Proof of how strongly it believes in that prediction can be found in its latest investment in the field, an innovative program in which Costa Rica’s public, private and academic sectors have teamed up to improve the quality of what has become the country’s highest value-added export: computer software.

The project, which is being supported with a $1.5 million grant from the IDB’s Multilateral Investment Fund (MIF), also marks the Bank’s first foray into this industry, which is taking root in countries across Latin America and the Caribbean.

In a ceremony held at San José’s presidential palace in June to celebrate the launching of the program, President Miguel Angel Rodríguez said software is destined to become in the coming century what coffee represented for his Central American country for over two centuries.

“We are exporting products of intelligence, of knowledge, the fruit of the minds of Costa Ricans who are doing things well and are making the country proud,” said Rodríguez, in reference to the approximately $50 million in exports chalked up by local software developers during 1998.

While that amount is still dwarfed by the country’s exports of coffee, bananas and its most recent major export, computer “chips” manufactured locally by microprocessor giant Intel, the software industry’s potential for growth is deemed to be huge. However, it remains hobbled by constraints, some of which the new project will seek to overcome.

Competitive challenge. In the new program, local software companies will have a chance to compete on the world market as well as to become engines of economic development by producing hard currency revenues and creating high-paying jobs, said Bertus Meins, the IDB’s representative in Costa Rica.

“This project is important for improving Costa Rica’s competitive edge,” Meins said at the program’s June launching ceremony. “It will bolster Costa Rica’s image as an emerging international center in the field of high technology, making it more attractive for private investors.”

While it lacks a large domestic market, Costa Rica has some relative advantages over other Latin American countries that are also developing their information technology industry. Among them are current trade agreements, its proximity to the NAFTA countries, its pool of skilled workers trained at low cost, and a lack of a dominant company in the burgeoning market for Spanish-language software.

The IDB-supported plan consists of three major components. In tune with Costa Rica’s tradition of investing heavily in education, it features a strong element of training to provide the software industry with adequately prepared professionals. A second part is aimed at introducing international-level quality systems. Lastly, the program will beef up Caprosoft, the local chamber of software producers, composed of some 40 small and medium-size companies.

Caprosoft and Procomer, Costa Rica’s export promotion agency, will contribute a total of $500,000 to the three-year project. CENAT, a university-supported center for high technology, will supply the equivalent of $500,000 in services and facilities.

The new initiative builds on Costa Rica’s well-known tradition of focusing on education—a tradition that has been paying concrete dividends. As early as 1974, the government used IDB financing to expand the Costa Rican Technological Institute (ITCR) into what has since become one of Latin America’s most advanced computer science and software engineering schools. Many itcr graduates are now employed in local software companies. itcr has also shown a consistent enthusiasm for responding to the needs of the private sector. While negotiating the terms of their investment in Costa Rica in 1996, Intel Corp. executives and itcr officials drafted an agreement to modify the school’s curriculum in order to meet anticipated personnel needs at the company’s microprocessor assembly plant (See “A high-technology incubator, The IDB, June 1997). The first class trained under the modified curriculum is due to graduate this year.

Ignacio Trejos, acting director of the ITCR’s computer engineering department, singled out another factor: in 1985 Costa Rica slashed taxes on imported computers from 133 percent to just 10 percent, a policy that allowed even small companies to acquire computers. Naturally, this spawned a demand for support services and software. Just as in the United States, students and professors in Costa Rica began to tinker in garages and to start up new ventures. “Many of the companies that are now exporting millions of dollars worth of software were established in the mid-1980s,” Trejos said.

Several Costa Rican software developers have even expanded overseas, establishing beachheads in Europe and South America. The local industry’s products range from accounting programs for pension funds to a text translation software.
Now, the explosive growth of the local industry, estimated at around 100 producers, including independent programmers, is outstripping the supply of skilled technicians. There is also a shortage of educators for software programmers.

Under the plan’s education component, university and community college curricula will be updated and a teacher-training program will be developed and launched. New teaching methods will be used and female students will be recruited to stimulate women’s participation in the new industry.

Quality is a critical problem. The IDB evaluation found that this issue needs more attention, especially since potential competitors elsewhere in Latin America have already established software process improvement networks (known in the industry as spins) involving various interested parties.

According to Alejandro Montalvo, Caprosoft’s former president, the new plan will aim to achieve the internationally recognized ISO 9000 quality certification for locally produced software. This part of the project will follow three approaches. International experts in software quality will be hired to train Costa Rican consultants, who will then transfer the technology of setting quality standards to local companies at a subsidized cost. A Costa Rican spin will then be established to promote a culture of quality in the local industry and to link it to similar networks worldwide.

In order to help its smaller software developers crack foreign markets, Costa Rica’s Procomer export promotion agency will organize industry-specific trade missions and develop programs to better market the country’s knowledge-based products, Procomer’s former general manager Eduardo Alonso said.

Software entrepreneurs polled by the Costa Rican business daily El Financiero hailed the project as a proposition that could eventually attract the risk capital that has fueled the industry’s explosive growth in North America, Europe and Japan. “This is a first, big step towards the production of high-quality software,” Eduardo Wheelock, general manager of local software firm Sysde Computaci
n S.A., told the daily.

—Reported by Willie Heinz in San José.