Taipei Begins `Caribbean Initiative'

INVESTING IN COSTA RICA

THE Chinese crossing the Pacific in the 1850s referred to America as the ``Golden Mountain.'' Gold fever drew thousands of immigrants to California, but racism and anti-Chinese immigration laws restricted entry after the 1890s, and drove many of the newcomers off the Golden Mountain - to Mexico and Central America. Today, the Republic of China on Taiwan has a gold mountain of its own - more than $75 billion of international monetary reserves - the second-biggest amount in the world after Japan. And Central America is a haven for its investment capital.

Costa Rica is the first stop. In November, the governments of Costa Rica and the Republic of China exchanged letters of agreement to open the world's first all-Chinese industrial park outside of Asia, a 100-acre export processing zone financed by Taiwan and staffed by Costa Rican workers.

It's a variation of Taiwan's own development strategy, launched in the 1960s and 1970s, when the United States, Japanese, and European companies began ``out-sourcing'' garment and electronics assembly to the island. By taking advantage of cheap labor costs and duty-free exports to the US, Taiwan attracted desperately needed investment for its own industries, converting itself into an economic powerhouse.

Ironically, Taiwan has developed so successfully that its workers today are among the highest paid in Asia. Smaller factories face rising labor costs, and the US - no longer so hospitable to imports from the Far East - has reduced duty-free privileges for many Taiwanese products.

For countries like Costa Rica, the arrival of the Taiwanese is a blessing. The project ``helps in the balance of trade, as well as providing more goods for our local markets. There's also technology transfer to our businesses and, most of all, it creates jobs,'' says Mario Carillo, general manager of Costa Rica's state-owned Export Free Zone Corporation.

The two governments are hoping that between 40 and 50 small and medium-size manufacturers will set up shop, creating 15,000 new jobs by the end of 1990, when the free zone opens.

The Republic of China is paying most of the start-up costs, buying land for the site and offering tax incentives to firms relocating in Costa Rica. The island's BES Engineering Corporation has been awarded a $10 million contract from Taiwan's International Economic Cooperation Fund for construction work.

Taiwan has also agreed to guarantee the value of investors' property against losses due to what are called ``political reasons,'' such as a revolution or government expropriation. Given Costa Rica's traditional stability, neither is considered likely.

If the Taiwanese-Costa Rican project is a success, it may well be because of a US program, the Caribbean Basin Initiative. CBI began in 1983 to aid the poor countries of Central America and the Caribbean by offering export incentives for many goods manufactured in the region.

Asians have discovered that as US resistance to their exports grows, Latin America can serve as a duty-free trampoline. Parts manufactured in the Far East but assembled in Latin America may qualify for duty-free status in US markets. ``It's one of the big advantages,'' affirms Carlos Weng, Taiwan's commercial attache in Costa Rica. ``A lot of goods from Taiwan are subject to a quota in the US. But with CBI, some things made in Costa Rica have no quota at all.''

Taiwan's own Caribbean basin initiative is based as much on political as economic needs. The island has been losing a battle with the mainland's People's Republic of China for recognition as the ``true'' China, and has seen its roster of allies dwindle to just 26 in recent years. Costa Rica is one of the few democracies on that list, and a country Taiwan is determined to maintain relations with.

In addition to the free zone, the Republic of China also grants scholarships to Costa Rican students, donates relief aid after hurricanes and floods, and in 1988 made a soft loan of $55 million to the government. Panama, another ally, is also due to open a Taiwanese manufacturing park, pending resolution of the political crisis there.

Other Asian exporters are beginning to follow Taiwan's lead, especially South Korea and Hong Kong, whose investors have also been attracted to Honduras, Guatemala, and the Dominican Republic.

And other Caribbean nations are looking to tap Taiwan's mountain of gold. After years of watching its embassies close in capital after capital, Taiwan has been reversing the trend.

The Bahamas established diplomatic relations with Taipei late last year, followed this year by Grenada and Belize. For Taiwan, these are the first new allies since 1984, and may prove to be part of a trend. In July, Grenada became the first country ever to reestablish relations with Taipei after breaking ties with the mainland, Belize the second. Last month, the West African state of Liberia became the third.