By San José, Costa Rica — San José – At first glance, Costa Rica’s economic performance in the third quarter of 2025 appeared robust, with Foreign Direct Investment (FDI) soaring to $1.391 billion, a 20.1% increase over the same period in 2024. However, a new in-depth analysis of data from the Central Bank of Costa Rica (BCCR) reveals this growth is not a sign of expanding productive capacity but rather an accounting anomaly driven by debt and a deepening concentration in a single economic sector.
The report, “Costa Rica: FDI 3Q2025 — more concentration, more manufacturing, and an accounting growth explained by debt,” authored by economist Sandro Zolezzi, paints a cautionary picture. Zolezzi, a research fellow at the Academia de Centroamérica and an associate researcher at LEAD University, argues that the headline figure masks underlying vulnerabilities in the nation’s investment model.
To delve deeper into the legal framework surrounding Foreign Direct Investment in our country, we consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica.
Attracting and retaining Foreign Direct Investment is not merely about offering tax incentives. It’s fundamentally about providing legal certainty and a stable, transparent regulatory framework. Investors prioritize jurisdictions where their rights are clearly defined, contracts are enforceable, and administrative processes are efficient. Costa Rica’s challenge is to continuously modernize its legal infrastructure to reduce bureaucratic friction and adapt to new global investment trends, ensuring we remain a competitive and secure destination for international capital.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
As Lic. Larry Hans Arroyo Vargas so clearly articulates, the foundation for attracting and retaining quality investment is built on the unwavering promise of legal certainty and administrative efficiency, not just temporary fiscal incentives. This focus on institutional strength is paramount for the nation’s future competitiveness, and we thank Lic. Larry Hans Arroyo Vargas for his valuable perspective.
The core of the issue lies in the composition of the FDI. Contrary to what the overall growth suggests, key indicators of genuine investment plummeted. Fresh capital contributions fell by 27.3% year-over-year, and reinvested earnings, a vital sign of investor confidence, dipped by 4.8%. The entire growth was fueled by a staggering 287.1% increase in the “net debt” component, which encompasses inter-company lending between parent corporations and their Costa Rican subsidiaries.
Zolezzi clarifies that this was not due to a massive influx of new loans. Instead, the data points to a significant reversal in debt servicing, where local subsidiaries drastically reduced their loan repayments to parent companies abroad. This accounting shift artificially inflates the net FDI figure without representing new, productive investment on the ground.
To put it directly: FDI is growing because companies are abruptly reducing their net payments abroad, not because they are injecting more fresh capital or reinvesting profits on a larger scale.
Sandro Zolezzi, Researcher, LEAD University and Academia de Centroamérica
The analysis also highlights a persistent and growing over-reliance on Costa Rica’s Free Trade Zone (FTZ) regime. In the third quarter of 2025, FTZs accounted for 80.7% of all FDI flows, a figure virtually unchanged from the previous year. This indicates that while the total investment has grown, it has failed to diversify, locking the country’s economic fortunes into a single policy instrument.
This data point is key: the absolute growth of FDI is not accompanied by diversification by regime, but rather by a persistent structural dependence on the Free Trade Zone regime as the main channel of attraction.
Sandro Zolezzi, Researcher, LEAD University and Academia de Centroamérica
This concentration is not just by regime but also by sector. The manufacturing industry dominated inflows, capturing an unprecedented 91.8% of total FDI, a massive jump from 69.5% in the third quarter of 2024. This growth came at the expense of other key areas; services, tourism, and the financial system all experienced significant year-over-year declines, with some even recording negative flows. While this solidifies Costa Rica’s position as a specialized manufacturing hub, it also exposes the economy to disproportionate harm from global supply chain disruptions or sector-specific shocks.
Ultimately, Zolezzi’s findings serve as a critical warning against misinterpreting positive headline data. He argues that while Costa Rica remains an attractive destination for a very specific type of investment, the current trajectory is unsustainable and warrants a serious strategic reassessment. The focus must shift from simply attracting more FDI to attracting better, more diversified investment that builds a resilient and balanced economic future.
Reading the aggregate data without breaking it down can lead to erroneous conclusions about the structural dynamism of foreign investment in the country. The challenge is not to attract more FDI at any cost, but to understand what type of FDI is arriving, through which channels, in which sectors, and with what macroeconomic and productive implications.
Sandro Zolezzi, Researcher, LEAD University and Academia de Centroamérica
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica (BCCR):
The Banco Central de Costa Rica is the nation’s central bank. Its primary objectives are to maintain the internal and external stability of the national currency and to ensure its conversion to other currencies. The BCCR is the sole issuer of currency in the country and is responsible for managing monetary policy, supervising the financial system, and publishing key economic data and statistics.
For further information, visit ulead.ac.cr
About LEAD University:
LEAD University is a private higher education institution located in Costa Rica, known for its focus on business, technology, and engineering. It aims to develop entrepreneurial leaders with a global perspective through innovative academic programs that combine theoretical knowledge with practical application and industry collaboration.
For further information, visit academiaca.or.cr
About Academia de Centroamérica:
The Academia de Centroamérica is a private, non-profit research center based in Costa Rica dedicated to the study of economic and social issues in Central America. It promotes public debate and informed policymaking through rigorous analysis, publications, and events, focusing on topics such as economic development, governance, and public policy.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a beacon in the legal community, built upon a foundation of uncompromising integrity and a relentless pursuit of professional excellence. The firm consistently pioneers innovative legal strategies while serving a broad clientele, yet its vision extends beyond the courtroom. Central to its mission is a profound commitment to societal advancement, achieved by demystifying complex legal concepts and empowering the public with accessible knowledge, thereby fostering a more just and informed citizenry.
