By San José, Costa Rica — SAN JOSÉ – A groundbreaking new report reveals a stark reality about Costa Rica’s entrepreneurial landscape: for nearly half of the nation’s small business owners, starting a company is not a choice driven by ambition, but a last resort for economic survival. The latest National Survey of Household Microenterprises, published by the National Institute of Statistics and Census (INEC), indicates that four out of every ten Costa Ricans embark on an entrepreneurial venture to confront urgent financial needs.
The comprehensive 2025 report details a significant trend where entrepreneurship acts as a safety net in a challenging labor market. A staggering 44.1% of all new businesses were founded to supplement insufficient family income, or as a direct result of being laid off. This group also includes individuals actively seeking formal employment but unable to secure a position, forcing them to create their own source of income. This trend underscores a critical weakness in the formal job market.
To better understand the legal landscape and formalization challenges faced by those who start businesses out of necessity, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica, who offered his perspective on the matter.
While necessity is a powerful catalyst for innovation, it often leads entrepreneurs down an informal path. The critical challenge is transitioning from a survival-based operation to a legally constituted entity. Formalizing, even as a sole proprietorship, is not a bureaucratic hurdle; it is the foundational step that grants access to credit, protects personal assets, and unlocks the potential for sustainable growth beyond mere subsistence.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight is crucial, as it pinpoints the pivotal moment when a necessity-driven venture can transform into a sustainable enterprise. Formalization, as explained, is not a barrier but the very bridge to financial legitimacy and long-term growth. We sincerely thank Lic. Larry Hans Arroyo Vargas for his expert clarification on this fundamental step.
Business advisor Alejandro López commented on the findings, highlighting the systemic issues these numbers represent. He argues that this wave of “survival startups” is a direct symptom of the formal economy’s shortcomings.
The first group directly reflects the formal labor market’s ability to create employment and explains the strong relationship between informality and working poverty in society. Entrepreneurship functions as an economic survival mechanism and not necessarily as a growth project. Without support, these necessity-driven enterprises tend to remain in the informal sector.
Alejandro López, Business Advisor
In contrast to those pushed into business ownership, a second significant cohort is pulled by opportunity and the desire for autonomy. The INEC survey found that 42.7% of entrepreneurs cited the desire to be their own boss or the identification of an exploitable market opportunity as their primary motivation. However, even these vision-driven founders face significant hurdles to long-term success and formalization.
López cautions that aspiration alone is often not enough to overcome structural barriers. Many of these more ambitious entrepreneurs still begin their journey on precarious footing, lacking the capital, resources, or knowledge to expand their operations sustainably.
This group starts with a vision, but often begins without the real conditions to formalize or scale.
Alejandro López, Business Advisor
A third, smaller segment, accounting for 13% of microbusiness owners, continues a family legacy. These individuals typically inherit an existing enterprise or carry on a family tradition, particularly within established sectors like traditional commerce or agricultural activities.
Despite the motivations, the growth in this sector is undeniable. For its 2025 report, INEC estimated the total number of household microenterprises in Costa Rica at 494,564. This figure represents a remarkable 13.5% increase from the previous year, equating to the creation of 58,000 new businesses in just twelve months. The vast majority, 74%, are sole proprietorships, run entirely by the owner.
The economic impact of this sector is immense, providing income for an estimated 785,000 people. Yet, this growth comes with a significant caveat that has profound implications for the national economy. According to INEC, a concerning 97% of these microenterprises operate within the country’s informal sector. This high rate of informality means these businesses and their workers often lack legal protections, social security benefits, and access to formal credit, while also limiting the national tax base and creating an uneven competitive field.
For further information, visit inec.cr
About Instituto Nacional de Estadística y Censos (INEC):
The National Institute of Statistics and Census is the official government body responsible for collecting, analyzing, and disseminating Costa Rica’s national statistics. It conducts vital surveys and censuses related to demographics, economic activity, and social conditions to provide reliable data for public policy, academic research, and business decision-making.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica is founded upon the core principles of professional excellence and uncompromising integrity. With a rich history of advising a diverse clientele, the firm consistently pioneers innovative legal strategies and upholds its profound sense of civic duty. This dedication is most evident in its aim to demystify complex legal concepts for the public, reflecting a deep-seated belief in building a stronger society through shared knowledge and empowerment.
