Export flagships in branding Central American countries
The case of Costa Rica

By Francisco Conejo and Magdalena Florek

Country branding, defined as the development of a strong, favorable and unique international brand identity, is playing an increasingly significant role on the global economic stage.  Governments around the world are moving beyond traditional promotion, instead embracing the concept of country branding to overcome intense global and regional competition and spur economic development. Country branding is particularly important for small developing countries, such as those in Central America, in their struggle to increase exports, attract tourism and obtain foreign direct investment.  Given their limitations, these countries must find innovative and effective ways to create, improve and communicate their national brands.

Exports are often considered ideal vehicles to build country brands. The power of their potential impact on the image of their respective countries is uncontested: today more than ever before, they transmit national culture and economic prowess.  Take for example Sony, BMW, or McDonald’s, brands that have come to symbolize the countries where they originated.

Export Flagships

Export flagships are strategically selected exports a) that truly symbolize the country; b) that both locals and foreigners associate most with the country; and c) in which the country is internationally competitive.  Flagship products do not need to be a country’s largest export.  Their strength lies in their rich meaning and associations, not mere sales volume.  For example, Cuba is widely known for cigars even though sugar has historically been by far a greater export.

Country brand associations can be classified into two types: 1) hard associations are rational, objective, and performance related, referring to either tangible brand features or functional benefits.  2) in contrast, soft associations are subjective and often based on emotion, such as excitement or pleasure, and are often the result of geographical, cultural and historic circumstances. Globalization and worldwide competition tend to standardize the hard factors of countries as these are easily imitated and even improved upon. However, because of their circumstantial nature, soft factors are more distinctive and often impossible to copy.  It is therefore the soft association that’s at the core of solid country brands.  By shifting its brand from a functional to an emotional positioning, a country can not only broaden its audience from special interest to the general public, but persuade them to experience a personal identification with the country itself as a whole, not merely its core products.  It is this direct personal relevance that ultimately distinguishes great country brands.

Ideal Flagships

While export flagships can be just about anything, it’s better if they are consumer goods given their general appeal and visibility. However, among consumer goods, traditional food products are ideal candidates as they are important communicators of culture and meaning, rich in associations and symbolism, and experiential in nature. This allows for the creation of an emotional bond with consumers with the potential to strengthen the national brand.  In addition, not only can traditional food exports be successfully used as vehicles for regional economic growth, they can also help maintain indigenous culture and might even become a source of national pride.

Traditional food exports to developed countries take advantage of two phenomena: On the one hand, there is the nostalgic perception of traditional food as being more wholesome and less processed.  This is an opportunity for developing countries to capitalize on their more natural and old fashioned image.  On the other hand, consumers in developed countries increasingly seek out the ethnic and the exotic. Since they have long covered their basic needs, they are now often more concerned with finding products that satisfy complex intangible desires such as novelty, status or belonging.  An important requisite is that these traditional food products be authentic, not mere “fakelore” built on spin.  Genuine traditional food products are thus an excellent opportunity for developing countries as they have a natural advantage in terms of exotic origin, a compelling story, unique imagery, and so on.

However, the type of food destined to become an export flagship needs to be carefully selected. The category needs to be generally relevant for international consumers and have high functional, experiential and symbolic value. The product itself must thus be steeped in local cultural and historical tradition, enjoy local support and be internationally relevant and demanded. But it must also be based on the country’s capability, experience and specialization in the area, ideally already enjoying an international reputation for high quality.

The Export Flagship Model

The authors propose that small developing countries use the Export Flagship Model to develop their country brand.  In brief, the model follows these four steps:

1) The country selects an appropriate export flagship product (EFP), brands and imbues it with rich and attractive meaning, and places it on the international market.
2) Consumers’ successful, positive experience with the product (functional, experiential and symbolic) transfers positive associations upstream, through the category, back to the country.
3) The improved country image then transfers positive associations back to the EFP and other categories/products, creating mutually reinforcing feedback loops.
4) The EFP may be extended through associated products which will follow its pattern of reinforcement, thus increasing the overall effect.

Having briefly gone over the theoretical bases of the Export Flagship Model, we will now illustrate its application in the context of Costa Rica, its coffee and the country’s recently acquired hi-tech capabilities. While fairly specific to Costa Rica, the example does shed some light on issues that are equally applicable to other Central American countries and other potential flagship products. 

The Case of Costa Rica in Central America

Central America has come a long way in recent decades, having diversified its exports from primarily agricultural commodities such as sugar and bananas to non-traditional products, light industry and services.  These changes, taken together with the international trend toward country branding, may tempt Central American nations to base or reposition their country brands on recently acquired industrial or hi-tech capabilities in order to portray themselves as modern and progressive.  However, the authors believe that this would be a mistake and recommend that Central American countries employ export flagships to develop and enhance their respective national brands.

Christopher Columbus discovered Costa Rica in 1502 during his fourth and last voyage.  It received its name, which means “Rich Coast,” due to supposed mineral wealth.  Not meeting Spanish expectations and lacking significant indigenous labor, the land became a relatively isolated colony depending mostly on subsistence farming.  After an unexpected independence from Spain in 1821, Costa Rica bet on coffee to fuel its economy as its moderate climate, mountain terrain and rich volcanic soils were ideal for the crop. Coffee exports flourished, leading the country towards development and prosperity; today, Costa Rica owes its railroads, universities, and its architectural jewel, the National Theatre, all to coffee.

Since the 1950’s, Costa Rica has followed an economic diversification program.  Exploiting non-traditional exports, the country hoped to reduce its dependency on coffee and bananas, and consequently its international demand/price vulnerability. By the mid 1980’s, the significant increase in non-traditional exports had reduced Costa Rica’s coffee exports to 35% of the country’s total exports and by 2005 to only 3%. Costa Rica is currently one of the smallest coffee producers in the world, supplying about 3% of the world’s coffee. However, unlike its larger competitors, Costa Rica focuses entirely on quality, successfully targeting upscale markets around the world. Costa Rica’s stability and development over the last 50 years have led it to become the fourth most developed country in Latin America. This, coupled with its scenic beauty, has made Costa Rica Central America’s main destination, in 2006 attracting over 1.6 million tourists. It has also allowed it to successfully attract foreign direct investment in textiles, services, electronics, medical equipment and most notably microprocessors and computer components, with a large Intel plant as its top producer.  Today, Costa Rica’s top two industries, tourism and computer chips, generate nearly 36% of the country’s foreign revenue.
It might therefore be argued that positioning Costa Rica through coffee exports is a step backwards, reinforcing the agricultural and underdeveloped stereotype that small developing countries all over the world are so desperately trying to overcome, and that Costa Rica should instead employ its hi-tech exports to position itself as a developed, modern country.  While this is certainly a valid argument, the authors strongly recommend using a more traditional export product such as coffee to build its country brand.  Here we explore the reasons why:

First and foremost, we have the issue of perception and association.  When countries are evaluated in terms of products, their image fluctuates depending on the product category in question.  Coffee is an important part of Costa Rica’s culture, its people, and even its landscape, making this product an ideal soft positioning vehicle.  In fact, while the relative importance of coffee has declined in relation to its other export products, Costa Rica is recognized internationally for the high quality of its coffee.  Coffee also links in well with tourism, Costa Rica’s other main activity (e.g. through ‘coffee tours’), and is an important part of the national reality and culture.  Beyond its functional performance, coffee is a national symbol of which Costa Ricans are proud of and is often hailed as the pillar of the country’s national identity.

The flagship export must also have a good story behind it to appeal to consumers’ emotions and become personally relevant.  Costa Rican coffee has a rich history, directly associated to widespread land ownership, the country’s strong middle class and democracy.

In order to achieve consumer preference, there must first be a close product-country fit, which occurs when important product features match a country’s perceived strengths. Costa Rica clearly has a natural advantage when it comes to making coffee, given its soil, climate, and history.  From this perspective, Costa Rica should not fight the agricultural stereotype, but instead take advantage of it and actively use it for its country branding.

Microchips, on the other hand, might actually present a liability for Costa Rica if their place of origin were to become known in the international marketplace.  This has to do with stereotypes, overgeneralizations used as cognitive shortcuts.  In other words, in order to save time and effort, people are reluctant to change how they think and will instead selectively tune out or adapt conflicting new information to support pre-existing views. So even though the attempt could be made to change stereotypical perceptions, say through marketing and advertising, it is unlikely that people’s deeply entrenched beliefs about the “appropriate” origins of microchips would change easily.  Worse still, such an attempt would require substantial resources, time and effort, three elements that small developing countries, including those in Central America, lack the most. 

With coffee, Costa Rica has already completed the functional stage of creating an export flagship: the country is already well known for its coffee exports.  If Costa Rica were to base its country brand on the newer hi-tech exports, in order to present itself as a modern nation, it would need to repeat the functional stage to build a new reputation.  The mechanics of this would be quite complicated and the results highly questionable.

In addition, despite recent investments, the country still lacks importance, capability and prestige in the global hi-tech arena: it is currently perceived as a mere offshore manufacturer, not a developer or innovator like the United States, Germany or Japan.  It is highly unlikely that Costa Rica will ever play in the same league as these hi-tech giants, or obtain the status of serious contenders such as Taiwan or Korea as it lacks its own industry and relies almost entirely on foreign direct investment.  Without a clear hi-tech leadership status, Costa Rica’s technology positioning and subsequent image evolution would not be at all credible. In addition, and perhaps most importantly, positioning based on hi-tech manufacturing would be both unappealing and incongruent with Costa Rica’s internationally renowned image based on nature, biodiversity and environmental protection so important for tourism.

Relying on hi-tech exports for brand building poses another very real problem for Costa Rica.  In today’s global economy, competitive pressures can easily lead a company to relocate one of its manufacturing plants to another country.  It would not be inconceivable for Intel to simply leave for a better location one day.  This would have not only a significant impact on Costa Rica’s economy (computer chips alone account for about 17% of the country’s exports) but it might cause other companies to follow suit, given Intel’s powerful international brand muscle, thus significantly affecting the sector in Costa Rica as well as its national reputation. 
Therefore, from a strategic positioning perspective, hi-tech exports as a branding platform may be a risky proposition that might place the Costa Rica brand in a vulnerable position. 

Finally, and probably most importantly, a country’s brand needs to be based on its reality. While Costa Rica is relatively developed (at least for Central American standards) and does enjoy significant technology investments, it is undeniable that it lacks the basic infrastructure to present itself as a truly developed first world country, much less a hi-tech one. The reality of things, such as terrible streets, poverty, crime and regular electrical, water and telecommunication outages are just a few of the areas that will immediately invalidate any hi-tech positioning desired and actually end up reaffirming current stereotypes, if not making them worse.  So from the country branding perspective, we believe it is wiser for Central American countries to under promise and over deliver than to wishfully attempt to be what they are not.   
 
In short, flagship products must reinforce a country’s image and need to be carefully selected according to competitiveness, uniqueness and desired identity.  The selected product must also have a good story behind it to appeal to consumer’s emotions and become personally relevant.  During the past 150 years, Costa Rica has literally lived its brand, coffee being an important part of everyday life.  The same cannot be said of hi-tech exports, which, while important for the economy, in the end are just another foreign product manufactured in a Costa Rican maquila simply to reduce costs.

Not capitalizing on the country’s excellent coffee reputation would be wasting valuable brand equity built up over the past century.  So even though the use of the coffee stereotype might initially seem like a step backwards, it is actually a step forward as it’s an interesting, credible, solid and unifying concept with the potential to contribute to Costa Rica’s national brand.  In addition, this reputation can later be transferred and used to build up other important areas.

Applying Costa Rica’s Case to Central America

In sum, the authors suggest that by creating appropriate export flagship products, such as coffee in the case of Costa Rica, Central American countries can develop and enhance their country brands. The authors further suggest that if possible, export flagships be local food as these are symbolically charged, powerful conveyors of culture. Beyond the immediate commercial benefits, export flagships will transfer positive associations to the country and might serve as a basis for the long term development of a country’s brand identity and other exports.

But what does all this mean for branding Central American countries? Let us first address the macro level. Given the small size and power of individual Central American countries, there is no question that the region needs to continue integrating into an economic block and operate in a coordinated manner. Only then will it become globally more competitive, visible and improve its international standing. However, Central America must seek more than mere economic growth.  It must also have a clear long-term vision of what it wants to become as a region and of its future role within the international community. Only by devising adequate strategies and tactics, all the way down to the national/local level, will it be able to successfully attain this vision.

An important aspect of this strategic process is the establishment of a solid regional brand.  This introduces cohesion by addressing not only commercial but also social and cultural factors within a single unifying concept.  Central America needs to integrate beyond the economic/political block it is currently attempting to be and become a regional branding block, rich is associations and appeal, increasing its international competitiveness. The region as a whole needs to position and differentiate itself first from other regions in the world, and second, but equally important, from other Latin American contenders, such as Mexico and South America, in order to be seen internationally as a distinct and more favorable location, be it for tourism, foreign direct investment, or even the retention/attraction of talent.

Central America has unique and favorable characteristics that make the development of a solid regional brand quite feasible.  Its location, access and geography, rich heritage and biodiversity, as well as unique history, character and features (including a series of strong export flagships) can all be used to effectively distinguish the region from its global competitors.

Let us now take a look at the micro level.  Despite the need for Central American countries to cooperate and contribute toward the development of a regional umbrella brand, each country must also create its very own national brand to differentiate itself from its peers.  This might seem awkward, and perhaps even counterintuitive, but in the end countries in the isthmus are fiercely competing against each other, not to mention against all the other countries in the world.

Given Central America’s relatively equal distribution power, resources and capacity, the region is largely competing in terms of standardized hard associations.  It is thus involved in a zero-sum dynamic, in which the gain of one country is the loss of another.  More specifically, the overall business sectors that seem to have the greatest growth potential within the region (light manufacturing, technology components, and services) are shared by different countries, driving them to compete against each other.  For example, a foreign textile corporation investing in Nicaragua might mean a potential loss for Honduras, a call center opening in El Salvador a loss for Panama, or a tourist going to Guatemala a loss for Costa Rica.  As such, the importance of having clear, unique and strong country brands, based on powerful and distinct soft associations, becomes even more important.

And this is where export flagships come in.  There is no doubt that microchips, and for that matter textiles and call centres, have enhanced the region’s economy.  Efforts in these areas need to continue, but neither the individual countries nor the region as a whole should use these products for branding purposes. Not only are they all foreign products with little or no actual relation to the region (thus lacking soft power), but their simultaneous manufacture by multiple countries in Central America—worse yet, around the world—makes them rather common, which goes against the fundamental purpose of branding: preference through differentiation. In addition, international recognition as a low cost producer of standardized products damages, rather than enhances, the country brand, making a country or an entire region actually seem cheap, poor and unsophisticated.

Following the export flagship approach, Central American countries need to develop unique, authentic and representative quality products with which they can enhance their national branding efforts.  However, they also need to be conceptually integrated in order to achieve synergy and strengthen the regional brand.  This should not be that difficult as Central American countries have had great local brands for decades. Unfortunately, except for the occasional exports to peer or poorer countries, these local brands have seldom ventured into large first world markets.  Granted, taking a brand international involves tremendous effort and involves lots of risk.  But perhaps the main reason is that local business have traditionally lacked wider aspirations and been satisfied with remaining local.   Further, they have been content with traditional economic models. In this era of globalization, Central America no longer has this luxury.  There is no reason why Central American countries cannot create and succeed selling their own brands abroad.  For example, just next door, Mexico’s Corona beer, a definite export flagship, has become a worldwide phenomenon thanks to effective branding.

In today’s global economy, the development of international brands is not only good business but essential from a strategic perspective.  Central America as a region, as well as its individual countries, need to leave their maquila (subcontractor) mentality behind and develop a strategy which moves exports from unbranded commodities to quality branded products.  Within the export flagship context, branded products might be Central America’s best presentation card as countries capable of producing their own world class brands, not simply serving as cheap subcontractors, might be worth importing from, investing in or even visiting.  Nevertheless, this not only requires encouragement and support from local governments, but their active participation through a solid and well managed country brand strategy into which these export flagships fit. 

Postponing the development of regional/national brands is not an option. By then other regions/countries of the world will have developed theirs and left Central America further behind.  Globalization is ruthless competition.  There is no room for mañana nor for internal bickering.  

 

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