1. Developing Supply Chains for Foreign Investors in Costa Rica Leveraging FDI for technological learning and suppliers development Roberto Calvo Director Costa Rica Provee Foreign Trade Corporation of Costa Rica

2. Agenda Country’s background Supply Chain Development Final remarks

3. Costa Rica at a glance Population: 4 million citizens. In the “center” of the Americas Oldest democracy in Latin America Universal Educational and Health System

4. Costa Rica at a glance Literacy Rate = 95% GDP per capita: US $ 3,920 Life expectancy: 78.1 years 6% of world’s biodiversity

5. Costa Rica trade policies impact in last 15 years…

6. Costa Rica: Export Evolution

7. Costa Rica: Thinking locally, acting globally…

8. Suppliers key role… Opportunities The 10 biggest U.S. automotive manufacturers spent 48 cents out of every dollar in sales in 2002 to buy materials, compared with 43 cents in 1996. (Liker, HBR) Businesses are increasingly relaying on suppliers costs, improve quality, and develop new processes and products (innovation) faster than their rivals’ vendors can.

9. To contribute to increased national value-added in the production of multinational firms installed in Costa Rica, and as a result, improve the competitiveness of small and medium-sized enterprises (SMEs). Supply Chain Linkages “ Costa Rica Provee”

10. Primary Goals - Improve the STI and production capacity SMEs through first class business relationships. - Contribute to the development of value-added local production through linkages. - Set up mutually beneficial relationships between local companies and institutions that foster competitiveness in the production sector.

11. Match – Makers!! STEP 1: DEMAND STEP 2: LOCAL SME

12. Costa Rica Provee Training and Assesment TNCSME

13. Measure 1

14. Measure 2

15. Measure 3

17. STI complexity Strategic Value for Electronic TNC (Indirect Materials) HIGHLOW Packaging, Pallets (transport accs) Consumables. Metalmecanics, (Level 1) Plastics (Level 1) Chemistry VA. Services (Level 1) Metalwork, (Level 2) Plastics (Level 2) Chemistry (L2) VA. Services (Level 2) R+D + Innovation Shared Services Metalwork, (Level 3) Plastics (Level 3) Chemistry (L3) 1996 2006

18. Suppliers STI Capacity Building Development Improvement of the productive processes (15%) Innovation, investigation and development with special materials or services (18%) New technologies (22%) Specialized Certifications (ISO 13485, ISO 9001:2000) (7%)

19. Final remarks.. for developing a program on your country 1.Sustainable linkages are not produced automatically as a direct consequence of FDI presence… it requires participation of Local Government, favorable policies, business conditions, and Business Community openness (TNC and SME).

20. Final remarks.. for developing a program on your country 2. For MNC: Local sourcing is not (only) Social Responsability, it’s a competitive issue 3. For SME: Think locally, act globally. “Toyota helped us dramatically improve our production system. We started by making one component, and as we improved, [Toyota] rewarded us with orders for more components. Toyota is our best customer”. Senior Executive, supplier to Ford, GM, Chrysler and Toyota, July 2001. (Choi, HBR)

21. Thank You Enjoy Costa Rica

22. Deep impact on export value added. Direct employment generation Costa Rica key link: Supply chain network of quality products and services. Increase competitiveness of the country for FDI. Country’s importance

23. Increase of corporations competitiveness. Time and Cost Savings. Increase of national operations from FDI corps. Export sector importance Technology transfer incluiding new manufacturing + R&D. Be part of the SC network of a world class company. Increase sales abroad by becoming a “global supplier” to other parent plants. EXPORTS SUPPLIERS SME´s

24. Challenges -POLICIES EVOLUTION -First Generation: Policies to promote and support business between SME and LE reducing the bureaucratic system to facilitate this system. -Second Generation: Policies to develop investment from FDI to Suppliers (Sustainable Development)

25. Challenges Creation of Research and Development (R&D) centers for investigation and improvement of products/services of LEs. (Universities and private sector) (JAPAN Case: Kobe Medical Industry Project, Kobe Promotion Center and others)

26. Learned Lessons 1.Sustainable linkages are not produced automatically as a direct consequence of FDI presence… it requires participation of Local Government, favorable politics and Business Community openness (TNC and SME). Government Business Community Policies

27. Learned Lessons 2. Policies pool Climate Investment Policies Local Productive Capacity Policies Strategic FDI Attraction Policies Local Suppliers Development Policies Politics and institutions for linkage promotion

28. Learned Lessons 3. On site Technical Assistance is critical for SME’s. 4. Weakness and Strengths of Local Market: Mapping the demand is critical to find local capabilities.

29. Learned Lessons 5. Culture on MNC: Development of Suppliers. “Toyota helped us dramatically improve our production system. We started by making one component, and as we improved, [Toyota] rewarded us with orders for more components. Toyota is our best customer”. Senior Executive, supplier to Ford, GM, Chrysler and Toyota, July 2001. (Choi, HBR)