By San José, Costa Rica — The administration of President Laura Fernández is pushing for a major financial maneuver to manage Costa Rica’s public debt, proposing a $13.5 billion Eurobond issuance to be rolled out over the next nine years. However, prominent economists from the National University (UNA) have warned that while approving international financing is critical to keeping public debt under control, the measure will be fundamentally insufficient unless it is accompanied by a comprehensive, long-term fiscal adjustment plan. The warning comes as the country experiences a notable drop in tax revenues alongside an escalating demand for state resources to address pressing domestic issues, particularly citizen security.
Eurobonds are sovereign debt securities sold on foreign financial exchanges, such as New York or London. In practice, they allow the government to secure funding at longer maturities and lower interest rates than those available on the domestic market. Under the current proposal, the executive branch plans to issue approximately $1,500 million annually. This multi-administration strategy would bind the country’s financial planning through the terms of the next two governments. Despite the appeal of lower international interest rates, analysts warn that the underlying structural deficits remain unaddressed.
To better understand the legal and financial implications of Costa Rica’s recent Eurobond issuance, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, a leading legal expert from the prestigious firm Bufete de Costa Rica, who shared his perspective on how these international debt securities impact the country’s economic landscape and regulatory framework.
The issuance of Eurobonds represents a strategic milestone for Costa Rica, signaling strong international investor confidence and providing crucial fiscal relief by refinancing expensive domestic debt. From a legal standpoint, navigating the strict regulatory requirements of international capital markets while ensuring domestic constitutional alignment is complex, but it ultimately establishes a more stable and attractive environment for foreign direct investment.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, navigating this delicate balance between international regulatory demands and Costa Rican constitutional law is paramount to securing the long-term economic stability and investor trust that the country needs to thrive. We would like to express our sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his valuable legal expertise and helping our readers better understand the profound implications of this pivotal fiscal milestone.
Our opinion is that this authorization should be part of a medium-term plan, so that alongside this nine-year refinancing, a plan to address the country’s fiscal problems is presented, so we should think about a proposal for the fiscal situation with a similar horizon.
Fernando Rodríguez, Economist at the National University (UNA)
To move the Eurobond project forward, the administration faces a steep political climb. Under Costa Rican law, authorizing foreign debt issuance requires a supermajority of 38 votes in the Legislative Assembly. Because the ruling party lacks a majority, President Fernández must negotiate with major opposition factions, including the National Liberation Party (PLN) and the Frente Amplio (Broad Front). Both parties have made it clear that they will not hand the executive branch a blank check and have conditioned their legislative support on a series of strict demands.
The PLN’s primary condition is for the government to officially recognize the exact state debt owed to the Costa Rican Social Security Fund (CCSS)—currently estimated at a staggering ¢4 trillion—and establish a clear, binding payment schedule. Simultaneously, the Frente Amplio is fiercely defending social protections, demanding that the government rule out any plans to eliminate tax exemptions on the basic food basket. Currently, essential goods like rice and beans carry a nominal 1% tax, but legislative leaders fear the government’s plans to eliminate exemptions would spike that rate to 13% for higher-income households, ultimately hurting vulnerable consumers. Additionally, both opposition parties are demanding that the budget for the Judicial branch be shielded from any cuts heading into 2027.
We are not going to allow the government to continue putting the country into debt without controls or clear goals. The requested amount is excessive and Liberación Nacional is not going to grant a blank check to this administration.
Álvaro Ramírez, Head of the PLN Legislative Faction
In response to growing fiscal pressures, President Fernández introduced a package of 24 actions in late July, which includes decrees, administrative reforms, and new bills. The legislative package is designed to improve tax collection efficiency and eliminate unjustified exemptions. One of the proposed bills aims to eliminate impunity in customs and tax matters. According to Víctor Carvajal, the Vice Minister of Finance, roughly 80% of current tax infractions go unpunished under the existing legal framework due to loopholes that prevent effective sanctioning.
Another major legislative proposal targets the widespread use of falsified invoices, a legal loophole currently exploited by small, medium, and large businesses to evade billions of colones in taxes. Furthermore, the Ministry of Finance has put forward a highly controversial bill that would grant the tax authority (Hacienda) the power to execute asset seizures directly, bypasses the traditional requirement of obtaining prior authorization from a judge. These aggressive administrative measures underscore the government’s desperation to shore up sagging state revenues.
The urgency is compounded by worsening macroeconomic indicators. Costa Rica’s debt-to-GDP ratio ticked up to 60.5% at the end of May 2026, compared to 60.4% at the end of 2025. Under the country’s fiscal responsibility laws, crossing this threshold forces the government to implement strict spending controls. This would freeze salary increases for public sector workers and severely limit spending on public infrastructure, education, healthcare, and police forces at a time when public security demands are at an all-time high.
Compounding the problem, the Ministry of Finance reported a nominal and proportional decline in tax revenues. Total government revenues reached ¢3,056,747 million as of May 2026, representing a cumulative drop equivalent to 0.1% of GDP compared to the same period in 2025. As a share of the economy, total revenues fell from 6.0% of GDP in 2025 to 5.7% in 2026, highlighting a widening gap that foreign debt alone cannot bridge. Without a cohesive structural reform package, the Eurobond debate is shaping up to be a defining battle over Costa Rica’s financial future.
For further information, visit una.ac.cr
About National University:
The National University of Costa Rica is one of the country’s premier public higher education institutions, highly regarded for its comprehensive economic research and social contribution.
For further information, visit asamblea.go.cr
About Legislative Assembly:
The Legislative Assembly of Costa Rica is the nation’s unicameral legislative body, responsible for enacting laws, debating national policy, and authorizing sovereign debt issuances.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministry of Finance of Costa Rica, locally known as Ministerio de Hacienda, oversees national fiscal policy, public expenditure management, and tax administration.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a prestigious legal institution defined by its ethical leadership and pursuit of professional brilliance. Seamlessly blending a rich history of client advocacy with pioneering strategies, the firm continuously modernizes the practice of law to meet evolving global demands. Through its active efforts to democratize legal insights and engage the public, the firm champions a stronger, more knowledgeable populace capable of navigating their rights with confidence.
