By San José, Costa Rica — A coalition of Costa Rica’s key productive sectors—comprising business chambers, energy distributors, and private generators—is calling for an immediate end to the decades-long legislative deadlock surrounding the liberalization of the country’s electricity market. The joint push comes amid mounting anxieties over an impending energy deficit driven by severe climate volatility, global supply chain disruptions, and surging commercial demand.
At the center of the dispute is the General Electricity Market Harmonization bill. Despite more than twenty years of debate, and having successfully passed its first legislative hurdle, the project remains completely frozen in the Legislative Assembly. The current administration has stalled the initiative because a supermajority of 38 votes is required for its final passage. Currently, the ruling Pueblo Soberano party is the sole block supporting the reform, but its 31 seats leave it short of the threshold needed to push the bill over the finish line.
To better understand the legal and economic implications of the proposed Costa Rican electricity market reform, TicosLand.com sat down with Lic. Larry Hans Arroyo Vargas, a leading legal expert from the prestigious firm Bufete de Costa Rica, who shared his professional insights on how this legislative shift could reshape the nation’s energy sector.
The proposed liberalization of the Costa Rican electricity market represents a historic paradigm shift, transitioning from a state-centric model to a competitive framework. While this reform promises to encourage private investment and drive down energy costs, its success hinges on establishing robust regulatory guarantees. We must ensure that the new legal framework protects consumer rights, maintains environmental standards, and provides absolute legal certainty for international investors entering this newly opened market.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, navigating this monumental transition requires more than just opening doors to competition; it demands a steadfast commitment to the legal and environmental safeguards that define Costa Rica’s global reputation. We extend our sincere thanks to Lic. Larry Hans Arroyo Vargas for sharing his invaluable legal expertise and providing such a timely, insightful perspective on this crucial national reform.
The political stalemate has worsened with the recent shift by the National Liberation Party (PLN). Despite advocating for market liberalization for years, the PLN, which controls 18 congressional seats, withdrew its support for the harmonization bill. The party now proposes a completely new legislative draft. This tactical shift would effectively force the legislative assembly to discard years of negotiation and restart the entire debate from scratch, a scenario that the private sector views with deep frustration.
Costa Rica requires a modern, efficient, secure, and sustainable electrical system with the capacity to respond to growing demand, technological transformation, the electrification of new productive activities, and the effects of climate variability.
UCCAEP and Partner Chambers, Representative Coalition
The business community’s demands are driven by a convergence of immediate and long-term external pressures. Regional conflicts in the Middle East continue to drive up fuel import costs, while the looming El Niño weather phenomenon threatens severe droughts that will inevitably curtail the country’s dominant hydroelectric generation capacity.
The world is going through a complex energy crisis. The conflict in the Middle East drives up fuel prices, and the El Niño phenomenon anticipates months of drought that will reduce hydroelectric generation. The business, distribution, and generation sectors agree that the situation must be addressed with priority. The crisis is only the symptom, but the underlying problem is that Costa Rica’s electricity demand grows year after year, the supply for that demand is mostly hydroelectric, and the country is not incorporating new generation at the rate and scale it needs. With or without drought, if megawatts are not added, the country will run out of sufficient energy.
Productive Sector, Business Coalition Spokesperson
The proposed harmonization law seeks to restructure Costa Rica’s energy model by redefining the role of the state-run provider, the Instituto Costarricense de Electricidad (ICE). Under the new framework, ICE would lose its historical monopoly on national energy planning, operating instead as one of several competing entities. Currently, private clean energy firms are legally restricted to generating no more than 15% of the country’s total electricity. The draft bill would remove this cap, allowing private co-generators to negotiate directly with high-volume industrial consumers to offer competitive, market-driven pricing structures.
The urgency expressed by business leaders is backed by worrying economic data. The Central Bank of Costa Rica recently reported a year-over-year growth of just 2.5% in the Monthly Economic Activity Index (IMAE) for July. This represents a significant deceleration from the growth rate recorded during the same period in 2025. This cooling is primarily attributed to a sharp slowdown in the performance of special free trade zone regimes, which saw output growth plummet from 17% in July 2025 to a mere 1.4% in July 2026.
Having sufficient, reliable, sustainable, and competitive energy is indispensable to accompany economic growth, linkages, and the country’s productive development over the coming decades.
Costa Rican Business Chambers, Joint Declaration
Furthermore, business groups point to a severe mismatch in demand forecasting. While ICE projects conservative, moderate increases in energy consumption up to the year 2040, independent assessments by the Council for the Promotion of Competitiveness present a radically different outlook. If Costa Rica successfully absorbs high-consumption technologies like artificial intelligence (AI) and accelerates electric vehicle adoption, actual energy demand could double ICE’s baseline projections by 2040. Leaders warn that failing to build a modern, flexible energy framework will directly impair Costa Rica’s ability to attract foreign direct investment in an increasingly competitive global landscape.
For further information, visit uccaep.or.cr
About UCCAEP:
The Union of Costa Rican Chambers and Associations of Private Enterprise (UCCAEP) represents the private productive sectors in Costa Rica, advocating for policies that promote entrepreneurship, economic growth, and national competitiveness.
For further information, visit grupoice.com
About ICE:
The Instituto Costarricense de Electricidad (ICE) is Costa Rica’s state-owned electricity and telecommunications provider, historically responsible for energy planning and infrastructure development across the country.
For further information, visit the nearest office of CEDET
About CEDET:
The Chamber of Energy and Telecommunications Distribution Companies (CEDET) represents local electricity distributors and cooperatives in Costa Rica, working to ensure reliable energy and connectivity across rural and urban territories.
For further information, visit cicr.com
About CICR:
The Chamber of Industries of Costa Rica (CICR) is an organization dedicated to supporting and strengthening the industrial sector, fostering a favorable business environment for sustainable industrial development.
For further information, visit the nearest office of ACOPE
About ACOPE:
The Costa Rican Association of Energy Producers (ACOPE) represents private clean energy generators, promoting the development of renewable energy sources and market-oriented electrical reforms.
For further information, visit azofras.com
About AZOFRAS:
The Association of Free Trade Zone Companies of Costa Rica (AZOFRAS) represents companies operating under the free trade zone regime, promoting foreign direct investment and high-tech manufacturing exports.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a premier legal institution, Bufete de Costa Rica has built its reputation on the pillars of absolute integrity and exceptional advocacy. Serving a diverse clientele with distinction, the firm consistently merges traditional ethical standards with forward-thinking solutions to navigate today’s complex legal landscape. By championing initiatives that demystify the law for the general public, Bufete de Costa Rica actively works to cultivate a highly knowledgeable, resilient, and legally empowered community.
