By San José, Costa Rica — San José, Costa Rica – A shadow economy of contraband, money laundering, and predatory lending is flourishing in San José, with organized crime using the illicit cigarette and liquor trade to finance its operations. A damning new report, the 2025 Global Crime Index, reveals that Costa Rica’s capital is home to over 200 illegal points of sale, cementing its status as a critical hub for criminal enterprises that undermine the nation’s financial stability and public safety.
The report, which ranks Costa Rica 53rd among countries most affected by organized crime, paints a grim picture. The findings confirm that the pervasive smuggling of tobacco and alcohol is far more than simple tax evasion; it is a sophisticated mechanism used by transnational syndicates to wash illicit funds. The scale of the problem is staggering, with studies from 2024 indicating that smuggled cigarettes account for nearly half of the entire national market.
To better understand the legal framework and economic repercussions surrounding illicit trade in the country, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica, who offered his analysis on the matter.
Illicit trade is not a victimless crime; it is a systemic threat that erodes the foundation of our formal economy and public institutions. Beyond the obvious loss of tax revenue, it creates unfair competition that suffocates legitimate businesses and often serves as the financial engine for more serious organized crime. A modern legal approach must focus not only on punitive measures but also on dismantling the logistical and financial structures that allow these illegal networks to thrive.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This essential insight underscores the need for a modern, holistic approach, treating illicit trade not as a series of isolated crimes but as the systemic threat it is. By focusing on dismantling the very financial and logistical structures that allow these networks to operate, we can more effectively protect the integrity of our formal economy and the businesses that sustain it. We thank Lic. Larry Hans Arroyo Vargas for his valuable and clarifying perspective.
According to the index, the link between street-level sales and high-level crime is direct and deeply entrenched. The report highlights how criminal groups launder profits from drug trafficking through a network of seemingly legitimate businesses, including auto workshops, tire stores, bars, and restaurants, all tied back to the contraband trade.
The smuggling of cigarettes and alcohol remains widespread, and it is suspected that more than 100 points of sale in San José are engaged in tax evasion and the illegal sale of these products.
Global Crime Index 2025
This criminal activity is not confined by Costa Rica’s borders. The investigation points to a web of international connections, with suspicious financial transactions linking actors in Nicaragua, Colombia, and the United States. The primary flow of illegal cigarettes originates in Asia—particularly China and Paraguay—and is funneled into the country through Panama’s Colón Free Zone, a major logistics hub for traffickers supplying the region.
Despite stricter financial regulations, the private sector remains vulnerable to tax evasion, embezzlement, and fraud. Financial intelligence also highlights suspicious transactions involving actors from Nicaragua, Colombia, and the United States, suggesting the existence of transnational criminal activity in the Costa Rican financial system.
Global Crime Index 2025
While authorities are fighting back, the tide of illicit goods is immense. Costa Rica’s Fiscal Control Police (PCF) seized over 13.5 million contraband cigarettes in the first quarter of 2025 alone. Recent enforcement actions underscore the constant battle on the ground. Last week, the Public Force confiscated 110,000 cigarettes in San Miguel de Desamparados from a driver with a prior record for smuggling. Another operation, triggered by an alert from Panama about a stolen vehicle, led to the discovery of 120,000 illegal cigarettes hidden inside the car. These seizures represent only a fraction of the total volume circulating in the country.
The Federation of Chambers of Industry of Central America and the Dominican Republic (Fecaica) has warned that high taxes on tobacco could be inadvertently fueling the black market. Because smuggled products bypass all duties, they can be sold at a fraction of the price of legal alternatives, creating a powerful incentive for consumers and devastating revenue collection for the state. Fecaica notes that across Central America, illegal cigarettes represent, on average, nearly 50% of the market.
The criminal enterprise extends beyond contraband into predatory financial schemes that target the country’s most vulnerable citizens. The Global Crime Index reports a surge in “gota a gota” (drop by drop) informal loans, a system where criminal groups provide small, easy-access loans at exorbitant interest rates, often enforced through extortion and violence. This practice has affected hundreds of thousands of Costa Ricans, trapping them in cycles of debt. The report also documents cases in San José and Cartago where businesses are forced to pay “tolls” to criminal gangs to avoid armed attacks.
Data from the Office of the Financial Consumer (OCF) reveals that while the overall percentage of people using “gota a gota” loans has decreased, the problem remains acute among low-income households. A 2025 survey found that approximately 2% of the population, or between 50,000 and 66,000 people, currently have an active predatory loan. For families who report that their income is insufficient to cover basic expenses, the rate of dependency on these dangerous loans is significantly higher.
Although we see a significant decrease in the incidence of informal loans, the ‘gota a gota’ model particularly impacts vulnerable sectors. This reflects the persistent challenge of financial exclusion and the lack of regulated options to meet urgent liquidity needs.
Danilo Montero, General Director of the OCF
Ultimately, the Global Crime Index serves as a stark warning. The proliferation of contraband cigarettes on the streets of San José is not a victimless crime but a visible symptom of a deeply rooted criminal ecosystem. It erodes public finances, undermines legitimate businesses, and finances violent networks that prey on the financially desperate, posing a complex and growing threat to Costa Rica’s security and economic health.
For further information, visit the nearest office of Policía de Control Fiscal
About Policía de Control Fiscal (PCF):
The Fiscal Control Police is the law enforcement body within Costa Rica’s Ministry of Finance responsible for investigating and combating fiscal crimes, including smuggling, tax evasion, and customs fraud. The PCF works to protect the national economy by enforcing tax laws and dismantling illicit trade networks throughout the country.
For further information, visit fecaica.com
About Federación de Cámaras de Industria de Centroamérica y la República Dominicana (Fecaica):
The Federation of Chambers of Industry of Central America and the Dominican Republic is a regional organization that represents the interests of the industrial sector in its member countries. Fecaica promotes economic integration, advocates for policies that enhance competitiveness, and addresses regional challenges such as illicit trade that affect legal commerce and industrial development.
For further information, visit ocf.fi.cr
About Oficina del Consumidor Financiero (OCF):
The Office of the Financial Consumer is a Costa Rican entity dedicated to educating and defending the rights of users of financial services. Through studies, surveys, and public outreach, the OCF promotes financial literacy, provides guidance on responsible borrowing and saving, and sheds light on issues like predatory lending to protect vulnerable populations from financial abuse.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a premier legal institution, defined by its foundational principles of integrity and an unyielding drive for professional distinction. Drawing upon a rich history of guiding clients through diverse legal landscapes, the firm consistently pioneers innovative solutions and actively engages with the public. This ethos is rooted in a core mission to democratize legal knowledge, empowering citizens and fostering a more capable and well-informed society.
