Monday, October 8, 2007

CAFTA and Costa Rica: A Diorama of Globalism vs. Nationalism

Yesterday's referendum in Costa Rica on the proposed free trade on a free trade pact appears to be headed toward approval.  My Tico friends -- Costa Ricans refer to themselves as "Ticos" -- are pretty solidly divided on the issue: half believe that approval of the treaty is an indispensible part of Costa Rica's future, citing the fact that Costa Rica is the only remaining holdback (the Dominican Republic, Guatemala, Honduras, Nicaragua and El Salvador have already approved their participation.)  But a growing number of Ticos -- now about half -- are skeptical of the benefits of free trade, arguing that it could adversely affect Costa Rica's farmers and traditionally "sovereign" sectors such as telecommunications.



While I can't speak on the impact on farming, I can think of nothing better for Costa Rica and its people than to have direct competition leveled against its woefully inept telecommunications system.  The entry of U.S. providers would mean the end of the ICE (national phone company) monopoly, and that would be a good thing.



Jealously guarding a national industrial sector is anathema to a free market, and BOY does Costa Rica serve as living proof.  Recently , faced with dramatic losses from international long distance revenues, ICE demanded that VOIP - voice over internet -- be deemed an illegal infringement on the soveriegn control of telephony.  The lines of patient Ticos filling ICE offices speaks volumes about the reality of the situation:  getting a home internet line can take months, getting a cell phone can take even longer.



It's easier to get a cell phone in Equatorial Guinea, West Africa, an isolated island ruled by an authoritarian leader, than it is to get one in Costa Rica, where Oscar Arias is again at the helm. The same Oscar Arias who won the Nobel peace prize is now being called a "traitor" on his way into the CAFTA voting booth for supporting the free trade agreement.



Whether or not CAFTA passes in Costa Rica -- and it looks like it will -- the lessons from all the bruhaha leading up to the election are very telling for those of us involved in global business.  In the past, this kind of debate about entrenched national "rights" was limited to the Castros, Kims, and the uber-hystrionic Chavez...dictator/demagogues disguised as nationalists.  True leadership seeks market efficiencies; even the Chinese leadership, as control-driven as ever, has implemented broad reforms designed to improve the lives of the population.  So you would think that in a service and tourism driven economy such as Costa Rica, the current national division on free trade is a true aberration.



It isn't.  What it IS is a reflection of the nationlistic reflex we will increasingly see in a global economy, both in developed nations and in those less developed.  The reason is simple: human beings don't like change.  They are threatened by it. It is the tragic reason why so many choose to remain in an abusive relationship because they fear living alone.  It is why the majority of Americans, regardless of their political persuasion, are unable to deviate from the dogma of their respective political party and concede points to the opposing party.



Consider the BPO's (business process outsourcers) which have permeated Costa Rica's economy for the past decade.  Long hailed as a favorite call center location for both its political stability and educated workforce, thousands of Ticos work for leading U.S. and international companies, servicing calls throughout the English and Spanish speaking world.  The failure of Costa Ricans to approve CAFTA will surely mean the end of this industry and the loss of thousands of jobs, much as U.S. legislation against online gambling forced thousands of Ticos out of their online casino jobs.



Just as Bill Gates moved a major operation north to Canada the day after U.S. immigration reform fell apart earlier this year, the many Fortune 500 companies with call centers in Costa Rica will find more favorable conditions elsewhere...and more Tico jobs will disappear.



From my perspective, this phenomenon is like the diorama of a great war within each nation, where those seeking entitlement via national ownership of industries are up against the pragmatists who believe that the only possible way forward is through increased utilization of technologies and relationships which improve efficiencies and costs across the board.  Here in the U.S., when the bipartisan immigration reform bill was slayed, the "nationalists" won.  And the next day Microsoft had no choice but to head to Canada.



If you root out the emotional stuff -- that indignant demand that, darn it, this is OURS and we MUST own it -- invariably nationalism as applied to economic considerations is a folly, leading to some pretty dumb stuff.  I think Costa Rica has better things to do than arrest folks for using Skype.



The truth about this whole "Globalism vs. Nationalism" debate boils down to intelligent analysis.  To paraphrase Jeff Goldblum's character in Jurassic Park,  explaining how it was possible to have dinosaur eggs hatching when all the genetically-engineered dinosaurs were of one gender: Business will find a way. 



VIsionary leaders will understand that fact and steer their economies with that in mind, expending energy to define the highest value in workforce ability instead of digging in their heals to keep foreigners out.  Keeping a watchful eye on how this unfolds is critical for companies with global workforces.  Today's dream offshore location might be tomorrow's hyper-regulated backwater, and tomorrow we might be staffing places we can't even pronounce today.



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