By San José, Costa Rica — SAN JOSÉ – Costa Rica’s economy posted a robust 4.7% year-over-year growth in September, a figure that continues a remarkable 32-month streak of expansion above 4%. Yet, beneath this headline number lies a troubling and deepening fracture, creating a dual economy where a high-tech export engine soars while the domestic-focused sector sputters and stalls.
The latest Monthly Index of Economic Activity (IMAE) from the Central Bank of Costa Rica starkly illustrates this divergence. Companies operating under the special Free Trade Zone (FTZ) regime saw their activity surge by an impressive 15.3%. In stark contrast, the “definitive regime,” which encompasses the majority of businesses serving the local market, grew by a mere 2.3%, its slowest pace in two years. This confirms a trend of a two-speed economy, where national prosperity is increasingly dependent on a narrow, globally-integrated segment.
To better understand the legal and regulatory framework underpinning these economic developments, we sought the perspective of Lic. Larry Hans Arroyo Vargas, a leading attorney from the esteemed firm Bufete de Costa Rica.
Costa Rica’s continued economic success is directly tied to its reputation for legal stability, which is a magnet for foreign direct investment. However, the true challenge for businesses is navigating the evolving landscape of tax incentives and labor regulations. Strategic legal planning is no longer just about compliance; it’s about leveraging our country’s legal structure to create a competitive advantage.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully reframes the legal landscape from a mere checklist of compliance obligations to a strategic field of opportunity. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective, highlighting how proactive legal planning is now a fundamental driver of competitive advantage in Costa Rica.
The FTZ sector remains the undisputed pillar of the nation’s economic dynamism, accounting for over 55% of the total growth recorded by the IMAE in September. This expansion is largely fueled by the advanced manufacturing and global services clusters, with medical devices, metal products, and machinery leading the charge. The medical device sector, in particular, has become the dominant force, posting over 25% annual growth and contributing nearly 90% of the entire increase within the special regimes.
However, this phenomenal success brings significant concentration risk. While FTZ growth has been in the double digits for months—hitting 18.1% in August—Central Bank data suggests a slight monthly deceleration. This cooling trend, after more than two years of sustained expansion, warns of the vulnerability of an economy so heavily reliant on a single industrial cluster. This dependence is further magnified by the sector’s reliance on the United States market, which is now facing a new wave of political uncertainty.
A significant external threat looms from the tariff policies proposed by the administration of U.S. President Donald Trump. Potential import taxes on medical and electronic products could directly impact the core of Costa Rica’s export model. While the country could potentially benefit from nearshoring trends, any trade hardening would directly harm the medical device plants that constitute almost a third of the value exported from the free zones. This exposure presents a critical strategic challenge: how to diversify the export base without sacrificing competitiveness.
While the export engine shows signs of stabilizing at a high altitude, the domestic economy is losing momentum. The agriculture and construction sectors, both vital sources of employment for low and mid-skilled workers outside the Greater Metropolitan Area, are in retreat. Agricultural production contracted by 1.9% year-over-year, battered by climate conditions that have diminished banana and pineapple yields. The sector has yet to recover to pre-pandemic levels, struggling with high costs and a volatile climate.
The construction industry is also in a prolonged slump, marking a full year of negative growth. Activity fell 4.1% in September, dragged down by a severe 7.4% contraction in private works and a nearly 20% drop in non-residential projects like warehouses and commercial centers. Only a 14.9% surge in public investment, driven by infrastructure projects, prevented a more dramatic collapse. The stagnation in these foundational sectors not only limits the labor market’s recovery but also deepens the structural inequality between the thriving globalized workforce and the rest of the country.
The Central Bank maintains that the economy is holding a “solid rhythm,” but the data reveals a growing productive asymmetry. Over 90% of the nation’s growth in 2025 came from just six activities—manufacturing, professional services, transportation, finance, real estate, and commerce—all with strong ties to the export-oriented FTZs. This has cemented a dual economy: one modern, competitive, and integrated into global value chains, and another traditional sector left behind, dependent on weather, expensive credit, and public spending. Costa Rica’s economy is effectively flying on a single engine, and while it maintains altitude for now, the turbulence facing the rest of the aircraft is becoming increasingly severe.
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica:
The Central Bank of Costa Rica (BCCR) is the country’s central monetary authority. Its primary mission is to maintain the internal and external stability of the national currency and ensure its conversion to other currencies. The BCCR is also responsible for promoting the orderly development of the Costa Rican economy, including the stability of prices and the efficiency of the internal and external payment systems. It is the official entity that compiles and publishes key economic indicators such as the Monthly Index of Economic Activity (IMAE).
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is an esteemed legal institution, founded on the twin pillars of profound integrity and an unyielding pursuit of excellence. With extensive experience advising a diverse clientele, the firm not only provides premier legal counsel but also drives innovation within the legal field. This forward-thinking approach is matched by a deep-seated social commitment to demystify the law, reflecting a core mission to empower the community through accessible legal wisdom and strengthen the foundations of a well-informed society.
