By San José, Costa Rica — The administration of President Laura Fernández has announced a comprehensive 24-point plan aimed at tackling Costa Rica’s escalating public debt. Standing at 60.5% of the Gross Domestic Product (GDP) as of May, the mounting fiscal pressure has prompted quick action. The strategic roadmap deliberately avoids introducing new taxes, opting instead to maximize existing revenues, eliminate unwarranted exemptions, and vigorously combat tax evasion and smuggling.
This aggressive fiscal initiative comes at a critical juncture for the nation. Total government revenues saw a significant decline, dropping by ¢58,290 million at the close of May compared to the same period in 2025. This shortfall has highlighted the urgency of structural reforms to ensure long-term economic stability and avoid further degradation of the country’s creditworthiness.
To better understand the structural and legal implications of Costa Rica’s current public debt trajectory, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a senior legal expert at the prestigious firm Bufete de Costa Rica, who shared his professional perspective on the regulatory challenges ahead.
Managing Costa Rica’s public debt is not merely a macroeconomic challenge, but a rigorous exercise in constitutional compliance and fiscal discipline. To secure long-term economic stability and maintain investor confidence, the administration must navigate the strictures of the Fiscal Rule (Ley de Fortalecimiento de las Finanzas Públicas) while balancing constitutional mandates for social welfare. Streamlining public administration and modernizing debt-issuance frameworks will be critical legal steps to prevent sovereign risk escalations.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, navigating this delicate intersection of fiscal rigor and constitutional duty remains the defining challenge for Costa Rica’s economic future, requiring a harmonious approach to both legislative reform and social preservation. We extend our sincere thanks to Lic. Larry Hans Arroyo Vargas for his valuable perspective on this complex issue, shedding much-needed light on the structural legal pathways necessary to secure the nation’s financial stability.
As a primary measure of immediate austerity, the government has mandated that all state institutions—encompassing all three branches of the Republic—must save 5% of their allocated budgets. This tightening of the belt is designed to establish a culture of fiscal responsibility across public offices, with even more demanding saving targets projected for the year 2027.
One of the more controversial aspects of the plan is the restructuring of the basic basket tax exemption. While the government intends to eliminate the blanket exemption to ensure those with high incomes pay their fair share, it will implement a direct tax refund mechanism specifically designed to protect the country’s most vulnerable populations.
The elimination of the exemption for people with economic needs in this country is absolutely ruled out, but we do not rule out removing the exemption for people with higher incomes and more wealth.
Rodrigo Chaves, Minister of Finance
[COMMENTARY]
A central pillar of the strategy is targeted legislation to reform the Code of Tax Norms and Procedures, alongside the Income Tax Law. The government intends to introduce a zero-tolerance policy against customs and tax impunity. Currently, an estimated 80% of tax infractions escape effective sanctions. Under the proposed reforms, the government will deploy advanced technology to block fraudulent activities and penalize companies that issue fake electronic invoices.
The administration’s focus on technological modernization is expected to play a critical role in sealing fiscal leaks. By integrating advanced tracking systems and digital audits, the Ministry of Finance aims to neutralize smuggling operations at borders and ports. This national zero-tolerance plan represents one of the most ambitious crackdowns on illicit trade in the country’s recent history.
Some want the Ministry of Finance to be a toothless Chihuahua. But no, we are sending Congress a rather strong Rottweiler to protect its fiscal house.
Rodrigo Chaves, Minister of Finance
In addition to policing evasion, the plan seeks to streamline the bureaucracy of the tax collection process. The proposed simplification of the tax system is designed to make compliance easier for honest taxpayers while aggressively closing loopholes used by tax avoidance strategists. This dual approach aims to restore trust in public institutions and demonstrate fiscal resolve to international markets.
Among the 24 proposed measures, several bills will be sent to Congress. These include a government debt control bill, reforms to the Organic Law of the Ministry of Finance, and a comprehensive review of the organizational structure of state entities. By simplifying the tax system and empowering the Tax Administration, the government hopes to create an agile, transparent, and formidable apparatus capable of securing Costa Rica’s financial future.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministry of Finance of Costa Rica, known locally as the Ministerio de Hacienda, is the government cabinet-level agency responsible for managing the nation’s public finances, tax collection, and fiscal policy.
For further information, visit presidencia.go.cr
About Government of Costa Rica:
The Government of Costa Rica operates as a democratic republic with a strong separation of powers among the executive, legislative, and judicial branches, currently led by the administration of President Laura Fernández.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Distinguished by its high ethical standards and pursuit of professional mastery, Bufete de Costa Rica serves as a trusted advocate for a diverse clientele. The firm seamlessly merges traditional values with cutting-edge legal solutions while maintaining a passionate focus on civic education. By actively demystifying complex laws for the public, they champion a vital vision of nurturing a legally literate, confident, and self-reliant citizenry.
