experts, both in the organization and external to the organization, that is centered on doing business in the Central American region. Today, we have an external expert. It happens to be the top executive of one of the Central American Group’s client companies. The name of the company NACS Inc. I will let Robert Doty tell you a bit about his company, a little bit about himself, and after that, we’ll start with the questions on the topic of establishing a manufacturing facility in Costa Rica

Robert Doty:  This is Robert Doty here.  I am the current president of NACS Inc. I’ve held a number of roles within the company over the last twenty-three years from machining, assembly, engineering, sales, and now I’ve taken over as president. Our company is really specialized in providing scalable solutions to our customers, focused in the areas of life science, space, and Medtech. We provide services that include prototyping, production, semi-automation all the way through to full-scale contract manufacturing. We’ve been in business for almost 30 years and central hub in the Minneapolis, Minnesota area.  We have recently expanded our company’s capacity by establishing a manufacturing facility in Costa Rica.

The Central American Group: That’s interesting. We’re going to talk a little bit about that today. Basically, if you can let us know what were the factors that motivated your company to set up manufacturing operations in Costa Rica?

Robert Doty: We looked at a number of different areas for further expansion.  We have a customer base in the United States that has very strong connections with Costa Rica. We have serviced these customers for over 10 plus years, and we really wanted to get down there and provide more service and more competitive cost opportunities for our customers. So, we decided to expand into The Central American Group’s Green Park Free Zone to set up operations with the goal of mimicking what we do in Minneapolis. We expect to have there for a long period of time to bring our current processes and procedures down to Costa Rica to drive quality and hire some very good talent.

The Central American Group: What are you hoping to accomplish in Costa Rica?

Robert Doty: We’re really hoping to really be close, closer to our customers so that we have great service and support and the ability to collaborate on new applications. We want to hire some really good talent, which we’ve already done, and we’ll continue to do so and provide very good, stable jobs for our employees down there. We will continue to expand and grow as the market needs are there.

The Central American Group: Can you tell us a little bit about the reasons behind your choice of the Central American Group’s Green Park Free Zone as opposed to any of the other options that were available to your company?

Robert Doty: Sure. We looked at a couple of different options in the Costa Rica area.   We concluded that the Green Park Free Trade Zone was the best option. We had a lot of confidence in infrastructure in an existing building and had very good confidence that it was going to happen on time within the budget we had set for ourselves and it absolutely did. I think we were ready to go within a day or two of the original schedules even though we had to fight through the pandemic.  That was really impressive for us. It has worked out really well.

The Central American Group: Costa Rica is very well known for the quality of its workforce and it’s got a very good educational system. As a matter of fact, it puts eight percent of its GDP into education every year.  Given those circumstances, what have you found with regard to the Costa Rican workforce? What’s been your experience been with individuals in that workforce thus far?

Robert Doty: We were really excited about it when we went to hire and bring our people on board starting in September of 2020. We put a number of different job descriptions out.  I think within the first week we had around 800 or more resumes for different areas such as machining, mechanical engineering, controls, engineering and technicians, and such.  We went through a number of interviews with potential candidates and found some really good people. We’re excited at the talent is really there. We went to the goal of establishing a manufacturing facility that would grow with good people.

The Central American Group: One thing that we’ve been getting and seeing, as have a lot of other people that are involved in manufacturing, the desire of companies to restore manufacturing to the Americas.  The phrase is being used now as ally-shoring. What we do find, however, is that rather than establishing an entire facility, a stand-alone manufacturing facility, companies that have source manufacturing in Asia are looking to do the same in Central America. From previous discussions, I know that your company has an interest in fielding this kind of response from companies that are looking to bring things back from China. Could you tell us with respect to that kind of activity, what capabilities your company has and what kind of firms could call upon you to do subcontract work for them in Costa Rica?

Robert Doty: Sure. We’re very much focused on a scalable solution. What we’re able to do is provide a full turnkey automated solution to help our customers to manufacture their products. In the Minneapolis area, NACS, Inc. is FDA registered, FDA certified, as well as ISO certified. We’re able to handle very complex devices such as drug delivery systems and MedTech. We are absolutely developing the same skill sets at our production facility in the Green Park.   We’re excited and we’re looking at current opportunities that are likely to come from Asia because of logistics and cost competitiveness, as well as work that has its origin in Costa Rica.  The neat thing, logistically, is that I can board an airplane at five-thirty in the morning in Minneapolis and I can be in San Jose at two o’clock in the afternoon.  Our plant is readily accessible, and the infrastructure is really good.

The Central American Group: That’s great. We’re glad to hear that. Just to wrap things up here. What advice would you give to other companies that are considering establishing a manufacturing facility in Costa Rica?

Robert Doty: You know, I think I would kind of put it all together and just say that, from a logistics standpoint, it’s a very great location in relation to the US. Workers with talent are there not only from a skilled operator standpoint but also from an engineering perspective. The labor pool is strong. The motivation that the employees have is great. As I have said, we are excited and ready to work. There are definitely some tax advantages and the free trade zone that can be taken into consideration for sure. And you also have the ability to service the local industry down there if you have existing US-based relationships that have made their way to Costa Rica.

The Central American Group: One other thing that I would mention, too, that it’s important is the CAFTA, the Central American Free Trade Agreement, which is essentially comparable to the USMCA that the US has with Mexico and Canada. So, with regard to your product being exported to the United States, it comes into the US duty-free. Is that correct?

Robert Doty: That is true. And that was definitely a factor.

The Central American Group: We get a lot of requests, as you know, from people looking to have things done in Costa Rica. If somebody is listening to this podcast and they’d like to get in touch with you, Robert, so that NACS Inc. could execute a project for them, how would they get in touch with you, Robert?

Robert Doty: You could definitely go to our website and then submit a request through the contact form.  That will come directly to me. We can take it from there.

The Central American Group: Robert, thanks. It’s been a pleasure talking to you. We wish you abundant luck in Costa Rica and actually looking forward to meeting you in person someday to talk more about establishing a manufacturing facility in Costa Rica.

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