Exports of microprocessors from Intel's plant in Costa Rica were up by 32% in the first half of the year, the company reported. William P. Abraham, the general manager of Intel, said that if the company maintained the same export and production pace for the second half of the year, exports would come in at around US$1.2bn.
Abraham was cautious, however. He said that his years in the industry had taught him that everything could change in the blink of a eye. Intel set up in the country in 1998 and, after an initial boom, suffered during the high tech bust in the early 2000s.
Outspoken. Abraham clearly feels that Intel's importance to the Costa Rican economy (it accounts for around 20% of the country's exports) means that he is free to comment on sensitive issues. He said that the shortcomings of the state telecoms company, the Instituto Costarricense de Electricidad, especially in the internet, were hampering Intel's growth. Abraham said that it was not possible to work properly when the internet in the country was in constant danger of collapsing. He added that Intel had no problem with the electricity services ICE provided, and that they were among the most efficient Intel had anywhere in the world. ICE has a monopoly on both electricity and telecoms in Costa Rica.
ICE has been the subject of a tug-of-war between the government and its employees over whether it should be privatised. The government, which was pushing for privatisation, or at least a more open, less coddling management style at the company, lost. The failure to make changes at ICE led to the resignation of the finance minister in May.
Abraham also said that Intel was concerned by the failure to push through labour reforms. These would have extended the working day to 12 hours.
Intel has nine manufacturing plants across the world. Its plant in Costa Rica is at Belén, 15km outside San José. The company is musing about opening a 10th plant but has yet to decide when or where.
Effect. The better performance from Intel is helping the rest of the economy. Yet even without Intel's contribution, the government says, the economy is on the move: output was up 3.8% in May, stripping out Intel. With Intel, growth was 5.2% in May. This was the fastest growth rate for three years.
Both figures mean that there have now been seven consecutive months of year-on-year growth in output. Some sectors of the economy, notably agriculture, have started to move from contraction to expansion. Agriculture had been contracting since November last year.
The pace of growth is coming as a surprise to the central bank, which had been forecasting growth of just 2.2% for this year. The central bank president, Francisco de Paulo Gutiérrez, said that the performance was impressive, given the run-up in oil prices in the first part of the year. He said that the key issue was what happens in the US: half the country's exports go there.
Cuts. Finance minister Alberto Dent announced US$75m in public sector spending cuts, made necessary because of the sluggish progress of the tax reform through congress. The reform has been before congress for a year.
Wages: The government increased public sector wages by 3.5% from 1 July. This was well below what the unions had been seeking: they wanted a 6.48% rise.
The government said that its fiscal constraints meant that it could not afford a higher rise. There was no pay rise for the better-paid: those earning over US$2,500 a month. The increase also applies to public sector pensions.
Usually the semi-annual increase is negotiated with the unions rather than imposed unilaterally.
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