New Boost for Booming Trade with China
The Kung Tse Oriental Institute building in San Pedro, east of San José, is painted a bright white. Inside, Ilien Kuo, the school’s founder, walks through the empty classrooms and points out where her 30 to 40 students gather for Mandarin classes on nights and weekends.
She’s had a total of about 80 students, even though the school has yet to be formally inaugurated. Most are lawyers, businessmen and professionals, even though that hadn’t been Kuo’s plan.
“I thought that I would get a lot of the second-generation Chinese (immigrants),” Kuo said, chuckling. “But it turns out the students are almost all Ticos.”
It’s just one more sign of a growing phenomenon: the “Chinafication” of Costa Rica, which reached a crescendo Wednesday when President Oscar Arias announced that Costa Rica has established formal diplomatic relations with the country (see separate story).
The announcement follows several years of booming trade between the two countries, during which China quickly hopped-skipped-jumped up the list to become Costa Rica’s second-largest trading partner behind the United States, both in imports and exports.
The effects can be seen and felt in nearly every sector of the Costa Rican economy, to varying degrees: clothing, consumer goods, cars and light trucks, construction materials, agricultural exports and even scrap (it is rumored that those expensive communication cables that keep getting stolen in Costa Rica end up in China).
In 2000, Costa Rica exported a slim $30 million of goods to China and imported $116 million, according to Central Bank figures. Since then, things have changed, drastically. Six years later, driven mostly by Intel products, exports to China from Costa Rica exceeded the $1 billion mark (TT, Jan. 19). Imports grew as well during those six years, to $618 million.
Increased trade with China is a global phenomenon. As China’s economy has grown aggressively over the last decade, that country has been sucking up raw material and imports from around the world, and just as fast spitting out all manner of consumer goods.
Trade numbers with Costa Rica are probably even higher than the official numbers, since an unknown amount of Chinese goods enter Costa Rica through third countries such as the United States, Colombia and Panama – and as last week’s toxic toothpaste scare (TT, June 1) demonstrates, this can bring unexpected problems.
As trade with China booms, more Tico businesses are looking toward the Asian nation.
The Costa Rican Chamber of Foreign Commerce and Representatives of Foreign Companies (CRECEX) began leading trade missions to China in 2000.With an average of two missions a year, CRECEX Executive Director Luis Monge figures the organization has taken at least 1,000 business people to China.
“It has given us a lot of experience in trade with Asia,” he said. In April, CRECEX opened a full-time office in China, called Prochina, to serve its 550 affiliates (TT, April 27).
More recently, CRECEX has gone regional, and other regional groups such as China Ya have taken up the China gantlet as well.
China Ya (which in English would be, “China Now”) was started by five Central American chambers of commerce – among them, the Costa Rican Chamber of Exporters (CADEXCO) – that represent a combined 30,000 companies. Like CRECEX, China Ya serves as a link to help its member companies handle paperwork, find contacts and do business in China.
Most Tico goods in terms of sales that make their way across the Pacific every year come from Intel. But trade representatives say there are many other strong growth areas.
The CRECEX executive director noted that decorative plants and seeds, scrap, transistors and semi-conductors are all growing exports. Even more important in the future will be agricultural exports, such as frozen fruit pulp, juices and canned products that can survive the long journey across the Pacific.
“Despite the size of its territory, China cannot feed itself,” said Alberto Güell, general director of China Ya, pointing out that a very small amount of Chinese land is arable, and more of it is being covered every day with concrete and skyscrapers.
Martín Zúñiga, manager of the publicprivate Foreign Trade Promotion Office (PROCOMER), said the real problem for Costa Rican businesses is getting the exports to go directly to China, without passing through third countries.
Working through third countries, Costa Rican exporters don’t have direct access to the Chinese market, and therefore don’t get top dollar for their products.
Many of Costa Rica’s ornamental plant exports, for example, arrive to China via The Netherlands, while other products destined for the mainland make a stop in Taiwan.
While exports to China are growing, a more visible change at home is the hundreds of millions of dollars worth of Chinese goods that are imported to Costa Rica each year – everything from clothes to tires to electronics to cars.
The daily La República reported Monday that there are now 12 different brands of Chinese cars and light trucks in the country. Stores such as Pague Menos, Girasol and Tiendas Alyss sell mostly consumer goods made in China.
“There is an important growth of products imported from China,” Zúñiga said, adding: “And not only finished products.”
Much of the textile goods imported from China are raw material for the Costa Rican textile industry. Imports of construction material like pipe and ceramic tile are increasing as well, to feed Costa Rica’s booming construction industry, which grew 64% last year compared to the previous year (TT, Jan. 26).
Luis Fernando Sanabria, the general manager of construction contractor Melco S.A., went on a CRECEX trade mission last October. He said Melco will soon begin importing from China all manner of electrical equipment – breakers, fuse boxes, wire, whatever is needed to set up the electrical system in a house or building.
“Obviously there’s a price advantage,” he said, but not through sacrificing quality: Much of the equipment Melco currently imports from the United States is actually made in China.
“What we’ve found is that big brands that are well known in the market are made over there,” he said.
Despite all that trade, until this month Costa Rica didn’t have formal diplomatic relations with China. Some trade representatives said this had put the brakes on closer economic ties.
The Chinese “are going crazy to come and invest here in the textile industry,” Güell said, which would allow them to circumvent trade restrictions the United States has placed on Chinese textiles.
The lack of diplomatic relations had made getting a Costa Rican visa for a Chinese businessman a nightmare of bureaucracy and waiting, and the process likely wasn’t made any easier after Costa Rican authorities turned up a huge passport smuggling ring run by a Chinese mafia (TT, Jan. 19).
On the other side, it took months for Costa Ricans to prepare for trips to China, since all visa paperwork has to be done through the Chinese Embassy in Mexico.
With diplomatic relations now established, however, all that could be changing.
Güell called it, “The best thing that could happen to Costa Rica,” and said that he expects Chinese investment to start rolling
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