Rumblings in Guanacaste: Lower Costs and Slower Living

The pot is slowly cooking in Guanacaste, Costa Rica’s smallest province and a growing source of interest among tech businesses in search of unexplored horizons in the country.

Costa Rica is Central America’s most popular destination for IT outsourcing, and a fairly solicited spot for investment in the Nearshore as a whole. That popularity has exerted tremendous pressures on the capital (San Jose) and other cities within the country’s Greater Metropolitan Area (known as GAM), causing increases in costs of labor, real estate and other operating expenses.

Under that context, Liberia and other cities within the Guanacaste province are emerging as compelling tier-2/tier-3 alternatives to the capital. 

It’s been four years since we wrote about Guanacaste here at NSAM. What follows is an attempt to “catch up” with what has been happening in the province to determine where it stands in its path towards becoming a bona fide destination for IT investment in Costa Rica.

Yet Unexploited Potential

The story of Guanacaste seems to be, as of today, one of yet unfulfilled potential. Several years ago, when we spoke to several IT executives with operations in the province, all of them agreed that a quiet footprint for tech was being built in the territory. Fast forward to 2023, the footprint is still there, but hasn’t grown to be noticeable enough.

Mario Chaves, President for Encora’s operations in the Americas, described the province as a great place to acquire fresh, affordable talents outside of San Jose and other Costa Rican cities which are already emitting a whiff of saturation.

The reasoning behind landing in Guanacaste was mostly personal, explained Mario. He and his brother Luis Carlos, both of them Liberia natives, wished to open an office of Avantica (which now operates under the Encora brand) in their home city. Nevertheless, after operating for several years in the territory, they are sold on its perks. 

“It is [a good option] because we were searching for talent in other provinces. Beyond the capital, San Jose, the cost/benefit when it comes to talent is quite favorable,” Chaves commented in a written exchange. “We have some good QA talents who graduated from UNA [in Nicoya], UCR [in Liberia] and UNT [Cañas]. About 40 of them, in total.”

“Junior profiles in Liberia and its surrounding area can be 15%-17% less expensive than what you find in San Jose,” added Henry Marchena, Encora’s VP of Delivery. “However, they begin to ask for good salaries once they acquire over two years of experience; developers, most of all.”

Adrian Lachner, President at Continum Datacenter and CEO of STEM-oriented university Invenio Education agreed that talent costs in Guanacaste are considerably lower than in San Jose, a fact he attributed to lower costs of living.

“Costs of living in these regions are considerably lower [than in the capital],” stated Lachner in a written interview. “Additionally, there are other ‘perks’: living at a slower pace, being surrounded by natural beauty. Those can go a long way for professionals, giving them a stronger appreciation for their jobs, allowing for different forms of productivity seldom seen in more saturated, urban environments.”

Encora and Continum aren’t  the only tech providers with operations in Guanacaste. Canadian firm Dellbridge Solutions opened an office in June 2022, leaving possible site in San Jose for later. 

“Places beyond Costa Rica’s GAM are a strong option to generate greater growth opportunities for foreign trade,” commented Dellbridge CEO Leon Kharkhourin in a press release. 

In spite of the interest, Guanacaste’s size seems to be its Achilles heel. It is the least populated province out of Costa Rica’s seven, with 412,800 people as of 2022, according to Costa Rica’s National Institute for Censuses and Statistics (INEC). That’s about a fourth of San Jose’s population of over 1.6 million. 

Such a small population means that Guanacaste is far from saturated in several ways, but the numbers also translate into difficulties to find prospects for employment. Dellbridge arrived on site with plans to hire only 50 workers in a two-year period. Adrian Lachner described the province’s capabilities for IT compared to those of the capital as “lesser in terms of quantity, but on par or even better in terms of quality.” 

As Mario Chaves put it, “[human] resources [in Guanacaste] are good, but scarce.”

Slowly (But Surely) Growing 

Despite its current shortcomings, Guanacaste seems embarked in a path of slow but steady growth. 

It is the largest growing province in terms of population, with a rate of growth of more than 2% over the past decade. It also boasts the largest amount of real estate development in the country, with 1.2 million square meters of planned construction projects during the first half of the year. The capital province of San Jose registered 1.04 million square meters during the same period. 

Guanacaste also looks poised to benefit from several development projects coming from public-private initiatives. Costa Rican authorities announced last year a US$100 million investment to expand the Guanacaste Airport. Solarium, an industrial park located right in front of the airport, has attracted the attention of companies such as Dellbridge Solutions, Sykes, Ad Astra and Coca Cola.

Procomer, the government’s investment promotion agency (IPA), has made it clear that it wants to direct foreign investment and attention into provinces outside of the GAM.

A Mexican Echo

There’s something in Guanacaste which reminds us of Merida, one of Mexico’s most promising cities for IT outsourcing. 

Located in the Yucatan Peninsula, Merida is known mostly as a tourism spot, not unlike Liberia and other cities in Guanacaste. However, Merida has been experiencing an explosion in real estate development and population growth over the past decade. Foreign direct investment (FDI) for the state of Yucatan, where Merida is located, reached US$547 million in 2022, surpassing the volumes drawn throughout the four previous years combined. 

Several tech providers have operations or plan to land in the territory. Accenture recently set up offices in the state of Yucatan. KSquare Group’s main Mexican offices, as well as its software academy, are located in Merida. Globant announced plans for an innovation center in Merida. 

Guanacaste as a province seems to be traversing a similar path; that of a tourism hotspot with a lot of potential for development in the tech services sector. 

Guanacaste’s fortunes won’t change from one year to the next. If it does continue down a path of diversification and development, it will be a while before its name is recognized as a true tier-2 or tier-3 alternative to GAM sites. 

Nevertheless, the seed seems to have been planted already for what could be the emergence of a viable option for IT sourcing and investment in Costa Rica.