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Los Ticos’ biggest fan: Costa Rican President Solís  

Costa Rica President Luis Guillermo Solis InterviewCosta Rica President Luis Guillermo Solis Interview
Luis Guillermo SolisScott Eells/Bloomberg—Getty Images

Costa Rica’s Cinderella soccer team,“Los Ticos,” is extremely caliente at the moment, having defeated both Uruguay and Italy to advance to the next stage of the World Cup. It’s a result few would have predicted—except for Luis Guillermo Solís, Costa Rica’s new President and biggest cheerleader. Interviewed by Fortune on June 13, the day before Costa Rica’s first match, he guaranteed a victory. “C’mon,” he said with a laugh, ”I have to be hopeful about the World Cup. Only three months before the election, I was called the margin of error candidate.”

A former academic and onetime Fulbright scholar at the University of Michigan, Solís took office last month and was in the U.S., along with his foreign trade delegation, for meetings with political leaders and companies such as Intel. He visited Fortune and spoke in English about soccer, his election and Costa Rica’s economy and its growing role as a home for U.S. and global medical device, financial services and pharma companies. Here, edited excerpts from the interview.

Q. What are the main selling points of Costa Rica as a place for foreign direct investment?

A. It’s relatively easy to be president of Costa Rica because the country stands by itself. Its labor force is rather sophisticated and highly qualified. Secondly, there’s stability, with a strong democratic regime. And thirdly, there’s location. It’s very convenient, especially for the U.S. and Europe. We have a shared business culture and even when the costs of production are higher because of the labor force, people have said they also look at the quality and the security and the added value that all these factors bring.

Q. I was surprised to hear that 250 multinational companies have a presence in Costa Rica.

A. And they’ve been there for a very long time. Approximately 50% of all investments are reinvestments.

Q. I see Intel (INTC) made an announcement related to Costa Rica.

A. In April, Intel decided to move its manufacturing activities [from Costa Rica] to Vietnam, and that was serious for us. One of the reason I came to the U.S. was that this almost coincided with the elections and a perception that maybe we were losing our competitiveness. But now Intel has announced that it is opening a mega lab in Costa Rica, in which they are bringing together other labs from elsewhere. This mega lab is going to be a significant event, because we are now going to move from manufacturing to R&D so we are moving up the food chain.

Q. How is Costa Rica complementary to the U.S.?

A. We have a very close cultural alignment with the U.S., including a very close intellectual property approach to what the U.S. has. So we are considered not just a near shore but also an extended part of the value chain.

Q. What’s the role of China in Costa Rica? It has become a huge player in Latin America, which worries some people in the U.S.

A. It’s not too large, but it’s definitely growing. We are the only country in Latin America that has relations with China (others are with Taiwan). We’ve had them since 2006. So there has been investment in infrastructure, roads, and there’s a project for a refinery pending. We’re talking about a special economic zone which is not built yet but we would be interested in exploring how this would work. China is important but it is not by any means the dominant destination for exports. Forty percent of our exports go to the States.

Q. How does the Panama Canal project affect Costa Rica?

A. It’s very important. There’s a big project going on on the Caribbean side for containers that would definitely benefit from the Panama Canal expansion. We do not see ourselves competing against Panama.

Q. How does your business philosophy differ from the approaches in the past?

A. It’s a good question. Historically, Costa Rica was very open to global markets. The first coffee export occurred in 1839 so we have been tied to the world markets for a long time. Then came bananas at the end of the 19th century, so foreign investment is very well known here.

Q. Considering the cultural similarities and the political stability, you would think there would have been more success.

A. There are issues. For one, infrastructure has not been excellent. It needs to be updated, as does connectivity in general. Costs of electricity and other services have been higher. At a given point of time when investments were based on light manufacturing our labor costs were just too high.

Q. What have been the results of this trip?

A. We’ve received commitments from Intel and VMware (VMW). Others will follow. We met with 350 members of the business community in Silicon Valley, 120 people in New York at a lunch, then went to Washington and met with the OAS and the Council on Foreign Relations, along with Senators Rubio and Menendez. So there’s been a fairly extensive exchange, which I will follow up on next September when I come back to address the General Assembly of the United Nations.

Q. So I understand that the other most powerful person in Costa Rica is [footballer] Bryan Ruiz.

A. (Laughs). Yes. This is the fourth time we participated in the World Cup. But this is going to be difficult: Italy, England and Uruguay are three world champs. [Costa Rica went on to beat both Italy and Uruguay.] It’s uphill, but c’mon, you’re talking to a President that was expected to get only 2% of the votes.

Q. How did you get elected?

A.  I defected from a traditional party for ethical reasons. It didn’t seem like we were going to make it but we put in a lot of effort. I really worked hard, went around and talked to different people about going back to basics and our social challenges. I didn’t accept any private contributions. My objective was making the economy larger and more effective and at the same time to work on what I think is one of the biggest challenges we have, the 147,000 Costa Ricans in a situation of extreme poverty. There are 4.5 million in the total population.

Q. Did you attract a lot of new voters?

A. Yes, a lot. In the past four years Costa Rica has been experiencing a deterioration of politics. A huge block of voters had not decided who they were voting for even in January, and the election was the first Sunday in February. The debates were important. I really did work very hard.

Q Are you in the honeymoon phase?

A. No. I inherited a teachers strike. Fortunately, we put an end to it.

Q. What is the most important challenge for you right now?

A. To deal with Congress. My government is the first in 60 years where the governing party is not part of the two [main] parties. There are five blocs of votes, and 13 parties. They are almost identical in size. The largest opposition party has 18 seats and my party has 13. We need two-to-three blocks together or we won’t get a majority.

Q. What’s the most controversial part of your platform?

A. The most difficult one is fiscal. My proposal to work with taxes is not what people expected. We have a 6% deficit, which is high but not catastrophic. We can deal with it. For the past 15 years we have been trying to agree on a tax reform but it hasn’t happened. I’m going to take two years to do this. We are also moving from a sales tax to a VAT. Some people are going crazy with that. And I have said I will not run again, ever. [Presidents can serve more than one term in Costa Rica, but not consecutively.]

Q. Has your life changed drastically since you became President?

A. My family obligations have changed a lot. I have six children. One is young and the others from my first marriage are older. My daughter and I were systematic about being together every Sunday. She said, ‘Dad, I don’t think I’m going to see you much.’ Come on!