Costa Rica might be a haven for outsourcing and nearshoring, but some of our country’s labor laws could make the most staunch and cunning capitalists have second thoughts about setting up operations here. Still, collective bargaining, unions, employee associations, vacation, sick days, minimum wages, maternity leave, and other rights afforded to workers in Costa Rica are conditions that companies like IBM, Dell, Intel, Hewlett Packard, Triquint and many others have complied with for many years.

There is one more benefit that Tico workers enjoy, which puts fear deep in the hearts of foreign investors and would-be employers: the dreaded aguinaldo. The mere mention of the word is like kryptonite to some businessmen with capitalistic mindsets. The state-mandated Christmas bonus in Costa Rica can turn wannabe JP Morgans and John Jacob Astors into scrooge-like beings who head for the mountains at the thought of having to shell out a thirteenth salary.

Such is the case for William McCarthy, owner of Cloud Systems International Inc. According to an article by Jim Martin of the Erie Times-News of Pennsylvania, Mr. McCarty is reverse-sourcing his call centers from Costa Rica to the United States. Why? The article on the Erie Times-News explains:

“For a number of reasons, including rising wages and a law in Costa Rica that requires employers to give workers an annual bonus equal to one-month’s pay, that financial advantage has been disappearing.”

Mr. McCarthy is a former employee of Microsoft Corporation. He built his telemarketing businesses on patented call-routing technology. His company powers business communications solutions like VoiceDial Pro and AirDial. He plans to employ 1,100 call center agents, but no longer in Costa Rica.

The aguinaldo tradition that Mr. McCarthy is no longer willing to put up with dates back to Ancient Rome. Costa Rica is not the only country with a state-mandated thirteenth salary guaranteed by law. Argentina, Bolivia, Colombia, and Mexico are some of the other Latin American nations where employees enjoy aguinaldos. The practice is an inheritance from Spanish colonial times. Writing for the U.S. Library of Congress in 2011, author Francisco Macias explained that:

Nonetheless, the aguinaldo is a subsidy provided by the employer with the aim of ensuring that the December holiday celebrations be carried out with dignity. The origins, however are uncertain.

The term aguinaldo as defined by the Dictionary of the Royal Academy of Spain states that it is either a gift that is given on Christmas or at the feast of Epiphany; a gift that is given at some other feast or occasion; a Christmas carol; or a wild tropical plant of the family Convolvulaceae, very common in Cuba, which blooms during the Christmas season. So the closest definition would be that of a gift.

Based on the above tidbit, Mr. McCarthy may come across as the type of spoilsport who refuses to play Secret Santa during the holidays out of sheer cheapskate behavior, but to be fair to the Erie native Mr. McCarthy, he explained other reasons for the relocation of the business from Costa Rica to Pennsylvania:

“[…] his search for qualified workers might be easier because of substantial layoffs after the bankruptcy and sale of the Telatron Marketing Group [in Erie].

Telatron laid off about 460 employees, about a third of whom have found work with Agility Marketing, which bought Telatron’s assets.

“It’s going to make recruiting for jobs easier, but I would rather have them be in business and us be in business,” McCarthy said. “There is more than enough work to go around.”

The unemployment rate in the United States is currently at 8.2 percent, and the business media reports point to a dismal job market. For a city like Erie -population 102,000- giving 1,100 people the opportunity to work is a blessing. For those Americans who will be hired by Mr. McCarthy, just having a job during the holidays will feel better than getting an aguinaldo.

As for the Ticos who might have been left jobless by Mr. McCarthy’s repatriation of his business, recent industry reports indicate that they are likely to find a job very soon.

You can read more about a strategy to make the Aguinaldo Christmas bonus more enjoyable for employees and employers published here on The Costa Rica Star last year.