by Rod Hughes

Internet money speculators are playing hob with the value of the colon. Late last year, Costa Rica raised the value of its colon against the dollar and for a time only about 487 of the local currency was needed to buy a dollar. Last week, it went up to 501 but that was just the beginning.

Monday, Banco Nacional raised the colon value unlaterally and drastically, surprising even the Central Bank. The buying model jumped from 505 Friday to 517 on Monday and the sale from 511 to 523. Bank spokesman Luis Carlos Mora said the move was to foil currency speculators who used the Internet overnight to manipulate currencies. He promised that today the colon would lose value by 5 colones.

Central Bank manager Roy Gonzalez commented, “It seems strange to us that Banco Nacional would adjust the exchange rate more drastically than the variation in Monex.” (Monex is the world currency market.) Economist Juan Munoz told the daily La Nacion, “The exchange rate shouldn’t be so elevated especially when Banco Central has $5.9 billion in reserve.”

Volume of trading colones vs. the dollar was a brisk $71 million on Friday but only $8 million yesterday. “Today, things were calmer,” said Gerardo Gonzalez of BAC of the trading Monday, “We don’t find any explanation for what happened.”

by Rod Hughes

It may not be any threat to Boeing yet, but a new consortium, Costa Rican Aerospace Alliance (Coraal), has signed a contract with Ad Astro Rockets to build a platform on which to test Dr. Franklin Chang’s plasma rocket engine, the daily La Nacion reported late last week.

Made up of six Costa Rican businessmen, the new firm will build a rectangual table-like structure to unite the rocket engine, its electrical and cooling systems and tie them in with the International Space Station still under construction. The engine, designed to free space rockets from costly and bulky chemical fuels, is the brainchild of Chang, a Costa Rican astronaut and physicist. The Coraal project will initially employ 187 persons.

The plasma engine prototype has been deveoped at Ad Astra’s facilities in Guanacaste province near Liberia. Chang told the press that, once the engine is tested in a vacuum at Ad Astra’s facilities in Houston, it would be ready to be hoisted up to the space station with a conventional rocket. Essentially, the engine heats a gas to such a temperature that an electron is released.

By being freed from the tyranny of chemical fuels, the engine will not only be cheaper to run but will accellerate more rapidly and make interplanetary (and later interstellar) flight more feasible. Chang thinks the more immediate use will be to hoist satellites into orbit or cargo to space stations. One suggested scheme on earth is to incinerate dangerous refuse and turn it into useful byproducts.

by Rod Hughes

We never thought we would ever see it, but Costa Rican companies are outsourcing in order to field their own brands even as the country woos foreign automotive parts firms to settle here. But the lure of cheap Asian labor is too good to resist.

Financial writer Peter Krupa of The Tico Times, Central America´s leading English’language publication, recently profiled three of these small companies that hope to grow larger by importing their own bands. The best example is Luis “Guilly” Cubero whose already successful Santa Ana bike retailer sells between 7,000 and 8,000 road and mountain bikes per year.

But come September he will be selling “Guilly Bikes” to display alongside imported brands like Trek, Cannondale, Shimano and Fox Racing, hoping to raise annual sales to 12,000. It would seem the right time with fuel prices rocketing upward. The bikes are designed by Cubero and manufactured in Taiwan.

Another such Tico Tirm is Cococo (Campania Costarricense de Computacion) t6hat now has its own laptops to sell alongside its Hewlett-Packards and Toshibas. Ditto BTC which is adding laptops assembled in-house from imported technology to its line of PCs already made at their Los Yoses plant.

The advantage for the company is obvious. “If you don’t have cheap labor from Asia, you can’t…compete,” Cubero told reporter Krupa. His bikes will range from a child’s model at $50 to more than $1,000 for top of the line models. And a Cococo laptop will go fore $500, 5-7% lower than equivalent imports.

But there are other advantages for the local buyer than just lower price. Getting a manufacturer to honor his warranty is often nearly impossible when the firm’s headquarters are on another continent and the local retailer is unhelpful. But parts and service are local with local companies.

But that trend is not stopping Foreign Trade Minister Marco Vinicio Ruiz from trying to attract foreign auto parts firms to do their outsourcing here. They would not feel lonely. Bridgestone-Firestone Tires set up the first automotive-related firm way back in 1967 and now turns out 12,000 tires per day, notes Tico Times reporter Leslie Friday recently. “Hutchings, Deshler, Continental AG and Daewoo are just a few among the long list of other companies who have in-country sites proving anything from assembly and electronics work to packaging,” Friday wrote.

The sprawling Bridgestone-Firestone plant alongside the PanAmerican Highway north of San Jose on the way to the airport is not the only example these days. In 2007 the country exported $240 million in automotive components and final products, Friday discovered, a whopping 214% over the 2003 figures. Costa Rica’s advantages were outlined by Gabriela Llobet of the Costa Rican Investment Promotion Agency (CINDE): Strategic location (proximity to U.S. markets), skilled workforce, political/economic stability and its incentives (e.g., free trade zones).

Besides giving evidence that CINDE has been doing an excellent job of aggressively marketing the country among foreign companies, interest in this country shows that the lessons of the Bridgestone-Firestone and Intel have sunk into the minds of companies. It was only 40 years ago when Ticos turned up their noses at a “made in Costa Rica” label. Today a product from this country is respected–even if it is made in Taiwan.