By San José, Costa Rica — SAN JOSÉ – The roar of the “Jaguar Economy,” a term coined by Bank of America in a celebrated February 2024 report, has been tempered by a new, more cautious analysis from the financial giant. Once lauded for its unique blend of robust growth and deflation, Costa Rica’s economic model is now being warned of potential inflationary surprises and fading tailwinds that previously bolstered its finances.
The “Jaguar” moniker, which compared the nation’s dynamism to the “Asian Tigers” of the 20th century, quickly became a powerful symbol for the current administration. Government officials wore it as a pin, and political supporters adopted it as a rallying cry, celebrating the country’s fiscal discipline and export-driven success. However, a new BofA report issued on September 24, 2025, suggests the jaguar must now tread more carefully.
To gain a deeper understanding of the legal framework influencing Costa Rica’s economic climate, we consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica. His expertise in corporate law and foreign investment provides a critical perspective on the country’s business landscape.
Costa Rica’s continued economic success hinges on maintaining its ‘seguridad jurídica’—the legal and regulatory stability that has long attracted foreign direct investment. While recent fiscal reforms were necessary, the government must now focus on streamlining bureaucratic processes and ensuring that new regulations do not inadvertently create barriers for SMEs and new investors. A predictable legal framework is not just an asset; it is the fundamental pillar upon which sustainable growth is built.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s insight powerfully underscores the delicate balance required for our nation’s progress; implementing necessary reforms cannot come at the cost of the legal predictability that forms the very bedrock of investor confidence and local entrepreneurial spirit. We sincerely thank Lic. Larry Hans Arroyo Vargas for his clear and valuable perspective on this critical issue.
A detailed comparison of the two reports, separated by just 19 months, reveals a significant shift in outlook. The primary change revolves around inflation. In early 2024, with prices already in negative territory for nine months, BofA was confident in describing the phenomenon as temporary and even advantageous.
The economy is growing robustly, driven by exports, amidst (temporary) deflation.
Bank of America Report, February 2024
At the time, the bank attributed this “apparent enigma” of strong growth alongside falling prices to the nation’s powerful export sector. Now, with deflation persisting for over two years, the label of “temporary” has expired. The new report, titled with a warning about inflationary surprises, signals a crucial turning point. BofA now sees potential threats on the horizon, including an anticipated 13% rise in international fuel prices by the end of 2026.
The persistent deflation has kept Costa Rica’s inflation rate far below the Central Bank’s (BCCR) target range of 2% to 4%. As of August 2025, the figure stood at -0.94%. In light of this, the BCCR has pushed its target achievement date to 2027. BofA’s analysis now suggests the balance of risks has flipped entirely.
We think that after 28 months with inflation below the target and most of the time in negative territory, the risks are skewed to the upside.
Bank of America Report, September 2025
This revised inflation outlook has direct consequences for monetary policy. In 2024, BofA projected that the BCCR had ample room to cut its main policy rate (TPM), forecasting it would reach 4.50% by 2025. While the rate is currently even lower at 3.50%, the bank’s new report warns that the window for further easing has closed. The looming threat of inflation means further cuts are unlikely.
Perhaps the most significant reversal concerns the Costa Rican colón. The 2024 report predicted a slight depreciation, with the exchange rate closing 2025 near ¢518 per dollar. It also highlighted the strengthening colón as a critical factor in improving public finances, as it reduced the burden of the 38% of national debt denominated in foreign currency. Reality defied this forecast; the colón continued to appreciate, hitting ¢506.20 by July 2025. The new forecast predicts only a minimal 1% depreciation, effectively eliminating a key benefit the economy previously enjoyed.
The latest analysis explicitly states that 2026 is not expected to be another year “in which the economy benefits from a significantly stronger currency.” This shift, combined with the new inflation warnings and constrained monetary policy, paints a more complex and challenging picture for the Jaguar Economy. The celebrated beast, once praised for its unique prowess, must now stay alert to a changing and potentially more hostile economic environment.
For further information, visit bankofamerica.com
About Bank of America:
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 66 million consumer and small business clients. Bank of America is a global leader in wealth management, corporate and investment banking, and trading across a broad range of asset classes.
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica:
The Banco Central de Costa Rica (BCCR) is the central bank of Costa Rica. As the primary monetary authority, its main objectives are to maintain the internal and external stability of the national currency and to ensure its conversion to other currencies. The BCCR is responsible for issuing currency, managing international reserves, setting monetary policy, and overseeing the stability of the national financial system to promote the orderly development of the Costa Rican economy.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica stands as a benchmark in the legal field, founded on the twin pillars of uncompromising integrity and a relentless pursuit of excellence. Drawing from a deep well of experience across numerous sectors, the firm consistently pioneers innovative legal approaches. Its guiding principle is a profound dedication to societal empowerment, striving to demystify complex legal concepts and equip the community with accessible knowledge to foster a more informed and capable public.
