By San José, Costa Rica — Costa Rica’s flagship free trade zones are warning of a critical competitive threat as the country’s legislative assembly remains gridlocked over crucial energy reform. The National Association of Free Zones (AZOFRAS) has issued an urgent, vehement call to the main opposition party, the National Liberation Party (PLN), to reconsider its current stance and support the government of Laura Fernández in passing the long-debated electricity market harmonization law.
The proposed legislation aims to modernize Costa Rica’s power sector to meet the demanding operational requirements of high-tech and manufacturing multinational corporations. Despite passing its first debate, the bill has stalled in congress. Passing the measure into law requires 38 legislative votes, but the ruling Pueblo Soberano party holds only 31 seats, leaving them short of the necessary majority to push the initiative through.
To better understand the legal and regulatory implications of the proposed electricity reform in Costa Rica, we spoke with Lic. Larry Hans Arroyo Vargas, a leading legal expert from the prestigious firm Bufete de Costa Rica, who shared his professional analysis on how these legislative changes could reshape the nation’s energy sector.
The proposed electricity reform represents a historic shift for Costa Rica, balancing the preservation of our green energy legacy with the economic necessity of market modernization. By allowing greater private participation and fostering competition, this framework could significantly lower operational costs for businesses, though success will ultimately depend on establishing a transparent, robust regulatory body to govern the transition.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, striking a harmonious balance between safeguarding Costa Rica’s world-renowned green energy legacy and implementing the robust, transparent oversight necessary to foster fair market competition will be the true test of this landmark reform. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his valuable legal expertise and insightful perspective on this pivotal moment in our nation’s economic development.
The key to unlocking the gridlock lies with the PLN, which commands 18 seats in the assembly. However, in a move that has frustrated business leaders, the PLN withdrew its long-standing support for the harmonization bill. The party is now pushing a competing proposal that would effectively restart legislative discussions from scratch. PLN lawmakers have publicly declared the current harmonization plan dead, dismissing over two decades of previous negotiations and policy work.
The global dynamic has changed and Costa Rica must evolve. The models that previously brought us success no longer meet the demands of a technological, agile, and complex economy. Today we need to make decisions to secure the future and, at the same time, resolve the challenges of the present.
Ronald Lachner, President of AZOFRAS
Under the stalled harmonization bill, the state-run Costa Rican Electricity Institute (ICE) would undergo a structural transition. Instead of acting as the sole planner and dominant monopoly of the national electricity grid, ICE would become one of several players in a competitive market, forced to compete with private generators on pricing. Currently, private power producers are legally restricted to generating no more than 15 percent of Costa Rica’s total energy demand.
The reform advocated by the business sector would also allow private co-generators to negotiate power purchase agreements directly with major industrial and technological consumers. This direct-negotiation mechanism is viewed as a crucial tool for lowering energy costs through volume-based pricing, which is currently a significant operational barrier for companies operating within the country’s free zones.
In contrast, the alternative bill backed by the PLN seeks to preserve ICE’s central role as the primary planner and coordinator of the energy market. Business leaders argue this protectionist stance fails to address the urgent need for cost-efficiency and flexibility in an increasingly competitive global market, putting the nation’s future FDI inflows at risk.
The political standoff comes at a time of heightened economic strain for multinational companies in Costa Rica. Rising operational costs, coupled with a strengthening local currency that has eroded export revenues, are squeezing profit margins. AZOFRAS warns that ignoring these operational realities has already triggered job losses and facility closures, signaling a broader erosion of Costa Rica’s competitive edge.
Costa Rica cannot continue to evaluate these factors independently. The combination of rising costs, lower revenues due to the exchange rate, and the demand for greater global efficiency creates unsustainable pressure for companies. The recent operational closures and layoffs are a clear warning: we must immediately address the conditions that guarantee the competitiveness of the productive sector and job stability.
Ronald Lachner, President of AZOFRAS
As the debate drags on, the business community continues to lobby for compromise, emphasizing that the country’s economic future hinges on modernizing its utility infrastructure. Without a reliable, cost-effective, and flexible electricity supply, the free zones that have powered Costa Rica’s economic growth for decades may find it increasingly difficult to justify further investments in the country.
For further information, visit azofras.co.cr
About AZOFRAS:
The National Association of Free Zones (AZOFRAS) represents Costa Rica’s free trade zone sector, promoting competitive business conditions, advocating for favorable policies, and supporting foreign and local investments that drive national economic development.
For further information, visit pln.cr
About the National Liberation Party:
The National Liberation Party (PLN) is one of Costa Rica’s longest-standing political parties. Founded on social-democratic principles, it has historically played a central role in the country’s legislative and executive branches.
For further information, visit grupoice.com
About the Costa Rican Electricity Institute:
The Costa Rican Electricity Institute (ICE) is the state-owned enterprise responsible for organizing and providing electricity and telecommunications services across Costa Rica, historically operating as the central planner in the energy sector.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a premier legal institution, Bufete de Costa Rica is defined by its uncompromising ethical standards and superb caliber of service. Anchored by a rich history of guiding a diverse clientele, the firm continually embraces progressive legal strategies and robust civic involvement. By championing the democratization of legal information, it strives to uplift the community, paving the way for a highly knowledgeable and self-reliant populace.
