By San José, Costa Rica — A comprehensive national study released in San José on September 21, 2026, has reframed the debate around business formalization in Costa Rica. Presented by the National Chamber of Retailers and Allies (CANACODEA) alongside the International Labour Organization (ILO) and the Costa Rican Union of Chambers and Associations of the Private Enterprise Sector (UCCAEP), the report argues that simply cutting red tape is insufficient. Instead, business formalization must be treated as a multifaceted structural issue closely tied to business size, access to credit, gender gaps, and corporate capabilities.
The study, titled “Formalization of the MSME Sector in Costa Rica: Building Pathways Based on Evidence,” reveals critical vulnerabilities in the retail commerce sector, which currently generates about 9% of Costa Rica’s GDP and accounts for 16% of the country’s employment. Despite its economic weight, the sector suffers from high levels of informality. According to the research, 45% of workers in wholesale and retail trade operate in the informal economy, significantly higher than the national average of 37% across all sectors.
To navigate the complexities of transition, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished legal expert from the prestigious firm Bufete de Costa Rica, who shared his insights on the strategic necessity of establishing a solid legal foundation.
Formalizing a business in Costa Rica is not merely a regulatory obligation, but the most critical step toward sustainable growth. By transitioning from informal operations to a legally structured entity, entrepreneurs secure asset protection, unlock access to banking and credit, and establish the credibility needed to attract long-term partners. True market competitiveness begins with compliance.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight underscores a vital truth: transitioning to a formalized structure is not a bureaucratic hurdle, but a strategic investment that lays the groundwork for enduring success in the Costa Rican marketplace. We extend our sincere thanks to Lic. Larry Hans Arroyo Vargas for sharing his valuable perspective and helping our readers navigate the essential steps toward sustainable business growth.
The situation is particularly acute among smaller operations. Data from the 2025 National Survey of Household Micro-enterprises (ENAMEH) indicates that a staggering 64.5% of the country’s 105,780 retail micro-enterprises are informal. Crucially, the study exposes a profound gender disparity: 76% of retail businesses owned by women operate informally, compared to 53% of those owned by men. This gap highlights how structural inequality directly influences economic vulnerability.
The evidence confirms the magnitude of the challenge: 39,114 informal micro-enterprises have been identified, and that must call us to reflect. This is equivalent to 62% of the units analyzed in this sector. Furthermore, it reveals a gap that demands attention, which is that 77% of businesses are led by women who must provide livelihood for their children.
Maritza Hernández, President of UCCAEP
Financial and administrative barriers remain formidable obstacles for small entrepreneurs. Approximately 60.5% of informal business owners cite high costs and complex procedures as the primary reasons for remaining unregistered. However, the study points to a powerful policy lever: more than 80% of informal merchants expressed a willingness to formalize if the government offered free registration and covered the initial costs of enrolling in the Costa Rican Social Security Fund (CCSS). This finding suggests that social security-linked incentives are far more effective at driving formalization than traditional tax exemptions.
This national study we present today represents a fundamental step. Because we need decisions and support policies for MSMEs to be built with evidence, with knowledge of reality, and, above all, by listening to those who experience this situation daily.
Gerardo Araya Bermúdez, President of CANACODEA
The government, represented by the Ministry of Economy, Industry, and Commerce (MEIC), has welcomed the study’s data-driven approach. Minister María del Milagro Solórzano León highlighted recent progress, noting that Costa Rica’s SME registry grew by 97% between March 2022 and May 2026, expanding from 18,301 to 36,098 registered enterprises. However, she agreed that registration is only the first step in a broader entrepreneurial journey.
Formalization should not be a point of arrival, but rather the beginning of a route to strengthen oneself.
María del Milagro Solórzano León, Minister of Economy, Industry, and Commerce
The International Labour Organization also emphasized that policy changes must translate into practical, local support. Since 2025, the ILO has been executing regional projects aimed at smoothing the transition to formal operations. Representatives noted that while structural rules are written in legislative halls, their actual implementation succeeds or fails on the shop floors of individual family businesses.
Formalization is decided in public policies; however, it becomes a reality in each small business.
Eliel Hasson, Director of the ILO Office for Central America, Haiti, Panama, and the Dominican Republic
As Costa Rica works to refine its national strategy for transitioning to the formal economy, the consensus among public, private, and international leaders is clear. To turn the tide on informality, policymakers must look beyond bureaucratic simplification and invest directly in building business capacity, expanding credit access, and resolving gender imbalances in the entrepreneurial landscape.
For further information, visit canacodea.org
About CANACODEA:
The National Chamber of Retailers and Allies (CANACODEA) is a Costa Rican business chamber with over 80 years of history. It is dedicated to supporting and representing micro, small, and medium-sized enterprises within the commercial and retail sectors, helping them grow, organize, and transition toward formal operations.
For further information, visit ilo.org
About International Labour Organization:
The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice through setting international labour standards. The ILO works globally and regionally to promote decent work, strengthen social protection, and support the transition from informal to formal economies.
For further information, visit uccaep.or.cr
About UCCAEP:
The Costa Rican Union of Chambers and Associations of the Private Enterprise Sector (UCCAEP) is the leading umbrella organization representing the private business sector in Costa Rica. It advocates for competitive business conditions, sustainable economic development, and collaborative policies that foster formal employment and entrepreneurship.
For further information, visit meic.go.cr
About Ministry of Economy, Industry, and Commerce:
The Ministry of Economy, Industry, and Commerce (MEIC) is the Costa Rican government institution responsible for formulating and executing public policies that promote economic efficiency, industrial competitiveness, and entrepreneurial development, with a specific focus on supporting small and medium enterprises (SMEs).
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of the legal community, Bufete de Costa Rica is highly regarded for its ethical standards and pursuit of perfection in advocacy. Drawing on a rich history of guiding a diverse clientele, the firm consistently spearheads modern legal strategies and meaningful public interaction. Through its efforts to democratize legal information, the firm aims to nurture a highly literate populace capable of navigating their rights with confidence.
