Artificial Intelligence in Costa Rica:

Challenges and opportunities for the financial sector and Fintech.

By Randall Barquero, Consortium Legal.

In October 2024, the Government of Costa Rica announced the National Artificial Intelligence Strategy (ENIA) 2024-2027, an initiative led by the Ministry of Science, Innovation, Technology and Telecommunications (MICITT) that seeks to promote the use, adoption and development of artificial intelligence (AI) in an ethical, safe and responsible manner. The ENIA was developed in collaboration with the public sector, civil society, the private sector, and academia, to maximize the benefits of AI for citizens and minimize any potential harm.

In addition, the drafting of the strategy was supported by various international organizations, including the European Union. Thus, Costa Rica becomes the first country in Central America and the Caribbean to publish such a strategy and one of the first in the region.

The ENIA defines specific actions to maximize the benefits of AI, proactively addressing the ethical, social, and technical challenges involved in its implementation. It is based on ethical principles that include human dignity, transparency, equity, and human oversight. These principles seek to ensure that AI development is people-centered and promotes well-being in all regions of the country, in line with the best global practices and international trends in AI.

I- Strategic axes of the ENIA

The ENIA is structured in 7 strategic axes:

1. 1. Ethical, safe, and responsible AI: Ensuring that AI respects human rights, is safe, transparent, and equitable, with a clear regulatory framework and a people-centered ethical approach. This refers to technical instruments such as regulatory sandboxes, technical standards, and best practices.
   2. Territorial articulation and economic development: Promote AI development in all Costa Rica regions to boost local economies and foster equitable development throughout the country. The intention is to generate regional innovation ecosystems, as well as AI clusters that allow the incubation of ventures and the development of SMEs in this area.
   3. Promotion of research, development, and innovation: Promote collaborations between the academic, private, and governmental sectors, generating knowledge and technological solutions that respond to the needs of the country. In this sense, we would seek to obtain differentiated funding and development of pilot projects in key sectors such as health, labor, and education.
   4. Intelligent government: Transform the provision of public services through AI solutions that improve efficiency, quality, and transparency, using technology to optimize processes and make data-driven decisions, as in the case of public procurement.
   5. Talent training and education: Implement reskilling and upskilling programs for the workforce to acquire new skills and adapt to the digital economy, ensuring that Costa Rican talent is prepared for the challenges and opportunities of AI. This would include specific educational programs for technological literacy and curricular modifications in public education programs to include AI.
   6. Digital infrastructure and enabling technologies: Develop a robust digital infrastructure, including 5G networks and other technologies to enable effective AI deployment and benefit all productive sectors. An AI Center of Excellence will also be established.
   7. International leadership: Position Costa Rica as a leader in the global governance of AI, actively participating in international forums and contributing to the definition of ethical and sustainable frameworks for the use of artificial intelligence. The country is already part of some international committees, forums, and organizations focused on AI.

II- Next steps

After the launching of ENIA, the following activities should be undertaken:

• • Deployment of 5G networks: Implement and expand 5G network infrastructure to support advanced AI applications.
  • Establishment of the National AI Center of Excellence: Establish a center dedicated to research, development, and training in artificial intelligence.
  • Development of a regulatory framework: Develop and enact specific regulations to ensure the ethical and safe use of AI, including data protection and cybersecurity. I refer to this point topic below.
  • Fostering public-private collaboration: Promote strategic alliances between the public and private sector to drive innovation and technological development.
  • Capacity building and training: Implement education and training programs to develop AI skills among professionals and the general population.
  • Monitoring and evaluation: Establish mechanisms to measure and evaluate the impact of the strategy, ensuring that the established objectives are met.

III- Measurement and Evaluation

The impact of the ENAI will be measured through various mechanisms to be established by the MICITT. These methods seek to ensure that the ENAI is not only effectively implemented, but also continuously adjusted to maximize its benefits and mitigate any risks. The main evaluation methods will be:

• • Annual reports: The MICITT will develop annual reports to evaluate the progress of the strategy. These reports will measure in-country impact, achievement of objectives, and efficient use of resources.
  • Performance indicators: Key performance indicators (KPIs) will be used to monitor specific aspects such as the adoption of AI in different sectors, job creation in technological areas, and improvement in operational efficiency.
  • Periodic evaluations: Periodic evaluations will be conducted to adjust the strategy as needed, ensuring that it remains aligned with national objectives and emerging needs.
  • Stakeholder feedback: Mechanisms will be sought to include mechanisms to gather feedback from key stakeholders, including the private sector, academia, and civil society, to ensure inclusive and effective implementation.
  • Monitoring of pilot projects: They will be closely monitored to assess their impact and scalability, allowing for adjustments before wider implementation.

IV- Challenges and opportunities in the financial sector and Fintech industry

The ENAI addresses several key issues for the financial sector and the technology sector, including innovations derived from Fintech activity. Among the aspects highlighted are the following:

1. Contributions and opportunities

• • Operational efficiency: AI can optimize internal processes, reduce operating costs, and improve accuracy in financial decision-making.
  • Personalization of services: Improve customer experience by personalizing financial products and services using advanced data analysis.
  • Risk management: Implementation of AI systems for fraud detection and financial risk management, increasing security and reliability.
  • Product and service innovation: AI drives the creation of new products and services, such as automated financial advice and algorithm-based investment platforms.
  • Access to new markets: Facilitates financial inclusion by offering services to segments of the population that traditionally have not had access to financial services.
  • Public-private collaboration: Promotes collaboration between the public and private sectors, as well as between the financial sector and the Fintech industry, to develop technological infrastructures and foster innovation.

2. Impacts

• • Digital transformation: The ENAI seeks to foster a comprehensive digital transformation in the financial and technology sector, improving the competitiveness and efficiency of companies.
  • Talent development: An increase in the demand for professionals trained in AI and related technologies is expected, which will boost education and training in these areas.

3. Risks

• • Cybersecurity: Increased cybersecurity risks due to increased reliance on digital systems and the need to protect large volumes of sensitive data.
  • Data protection: Challenges in the protection of personal data and privacy, especially in the handling of sensitive financial information among different economic actors.
  • Job displacement: Possible job displacement due to process automation, like the expected impact on other industries, requiring retraining and labor adaptation strategies.

V- Concluding remarks

The approval of Costa Rica’s National Artificial Intelligence Strategy (ENAI) represents a significant milestone on the road to responsible innovation and technological development, which seeks to position the country at the forefront of digital transformation. Undoubtedly, it is a very important challenge for countries, particularly smaller ones like Costa Rica, to keep pace with global technological progress. Therefore, establishing concrete plans, principles and strategies represents a significant step in that direction. What follows, the effective implementation of the ENAI, implies carrying out concrete, very ambitious and relevant actions in several aspects, including, most especially, the regulatory aspect.

Developing a regulatory framework that balances innovation with the protection of citizens’ rights is fundamental. This includes the creation of specialized AI supervisory bodies, or the adequate training and preparation of existing ones (e.g., financial regulators) to monitor and evaluate compliance with regulations to be enacted or reformed in the framework of ENAI implementation. Regulation must be flexible and adapt quickly to technological advances so as not to hinder innovation. At the same time, however, it must be ensured that the development and use of AI respects ethical principles and human rights, and that legal liability in cases of failure or damage caused by AI systems or “agents” can be clearly defined. In addition, it is necessary to ensure transparency in algorithms and automated decisions to avoid bias and discrimination, as transparency in the operation of AI systems will be increasingly relevant to maintain user confidence and comply with applicable legal provisions.

Another major regulatory challenge is to review and develop new AI-specific regulations to ensure the privacy and security of personal data, including the handling of sensitive financial information, ensuring that the use of AI complies with recognized international principles and practices. Also, AI presents unique challenges in terms of intellectual property, such as the creation of works and patents generated by machines or AI agents. Therefore, it will be necessary to review and adapt intellectual property regulations to address these challenges and ensure that the rights of creators and developers are protected. Finally, in terms of cybersecurity risks, it is crucial to establish robust measures to protect AI systems against cyberattacks and to create rapid response protocols for security incidents, including those involving AI technologies.

It is with great enthusiasm that we look forward to seeing the MICITT’s next actions for the implementation of the ENAI, and we will be attentive to its openness to foster public-private collaboration in regulatory aspects such as those described above.