Small Business

BusinessWeek


Since the late 1970's, Costa Rica has been luring tourists to its lush rainforests and exotic beaches. A pioneer of eco-tourism, the country, wedged between the Pacific Ocean on the west and the Caribbean on the east, is primarily known for its amazing biodiversity that includes an astonishing array of flowers, birds, butterflies, and other creatures. In more recent years, however, the country has also become an attractive destination for scores of foreign entrepreneurs who have launched hundreds of ventures in what is known as the Switzerland of Latin America.

Globalization and technology have made it possible to do business almost anywhere on the planet. For entrepreneurs looking at locations, going abroad can offer an alternative to the usual path of highly trafficked business centers, as well as a whole new set of advantages. Following in the path of multinational corporations, entrepreneurs are finding new opportunities in crossing borders. In the case of Costa Rica, perched between two of the world's largest markets (North and South America), there's a highly developed tourist industry and a growing expat community.

Enticed by Costa Rica's low costs, highly educated and often bilingual workforce, political stability (the country abolished its army in 1949), attractive tax incentives, pleasant climate, and one of the highest standards of living in Latin America, Costa Rica has become a burgeoning haven for small-business owners.

CHIPS AND COFFEE. "In the 1980s, Costa Rica adopted a fundamental change in its economic orientation and decided to establish policies and concrete programs that attracted foreign investment," says Hernan Pacheco, a lawyer and president of the Costa Rican-American Chamber of Commerce (AMCHAM). According to Pacheco, in the past five years alone there has been an injection of some $600 million in foreign investment, half of it coming from the U.S.

Perhaps one of the best-known businesses to emerge out of Costa Rica is Café Britt. Steve Aronson, a native of New York and an early proponent of sustainable, organic coffee production, founded the company in 1985 in Heredia, north of the capital of San José. Today, Café Britt is the country's leading exporter of gourmet coffee, with an estimated $39.1 million in sales. More recently, high-tech giants such as Intel (INTC), Microsoft (MSFT), and Hewlett-Packard (HPQ) have come to Costa Rica, investing hundreds of millions of dollars.

The widespread interest and success of these companies, says Pacheco, has influenced a steady and growing number of small- and medium-size businesses. "Now," he says, "we have everything from a small shop on the beach, a restaurant or bar, tourist resorts, or high-tech companies, all started by foreign entrepreneurs."

LABOR OF LOVE. One of them is the hotel and resort called Lands in Love (in Spanish, Tierras Enamoradas). Established by a team of 25 Israelis, a group of friends who had dreamed of finding a place where they could live and work together, the resort opened for business six months ago. After Yoel and Michal Nelson discovered a property nestled in a cloud forest in Alajuela province that included a neglected hotel, the group decamped to Costa Rica and set about refurbishing the existing structure and launching their business.

They invested about $4.5 million to purchase the 269 acres, renovate the buildings, and landscape the grounds that include a camping area, hiking trails through the jungle, waterfalls, and a small orchid farm. The hotel, which is made up of 33 bungalow-type rooms that hug the graceful rim of the valley — all with breathtaking views of a nature preserve — also includes a swimming pool, a conference room, a pet hotel, and a gourmet vegetarian restaurant.

"We had this idea for six years," says Tal Halivni, one of the partners who also transferred his aircraft-parts company, Total Sky Lands, to Costa Rica. He says, "We looked at 250 estates [here] before we bought this one," as well as potential opportunities in Portugal and New Zealand.

DIVERSE EXPERIENCE. The group also came up with an innovative business plan. Each member is a full partner, although not everyone is a financial investor. "We set up a cooperative," says Nelson. "Everybody has many talents here." Instead, the time and skills that each person brings to the enterprise is considered a kind of currency.

Nobody in the group (they range in age from 27- to 56-years-old) had any experience running a hotel, but they did have a wealth of previous work experiences. Yaniv Ephod ran a gardening business, and he's in charge of landscaping and upkeep on the grounds. Na'ama Ariel, a former stewardess for the Israeli national airline, El Al, also ran a catering business back home and is responsible for the restaurant. Ayelet Paz, who owned a house-cleaning business in Tel Aviv, is in charge of housekeeping at the hotel. Michal Nelson, who was formerly the personal assistant to two generals in the Israeli Army, is the general manager of the hotel. All took Spanish lessons before arriving in the country and continue to learn as they go.

Starting a business in Costa Rica is relatively simple, if not always straightforward. In general, the government requires a minimum financial investment of $220,000 and incorporation of the company. Most choose to create what is called a Sociedad Anónima (SA), which is comparable to incorporation in the U.S. Unlike many Latin American countries, it isn't necessary to have a Costa Rican citizen as a business partner. But most foreign entrepreneurs hire a Costa Rican attorney to help them with the paperwork, bureaucracy, and tax laws.

CULTURE GAP. "I think this is a very good country for doing business," says Yoel Nelson. "The government and financial institutions want to support you if you have a good business, and they like to be involved with the international community…. If you can understand the system, you can work here with a lot of joy."

However, not everything is perfect in paradise. As with doing business in any foreign country, there can be a host of challenges, due in part to cultural and procedural differences. Indeed, the Lands in Love group encountered a number of them along the way to opening day. They differed with the Costa Ricans over the need and use of construction plans. Then the furniture that they had ordered arrived not exactly to specification, and they found themselves sawing off sofa and table legs.

Boaz Raufman, a software engineer, soon discovered that while the cloud forest they were located in was beautiful, it had little to nothing in the way of communications or electricity infrastructure. So he created an electricity grid and communications system that includes Internet wireless capabilities. He's now in the process of laying a fiber-optic-cable network.

SAVING THE FOREST. Several members say they have learned so much in the process of refurbishing and running the resort in Costa Rica that they're considering starting ancillary ventures. They've already launched a real estate business and Raufman is considering developing a communications and information-technology consultancy.

Together, they have also set up an ecological foundation, Terra Oriens, that purchases rainforest areas for preservation and promotes environmental awareness. After all, as Nelson says: "We came to a lovely country — we would like to do something for the environment and for the people."

For small businesses, it's easily possible to think globally while acting locally.


Steve Ballmer, Power Forward
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