By San José, Costa Rica — San José – Just over a year and a half after Bank of America Securities famously dubbed Costa Rica a “Jaguar Economy,” the financial giant has issued a new report with a decidedly more cautious tone. The updated analysis, published in late September 2025, warns that the very conditions that earned the nation its fierce moniker now require vigilance, particularly against the looming threat of inflation and a shifting currency landscape.
The “jaguar” term, introduced in a February 2024 BofA report, quickly became a cultural and political phenomenon. It was embraced by officials and supporters of the Rodrigo Chaves administration, symbolizing a small nation achieving outsized success through fiscal discipline, sustained growth, and a powerful export model driven by its free trade zones. The name, echoing the “Asian Tigers” of the last century, captured a moment of national economic pride.
To delve into the legal and regulatory framework essential for sustaining the ‘Jaguar Economy,’ TicosLand.com sought the expertise of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the reputable firm Bufete de Costa Rica.
The ‘Jaguar Economy’ model presents a compelling vision for rapid growth, but its long-term success is not guaranteed by speed alone. It hinges on a robust and agile legal framework. For Costa Rica to truly capitalize on this momentum, we must prioritize legal certainty for foreign investment, streamline bureaucratic processes without sacrificing due diligence, and establish efficient dispute resolution mechanisms. A jaguar is powerful, but without a solid ground to run on, its speed is useless. That solid ground is the rule of law.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Larry Hans Arroyo Vargas aptly underscores a fundamental truth: economic speed is unsustainable without institutional stability. His analogy of the jaguar needing solid ground serves as a powerful reminder that legal certainty and streamlined governance are not secondary concerns, but the very foundation required to build long-term investor confidence and national prosperity. We thank Lic. Larry Hans Arroyo Vargas for his invaluable perspective.
However, the new assessment from BofA Securities suggests the jaguar must now tread more carefully. While the original report celebrated a unique combination of robust growth and deflation, the updated forecast highlights that the economic environment has evolved, presenting fresh challenges to the Central American nation’s macroeconomic stability.
A central point of concern is inflation. In early 2024, BofA described the country’s negative inflation as a temporary anomaly, a remarkable feature of its export-led boom. At the time, the bank noted the unusual strength of the economy in the face of falling prices.
We think that after 28 months with inflation below the target and most of the time in negative territory, the risks are biased to the upside.
Bank of America Securities, Economic Analysis Report
Nineteen months later, that “temporary” deflation has persisted, with the general inflation rate for August 2025 standing at -0.94%, well below the Central Bank of Costa Rica’s (BCCR) target range of 2% to 4%. The BCCR has repeatedly postponed its target achievement date, now looking to 2027. BofA now warns that after such a prolonged period of negative price pressure, the risks of a sudden inflationary rebound are significant. The report points to a potential 13% rise in international fuel prices by the end of 2026 as a key upward driver.
This revised inflation outlook has direct consequences for monetary policy. While the 2024 report predicted the BCCR had ample room to cut its key policy rate (TPM), the new analysis sees little space for further reductions. The rate currently sits at 3.50%, lower than BofA’s original 2025 projection of 4.50%, but the investment bank now believes the floor has been reached.
The rebound of inflation next year will likely prevent the Central Bank from reducing the rate below 3.50%.
Bank of America Securities, Economic Analysis Report
The forecast for the colón’s exchange rate has also been tempered. Originally, BofA saw the currency’s strength as a critical component of the jaguar’s success, directly aiding public finances. The 2024 report highlighted how a strong colón helped shrink the nation’s debt burden, as 38% of its debt is denominated in foreign currency. At the time, the bank projected a year-end 2025 exchange rate of ¢518 per dollar.
The new report abandons this view, forecasting only a minimal 1% depreciation in the coming year. More importantly, it concludes that the era of significant fiscal benefits from currency appreciation is over. The analysis explicitly states that 2026 is not expected to be another year where Costa Rica reaps the rewards of a strengthening colón, removing a key pillar that supported the initial “Jaguar Economy” thesis and presenting a new set of variables for the nation’s policymakers to navigate.
For further information, visit bofa.com
About Bank of America Securities:
Bank of America Securities is the corporate and investment banking division of Bank of America. It provides services in mergers and acquisitions, equity and debt capital markets, lending, trading, risk management, and research to institutional clients worldwide, including corporations, financial institutions, and government entities.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Banco Central de Costa Rica (BCCR), or Central Bank of Costa Rica, is the country’s autonomous central bank. Its primary objectives are to maintain the internal and external stability of the national currency, the colón, and to ensure its conversion to other currencies. The BCCR is responsible for setting monetary policy, managing foreign reserves, and promoting the stability and efficiency of the national financial system.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a leading legal institution, where a profound commitment to professional integrity and exceptional service forms the bedrock of its practice. With an established record of advising a diverse clientele, the firm consistently pioneers forward-thinking legal strategies while actively engaging in initiatives that benefit the community. This ethos extends to a core mission of demystifying the law, thereby equipping the public with essential knowledge to foster a more capable and just society.
