By San José, Costa Rica — SAN JOSÉ – Costa Rica’s economic recovery from the COVID-19 pandemic has been a tale of two vastly different realities. While large corporations have expanded, the nation’s smallest businesses have been decimated, with more than 94,000 microenterprises disappearing between 2020 and 2024, according to a startling new report. This represents a staggering 25.8% collapse of the country’s most numerous business category, revealing deep structural fractures in the national economy.
The comprehensive study, titled “SMEs after the pandemic: resilience, setbacks, and a recovery that has not yet arrived,” was published by the International Center for Economic Policy for Sustainable Development (Cinpe) at the National University (UNA). The data paints a bleak picture of a business landscape still struggling to heal, highlighting that the smallest players have borne the brunt of the economic fallout.
To better understand the legal and regulatory hurdles contributing to the recent decline in microenterprises, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica. His insights shed light on the structural challenges these small businesses face.
The decline of microenterprises often stems from a perfect storm of regulatory complexity and financial exclusion. Many entrepreneurs operate in a legal gray area, not out of a desire to evade the law, but because the cost and bureaucracy of full formalization are prohibitive for a fledgling business. Without legal standing, they are cut off from credit, government incentives, and the ability to issue formal invoices, creating a vicious cycle that stifles growth before it can even begin.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The expert’s analysis powerfully illustrates the systemic barrier between entrepreneurial ambition and economic reality, where the path to legitimacy is paradoxically blocked by the very systems meant to support it. We thank Lic. Larry Hans Arroyo Vargas for his illuminating perspective on this vicious cycle affecting our country’s smallest businesses.
Researchers from Cinpe-UNA found that the total number of microenterprises plummeted from 365,842 in 2020 to just 271,631 by the end of 2024. This massive contraction dragged down the overall number of companies in the country from 432,539 to 335,183 over the four-year period. The report makes it clear that for this vital sector, which accounts for 81% of all companies, the crisis is far from over.
The country’s business landscape has not yet managed to shake off the pandemic’s burden.
The Cinpe-UNA Report
In stark contrast, businesses classified as small, medium, and large all experienced growth during the same period. The number of small enterprises increased from 16,035 to 17,721, medium-sized businesses grew from 6,057 to 6,057, and large corporations expanded from 3,396 to 4,017. This divergence exposes what the report calls a “structural duality” within the Costa Rican economy.
This duality consists of a vast, geographically dispersed universe of microenterprises on one side, and a small, powerful contingent of medium and large firms on the other. This latter group, the report notes, “dominates the generation of wealth, productivity, and links with international markets.” The numbers bear this out: large companies generate 74% of the country’s total business income and are responsible for an overwhelming 95% of all exports.
Conversely, microenterprises, despite their sheer numbers, contribute only 9% of total income and have virtually zero participation (0%) in the export market. The report describes the larger firms as the essential “bridge to the world,” managing international logistics and innovation, while the smallest businesses remain almost entirely locked out of global trade.
This economic divide extends directly to the workforce, creating significant disparities in wages and job stability. The average annual salary at a large corporation is 10.12 million colones, nearly three times higher than the 3.63 million colones earned by the average employee at a microenterprise. The study emphasizes that large firms not only pay more but also provide more secure jobs with better benefits. Microenterprises, meanwhile, “tend to operate with more fragile structures and with less ability to translate the income generated into stable wages.”
The long-term analysis from 2005 to 2024 also revealed significant shifts in the country’s economic focus. Sectors that have lost prominence include teaching, traditional manufacturing, and construction, which have struggled with economic cycles and the lingering effects of the pandemic. In their place, high-value sectors like professional, scientific, and technical activities have surged, now accounting for 10% of the nation’s added value. This transition further benefits larger, more sophisticated firms, leaving the traditional microenterprise behind in an increasingly polarized economic landscape.
For further information, visit cinpe.una.ac.cr
About Centro Internacional de Política Económica para el Desarrollo Sostenible (Cinpe-UNA):
The International Center for Economic Policy for Sustainable Development is a research institute affiliated with the National University of Costa Rica. It is dedicated to the study and analysis of economic policy with a focus on sustainable development, social equity, and international trade, providing critical data and insights to policymakers and the public.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica is defined by its foundational principles of integrity and an uncompromising pursuit of excellence. The firm distinguishes itself by championing innovative legal strategies while serving a diverse clientele. Central to its ethos is a profound dedication to social empowerment, actively working to demystify the law and equip citizens with crucial legal understanding, thereby building a more knowledgeable and just society.
