Today was all about the business tours. Our first stop of the day was to Boston Scientific. This worldwide company produces a variety medical supplies used in various fields such as endoscopy, urology, etc. Specifically in the Costa Rican location, Boston Scientific produces biopsy forceps, catheters, and guide wires. Our tour guide took us through each product and demonstrated how they would be used. They also went through the various certifications and awards that they had received which recognizes them as a world leader in their respective field. While we were not able to see the products being assembled up close and personal, we did get to see examples of their clean rooms where employees sterilized their hands and gown up in preparation of entering the work area. I found their walls very interesting. They contained a multitude of things from their core values (patient care being number 1) to quality metrics showing how well they are meeting their goals. All this is in the hope of keeping employees up to date and aware of what is gong on with the company worldwide and also at their specific plant in Costa Rica. I think it is a beneficial technique to employees because it is constant communication among employees and they feel connected to the company because they know what is going on.
The next stop on the business tour was all about souvenirs at Sr. y Sra. Ese. The company hand makes a large variety of souvenirs from wood found locally in Costa Rica. They supply approximately 70% of all souvenirs sold within Central America. Before they can do anything to the wood, it must be dried out for 5 years to remove any water present. They use a multitude of woods found in Costa Rica such as guanacaste, iron wood, tiger wood, etc. The company strives to maintain the integrity of the wood so it is not treated with any chemicals or stained; it is simply sanded down and leather polished to bring out the natural beauty of the wood itself. Once the wood is polished, workers then can create the individual souvenirs ranging from jewelry, wind chimes, crosses, etc. Specifically, seeds are mixed with the wood to create the jewelry and recycled tires are used to create the string for the wind chimes. Again we can see that companies used recycled materials and strive to generate as little waste as possible.
The last business stop of the day was at Samtec. Essentially, their company creates cabling, connectors, and other devices to facilitate transfering a signal from one location to another. They are a worldwide leader in their industry with operations in the USA, Costa Rica, China, and Malaysia. The currently have a 5A1 rating which is the highest for current and future business health. Approximately 23% of the company's manufacturing takes place in Costa Rica. Not only are they an industry leader but they also give back to their community by providing playgrounds for schools, continuing education for employees, and others. One of their main mottos is a ROCK which stands for Revise, Organize, Clean, and Keep. This serves as a guide for all employees as to what thecompany's main mission is and what they want to accomplish.
We were not allowed to take pictures but this made sense whenever we toured the plant operations. A large majority of their machines were created and designed by engineers within the company to serve specific purposes and to accomplish specific tasks. As such, these machines are basically trade secrets and give Samtec a competitive advantage so to speak. While we could not take pictures, we were able to handle the various cables and connectors and see how much detail and precision goes into to making these components. The quality control was by far the most interesting because it involved this complex robotics system that would pick up one component, check its size and fit, and then place it into a container depending upon if it passed or failed the measurements. While I'm sure we have all encountered or used their products in some respect, I think many of us did not realize how many details going into our various devices, products, etc. and how much work goes into one tiny company of a much large object. It is really a testament as to how efficient and successful they are in that they are an industry leader and have about an 87% market share.
Question of the Day:
Discuss some of the pros and cons for Costa Rica in offering these zones to foreign companies and why foreign companies want to locate in these free zones.
Free zones are specific areas where companies do not have to pay any taxes or very minimal taxes so as to encourage and boost economic growth with that area. Free zones can also be areas where goods produces do not have to be subjected to customs inspections. As such, Costa Rica employs this technique to incentive foreign companies to come to the country and set up business operations. Obvious pros for Costa Rica offering these free zones are economic incentives. They are able to bring in huge, international companies that are leaders in their respective fields. The inflow of these businesses not only brings more money into the local economy but they also provide jobs for locals which would also improve the economy. Even better, many of these companies provide health care services, continuing education for employees, and community involvement; not only are they helping the country financially but also socially.
Cons for Costa Rica offering free zones could be environmental impact of the businesses locating here. The government may not place as many restrictions on the foreign company as they would perhaps for a local company so setting up operations could have a significant impact on the environment in future. The government may also give the tax incentives for the companies for a specific time period but after that time expires, the company may pull out of Costa Rica all together (Intel for example). Companies leaving Costa Rica would cost the economy money because they relied on the influx the company's presence had provided in the past. Due to the incentives they provide, foreign companies may also have the upper hand in bargaining so Costa Rica may have to give up more stipulations in the negotiating process. Not having the upper hand, the government may be essentially forced to disregard rules and regulations that they would normally enforce. Lessening their standards for foreign companies could have a financial, social, political, and environmental impact.
As mentioned, these free zones often provide significant tax breaks or lax customs processes so these incentives would attract foreign companies to locate within these free zones. In addition to the tax breaks, foreign companies will also be able to hire local people. Because the country is relatively poor, the cost of labor is dramatically decreased and thus the company's costs are even lower. Foreign company's overhead costs would be dramatically lower in these free zones in a country like Costa Rica. These large incentives attract companies to Costa Rica and make it cost-effective and ideal to locate a base of operations within the country.
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