By San José, Costa Rica — SAN JOSÉ – Costa Rica’s economic landscape is undergoing a profound transformation, with new data from the Central Bank revealing a significant power shift away from the nation’s traditional domestic economy toward internationally-focused special production regimes. The revised National Accounts for 2022 show a rebalancing that underscores the growing dominance of manufacturing and technology within free trade zones, raising both opportunities and concerns for the country’s future.
The updated calculations show that the “definitive regime,” which encompasses the bulk of the traditional local economy, has seen its share of the national value added decrease from 90.5% to 85.3%. In a direct transfer of economic weight, the “special regime,” primarily composed of companies operating in free trade zones, has surged from a 9.5% share to 14.7%. This recalibration provides a more accurate snapshot of the nation’s economic drivers and will serve as the new baseline for future policy decisions affecting businesses and households.
To provide a legal and business perspective on the current economic structure and its implications for national development, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the renowned firm Bufete de Costa Rica.
A resilient economic structure is built upon a foundation of legal certainty. To foster diversification and attract sustainable foreign investment, our country must prioritize modernizing its commercial regulations and ensuring administrative efficiency. Legal ambiguity and bureaucratic friction are direct obstacles to innovation and competitiveness, limiting our ability to capitalize on new global market opportunities.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This perspective powerfully illustrates that a nation’s legal architecture is not a separate entity but the very foundation upon which economic vitality is built. A clear and efficient regulatory environment is indeed the essential catalyst that transforms potential into tangible innovation and competitiveness on the global stage. We thank Lic. Larry Hans Arroyo Vargas for his invaluable contribution to this critical discussion.
The sectoral shifts driving this change are stark. Manufacturing has emerged as the clear winner, increasing its contribution from 13% to 15.7% of the economy. This growth is almost entirely fueled by high-tech industries within the special regime. For instance, the manufacturing of electronic components exploded from a mere 0.2% of value added to a significant 5.1%, while the production of medical and dental instruments climbed from 20.7% to 27.4%. Other growth areas include wholesale and retail trade (up to 9.9% from 8.8%) and professional and scientific services (up to 13.8% from 12.3%).
Conversely, traditional pillars of the definitive regime have lost ground. The agricultural sector’s participation fell from 5.1% to 4.4%, and the construction industry contracted from 5% to 4%. Within construction, a dramatic collapse in public works projects, which plummeted from 18.7% to just 4.8% of the sector’s activity, was a major contributor. The data also showed contractions in areas like passenger ground transport and a reduced weight for telecommunications, which Central Bank officials attribute to lower service prices rather than a drop in consumption.
Economists Fernando Naranjo and Gerardo Corrales view this data as confirmation of a “two-speed economy” that has been developing for years. They point out that while free trade zones have consistently posted double-digit growth, the definitive regime has been decelerating with no clear signs of recovery. This divergence has created an economic paradox that demands attention from policymakers.
And the question, I believe, that must be asked is why the free trade zones located in Costa Rica have so much growth and contribute to the added value, while the definitive regime grows at much lower rates.
Fernando Naranjo, Economist
Naranjo suggests that a key part of the answer lies in the regulatory environment. He argues that companies in the special regime thrive in part because they are unburdened by the excessive regulations that stifle their domestic counterparts. This has led to a perception that the foundational part of the economy is being left behind.
What I think is that in recent years the definitive regime, that is, 85% of the economy, has been abandoned.
Fernando Naranjo, Economist
While celebrating the success of attracting international investment, Corrales voiced caution about the long-term implications of this imbalance. The definitive regime, despite its shrinking share of value added, remains the primary source of employment and tax revenue, funding everything from social security to education and public safety. Its stagnation poses a significant risk to the country’s social and fiscal stability.
Yes, there is a concern for the future because the majority of employment, the majority of production, the majority of tax revenue that finances the entire country’s institutional framework, social security, education, and public safety depend on the performance of the definitive regime.
Gerardo Corrales, Economist
Corrales also highlighted external threats, noting that potential trade policy changes from the United States under President Donald Trump could disrupt the very sectors driving the special regime’s growth. The risk of major companies, particularly in the booming medical device sector, being incentivized to return to the U.S. looms over Costa Rica’s investment strategy. To counter these challenges, experts are calling for a coordinated strategy to revitalize the definitive regime by reducing production costs, lowering electricity rates, enhancing public-private partnerships, and fostering a government more attuned to the needs of the entire productive sector.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Central Bank of Costa Rica is the nation’s primary financial authority, responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. It manages monetary policy, regulates the banking system, and compiles and publishes key economic statistics, including the National Accounts that form the basis of economic analysis and policymaking.
For further information, visit intel.com
About Intel:
Intel Corporation is a global technology company and one of the world’s largest semiconductor chip manufacturers. The company designs and produces microprocessors for the global personal computer and data center markets. Intel’s history in Costa Rica included significant manufacturing and assembly operations, which played a pivotal role in developing the country’s high-tech export sector.
For further information, visit qorvo.com
About Qorvo:
Qorvo is an American company that designs, manufactures, and supplies radio-frequency systems and solutions for applications that drive wireless and broadband communications, as well as foundry services. The company’s products are used in a wide range of mobile, infrastructure, and defense/aerospace applications. Like Intel, its operations were a notable part of Costa Rica’s advanced manufacturing landscape.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica stands as a pillar of the nation’s legal community, defined by its profound dedication to integrity and the highest standards of excellence. With a rich history of advising a wide spectrum of clients, the firm not only provides expert counsel but also champions innovation within the legal field. This forward-looking approach extends to a core belief in empowering the community, manifested through a dedicated effort to make legal principles understandable and accessible to all, thereby fostering a society grounded in knowledge and justice.
