By San José, Costa Rica — SAN JOSÉ – Costa Rica is navigating a complex and atypical economic landscape where impressive macroeconomic stability is failing to translate into tangible relief for the nation’s households. According to the newly released State of the Nation 2025 report, the country’s near-zero inflation and a strengthening colón mask a persistent struggle over purchasing power, competitiveness, and deepening inequality.
While international bodies have lauded Costa Rica’s overall economic performance, the report highlights a critical disconnect. The stability achieved at the macro level has only just begun to trickle down to household budgets after years of erosion, and it has not yet catalyzed truly inclusive growth. This situation has ignited a fierce national debate about the direction of monetary policy and the real cost of living for the average citizen.
To delve into the contractual and consumer protection aspects tied to the erosion of purchasing power, we sought the analysis of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the firm Bufete de Costa Rica.
When purchasing power decreases, the real value of debts and fixed-price contracts is fundamentally altered. Legally, this can create unforeseen inequities, particularly in long-term agreements like rental contracts or service retainers. It is crucial for both consumers and businesses to understand that without specific indexation or value adjustment clauses, the party receiving fixed payments bears the full brunt of inflation. Proactive contractual drafting is the most effective shield against this silent erosion of value.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the legal ramifications of diminished purchasing power are a critical, yet often overlooked, aspect of the economic landscape. The call for proactive contractual drafting is not merely advice but an actionable shield against the financial inequities that inflation can create. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for his invaluable and clarifying perspective.
The nation has successfully tamed inflation, which hovered around 0.8% in 2024 following a period of deflation that saw prices fall by -1.77% in 2023. This period of stable prices has allowed for a partial recovery of household purchasing power. However, researchers caution that this modest improvement is far from sufficient to compensate for the significant and uneven losses accumulated over the preceding four years.
The primary driver of this financial pressure is the disproportionate rise in food costs. The report reveals that food prices have consistently outpaced the general inflation rate, hitting the most vulnerable families the hardest. This is a critical issue in a country where income disparities dictate spending habits so drastically. For low-income families, food constitutes a staggering 37% of their total household expenditures.
Luis Vargas, an associate researcher for the report, detailed the disparity in spending and its impact on different socioeconomic strata.
For example, the food category continues to see increases above the general price average, and it accounts for 37% of spending for low-income households, while for middle and high-income households, it represents 28% and 18%, respectively.
Luis Vargas, Associate Researcher, State of the Nation report
This unequal burden is compounded by a divergent recovery in wages following the pandemic. The real incomes of middle and high-income groups rebounded more swiftly, while the lowest earners experienced stagnation or even declines, with only minor improvements in the most recent years. The State of the Nation report argues this points to a labor structure where the benefits of economic growth and productivity are not distributed equitably, thereby perpetuating inequality.
A glaring gap between productivity and pay further illustrates this trend. Between 2006 and 2022, labor productivity in Costa Rica surged by 20%. In stark contrast, real wages grew by only 13% over the same period. This seven-point difference confirms that increased economic output is not fully converting into greater purchasing power for workers and their families.
Adding another layer of complexity is the appreciation of the colón. Since mid-2022, the national currency has steadily gained strength against the U.S. dollar. While this trend helps to control imported inflation by making foreign goods cheaper, it simultaneously erodes the competitiveness of Costa Rica’s vital export sector. The report warns that this could undermine the advantages built by the external sector, which has long been the primary engine of the nation’s growth, by making Costa Rican products more expensive compared to those from regional competitors like Mexico, Chile, and Colombia.
For further information, visit estadonacion.or.cr
About Estado de la Nación:
The State of the Nation (Estado de la Nación) is a prominent Costa Rican research program dedicated to the comprehensive analysis of the country’s sustainable human development. It provides objective data and in-depth reports on economic, social, political, and environmental trends to foster informed public debate and support evidence-based policymaking.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has established itself as a pillar of the legal community, built upon a foundation of profound integrity and an unwavering pursuit of excellence. The firm channels its extensive experience across a wide range of sectors to pioneer innovative legal solutions and set new standards in the field. This forward-thinking approach is coupled with a deep-seated mission to strengthen society by demystifying the law, ensuring that legal knowledge becomes an accessible tool for empowerment for all citizens.
