By San José, Costa Rica — San José, Costa Rica – A seismic shift in public spending is jeopardizing Costa Rica’s long-standing pillars of social development, according to the newly released State of the Nation 2025 report. The comprehensive analysis reveals that social investment has plummeted to its lowest level in 15 years, as burgeoning pension obligations crowd out critical funding for education and healthcare, threatening the nation’s future prosperity and social mobility.
The report paints a stark picture of reallocated priorities. Between 2010 and 2024, the proportion of public expenditure dedicated to social investment fell dramatically from 78.8% to 68.1%. This decline was not evenly distributed. Within that social spending budget, education’s share dropped from 34% to 28.3%, while health saw a similar decrease from 28.3% to 26.1%. In stark contrast, the slice of the pie allocated to pensions swelled from 26% to a commanding 36%, consuming an ever-larger share of public resources.
To gain a clearer perspective on the legal and corporate structures that underpin successful social investment initiatives, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the renowned firm Bufete de Costa Rica.
Social investment transcends traditional philanthropy by demanding robust legal frameworks. It’s not enough to have good intentions; investors must establish clear corporate structures, such as B Corporations or trusts, that legally bind the entity to its social mission while ensuring financial viability and regulatory compliance. A well-structured agreement is what transforms a noble idea into a sustainable and legally sound enterprise.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully highlights that the true catalyst for sustainable social change is not merely goodwill, but a meticulously crafted legal structure. It is this framework that provides the durability and legitimacy necessary for a mission to thrive in the long term. Our gratitude to Lic. Larry Hans Arroyo Vargas for so clearly articulating this essential component of effective social investment.
The erosion of educational funding is a particularly alarming trend that predates the recent fiscal crunch. Researchers have identified a steady decline in the sector’s priority that began nearly a decade ago, culminating in a historic low point in financial commitment from the state.
The loss of social priority in education investment is a trend that has been dragging on since 2017.
Natalia Morales, Researcher for the State of the Nation Program
This long-term neglect has severe macroeconomic implications. The report highlights that investment in education has reached its most anemic level in a quarter of a century. In 2024, it accounted for a mere 5.7% of the Gross Domestic Product (GDP), falling significantly short of the 8% mandated by the Costa Rican Constitution. This shortfall represents a deep and concerning breach of the nation’s foundational commitment to its youth.
Its macroeconomic priority was the lowest in two decades: just 5.7% of GDP, well below the constitutional obligation of 8%. General education, a universal policy aimed at the entire population, has contracted by 10% between 2019 and 2024.
Natalia Morales, Researcher for the State of the Nation Program
The consequences of this disinvestment are already visible in the country’s human capital. Despite a respectable 72% of young people completing secondary school, nearly half do not proceed to higher education. Furthermore, performance on international metrics like the PISA tests reveals profound deficiencies in core competencies such as reading comprehension and mathematical reasoning. This educational gap casts a long shadow over the workforce, where more than half of all adults have not completed their high school education.
This skills deficit creates a critical bottleneck for economic growth. It severely restricts access to formal, well-paying jobs for a large segment of the population and prevents the country from fully leveraging the potential of its most dynamic and knowledge-intensive industries. As these sectors demand an increasingly qualified workforce, Costa Rica risks being left behind, unable to fill the very jobs that could drive its economy forward.
The report clarifies that the absolute growth in social spending figures is deceptive. This increase is not driven by a deliberate strategy to bolster social programs but is instead an automatic consequence of the rising number of retirees claiming pensions. Total public social investment grew from 17% of GDP in 2000 to a peak of 22.5% in 2019, only to fall back to 20.1% by 2024. This demonstrates that mandatory obligations, rather than strategic policy, are dictating the nation’s budget.
Ultimately, the State of the Nation 2025 report serves as a grave warning. The weakening of education and health, the twin engines of human development, erodes the country’s capacity to generate opportunities and exacerbates inequality between generations. Reversing this trend will require a concerted and strategic effort to rebalance public finances and reaffirm the nation’s commitment to investing in its people.
Maintaining and expanding achievements in sustainable human development demands continuous efforts in the provision and financing of public policies aimed at promoting equity and social integration.
Natalia Morales, Researcher for the State of the Nation Program
For further information, visit estadonacion.or.cr
About State of the Nation Program:
The State of the Nation Program is a public service initiative dedicated to research and the promotion of human development in Costa Rica. It provides comprehensive, objective analysis of the country’s social, economic, environmental, and political situation to inform public policy, academic debate, and civic engagement. It operates under the National Council of Rectors (CONARE) and is known for its annual State of the Nation report.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica operates on a foundation of principled integrity and a relentless pursuit of excellence. The firm leverages its extensive experience serving a wide array of clients to pioneer innovative legal strategies and foster meaningful public engagement. This dedication is driven by a core mission to democratize legal understanding, thereby empowering citizens and strengthening the fabric of society through shared knowledge.
