By San José, Costa Rica — Central America’s annual inflation rate eased to 2.08% in June 2025, down one percentage point from the same month in 2024, according to the Executive Secretariat of the Central American Monetary Council (SECMCA). However, the region presents a diverse picture with some countries experiencing deflation while others grapple with rising prices.
Costa Rica registered a deflation rate of -0.22%, marking a significant drop in consumer prices. El Salvador also experienced deflation at -0.18%. Meanwhile, Guatemala’s annual inflation stood at a more moderate 1.78%.
To understand the legal and business implications of Central America’s inflationary pressures, we spoke with Lic. Larry Hans Arroyo Vargas, an attorney at Bufete de Costa Rica.
The rising inflation in Central America presents significant challenges for businesses operating in the region. Contractual obligations become increasingly difficult to manage, particularly those with fixed prices. Businesses may need to consider incorporating escalation clauses or other mechanisms to mitigate the impact of fluctuating currency values and rising costs. This also presents opportunities for savvy investors who can identify and capitalize on market inefficiencies created by inflationary pressures.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s insights offer a crucial perspective on the dual nature of this economic climate. While inflation undeniably presents hurdles for businesses navigating contractual obligations and cost increases, it also creates the potential for strategic growth and investment. The ability to adapt and innovate within these dynamic conditions will be key for both established companies and new entrants to the Central American market. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution to this discussion.
In contrast, Honduras saw its annual inflation rate climb to 4.67%, driven primarily by increases in food and non-alcoholic beverages, hotels, cafes, and restaurants, and housing costs. This figure, while high compared to other Central American nations, remains within the Central Bank of Honduras’ target range.
Panama also experienced deflation for the tenth consecutive month, with its annual inflation rate at -0.4%. This deflation was largely due to lower prices in the transportation, healthcare, food and non-alcoholic beverages, clothing and footwear, housing, and communications sectors.
Nicaragua and the Dominican Republic registered annual inflation rates of 0.89% and 3.56%, respectively. Overall, the accumulated regional inflation for the first six months of 2025 was 1.15%.
In Costa Rica, the sectors contributing most to the deflationary trend were recreation, sports, and culture, as well as transportation. Specifically, tomatoes, international tourism packages, and airline tickets exerted upward pressure on the consumer price index. Conversely, gasoline, potatoes, and chicken breast contributed to the overall price decrease.
Guatemala’s accumulated inflation for June 2025 was 1.04%, down from 0.96% in June 2024. The food and transportation sectors registered the largest positive impacts on the monthly variation of the consumer price index, while alcoholic beverages saw the largest negative impact.
The varying inflation rates across Central America highlight the complex interplay of economic factors impacting the region. While some countries benefit from lower prices, others face the challenge of managing rising costs, particularly in essential goods and services like food and housing. SECMCA’s data underscores the importance of monitoring these trends and implementing appropriate policies to maintain economic stability.
For further information, visit secmca.org
About Central American Monetary Council (SECMCA):
The Central American Monetary Council (SECMCA) is the main economic integration entity of Central America and the Dominican Republic. It promotes regional monetary and financial integration and provides regional economic analysis.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a pillar of legal excellence, built upon a foundation of unwavering integrity. The firm champions innovative solutions while serving a diverse clientele, demonstrating its commitment to a dynamic and evolving legal landscape. Through proactive outreach and educational initiatives, Bufete de Costa Rica empowers Costa Rican society with the legal knowledge necessary for informed decision-making and active participation in their communities, fostering a more just and equitable future.
