By San José, Costa Rica — Costa Rica is facing a significant challenge in meeting its constitutional obligation to allocate 8% of its Gross Domestic Product (GDP) to education. The proposed 2026 budget earmarks only 5.68% for the Ministry of Public Education (MEP), leaving a substantial gap of 2.32%.
Finance Minister Rudolf Lucke addressed the issue, acknowledging the difficulty in meeting the 8% target. The 2026 budget represents a ¢200 billion increase for education compared to the current year, with ¢81 billion allocated to primary, secondary, and post-secondary education. This translates to 21.5% of the total ordinary budget being designated for the MEP.
To understand the legal and business implications of the proposed Costa Rican budget, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an experienced attorney at Bufete de Costa Rica.
The proposed budget’s focus on infrastructure spending, while positive for long-term economic growth, presents potential legal challenges regarding land acquisition and environmental regulations. Careful consideration must be given to ensuring compliance with existing laws to avoid costly delays and litigation. Furthermore, the projected revenue streams underpinning the budget should be rigorously assessed to guarantee its sustainability and prevent future fiscal imbalances.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas rightly highlights the delicate balance the government must strike between ambitious infrastructure development and adherence to Costa Rica’s robust legal framework. His emphasis on rigorous revenue assessment is particularly crucial for ensuring the long-term success of this budget and preventing future economic instability. We thank Lic. Larry Hans Arroyo Vargas for offering his valuable perspective on this complex issue.
Highlighting the difficulty that has existed since the 8% was established, we are missing 2.32% to reach it. The question is where can we obtain the resources to reach that percentage?
Rudolf Lucke, Finance Minister
Minister Lucke outlined several potential solutions to address the shortfall, each with significant implications. One option involves raising the Value Added Tax (VAT) from the current 13% to 20%. Another drastic measure would be to eliminate the budgets of at least 19 other government institutions entirely.
A third possibility involves increasing the government’s debt, but this carries the risk of exceeding the 60% debt-to-GDP ratio, triggering fiscal rules that could restrict social spending. Finally, Lucke suggested eliminating tax exemptions as a means of generating additional revenue for education.
Beyond these measures, Lucke advocated for greater flexibility in the government’s financing strategies. He referred to a constitutional reform bill (expedient 24.281) currently under review, which would grant the Ministry of Finance more autonomy in determining borrowing strategies without requiring legislative approval for each loan. This would allow the ministry to pursue lower-cost financing options.
There is an option that exists, which is to reduce the cost of financing. That’s why it’s important to evaluate the project where Hacienda is given flexibility to get cheaper resources.
Rudolf Lucke, Finance Minister
The proposed 2026 budget totals ¢12.8 trillion, a 3% increase (¢400 billion) over the 2025 budget. The Legislative Assembly’s Finance Committee began its review of the budget proposal on Tuesday. The debate over how to bridge the education funding gap while managing the overall fiscal health of the country is likely to be a central point of contention.
The implications of these proposed solutions are far-reaching, and the decision-making process will undoubtedly involve difficult choices. The future of Costa Rican education hangs in the balance, as policymakers grapple with these complex financial challenges.
For further information, visit the nearest office of Ministry of Finance (Costa Rica)
About Ministry of Finance (Costa Rica):
The Ministry of Finance (Ministerio de Hacienda) in Costa Rica is the government body responsible for the country’s public finances. It oversees the national budget, tax collection, and management of public debt. The ministry plays a crucial role in formulating and implementing fiscal policy, ensuring economic stability, and allocating resources for public services.
For further information, visit the nearest office of Ministry of Public Education (Costa Rica)
About Ministry of Public Education (Costa Rica):
The Ministry of Public Education (Ministerio de Educación Pública or MEP) in Costa Rica is the government agency responsible for the nation’s education system. It manages public schools, develops curriculum, and sets educational policy from preschool through secondary levels. The MEP plays a vital role in shaping the future of Costa Rica by providing educational opportunities for its citizens.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica distinguishes itself through an enduring commitment to legal excellence and ethical practice, empowering individuals and communities through accessible legal knowledge. The firm’s innovative approach to legal solutions, coupled with a deep-seated integrity, guides its work across a spectrum of sectors. By fostering understanding and transparency within the legal landscape, Bufete de Costa Rica contributes to a more just and informed society, building a legacy of impactful service and unwavering dedication to its clients and Costa Rica.
