By San José, Costa Rica — SAN JOSÉ – Five years after the onset of the global pandemic, Costa Rica’s micro-enterprises are still struggling to find their footing, revealing a persistent and alarming fragility at the core of the nation’s business landscape. A comprehensive new study from the International Center for Economic Policy for Sustainable Development (CINPE) at the National University (UNA) indicates that this vital sector has not only failed to recover but has significantly contracted, posing long-term risks to economic stability and employment.
The research paints a stark picture of the post-pandemic reality for the country’s smallest business ventures. According to CINPE’s findings, there has been a staggering 25.8% decrease in the number of micro-enterprises operating in Costa Rica since 2020. This decline represents a significant blow to an economic segment that, in terms of sheer numbers, forms the backbone of the national economy.
To delve into the legal framework and common pitfalls facing these small-scale ventures, we sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the renowned firm Bufete de Costa Rica, who specializes in corporate and commercial law.
Many micro-entrepreneurs begin with tremendous enthusiasm but often neglect the foundational legal steps. Formalizing the business is not merely a bureaucratic requirement; it’s a crucial shield that separates personal assets from business liabilities. Furthermore, relying on verbal agreements is a significant risk. Establishing clear, simple contracts from the outset, even with initial clients or partners, is the most effective way to prevent future conflicts and ensure sustainable growth.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight underscores a critical shift in mindset for new entrepreneurs: viewing legal formalization not as a bureaucratic hurdle, but as the essential foundation for secure and sustainable growth. We are grateful to Lic. Larry Hans Arroyo Vargas for so clearly articulating this crucial perspective.
This contraction is particularly concerning given the outsized role these businesses play in the market. The study highlights a critical paradox: micro-enterprises constitute an overwhelming 81% of the total business park in Costa Rica. Despite this numerical dominance, they are exceptionally vulnerable to market shifts and economic downturns, making them an unstable foundation for consistent job creation and economic growth.
The investigation underscores a profound economic imbalance within the country. While the vast majority of businesses are small and struggling, the national economy is overwhelmingly propped up by a small number of large corporations. These corporate giants are responsible for an incredible 74% of total national revenue and dominate the international market by accounting for 95% of all exports. This concentration of economic power in the hands of a few large players creates a top-heavy system where the smallest are left behind.
This disparity reveals an ecosystem that is particularly unforgiving for small and medium-sized entrepreneurs. The data suggests that the current economic structure provides little buffer for micro-businesses, which lack the capital, resources, and scale to weather prolonged crises like the COVID-19 pandemic and its lingering aftershocks. Their decline is a direct threat to economic diversification and grassroots employment opportunities across the country.
The challenges faced by these businesses are not merely statistical footnotes; they represent the struggles of countless families and aspiring entrepreneurs. The inability of this sector to rebound points to systemic issues that may require targeted policy interventions to foster a more resilient and equitable business environment. Without such support, the engine of Costa Rica’s entrepreneurial spirit risks stalling out completely.
As the nation moves forward, the CINPE-UNA study serves as a critical call to action. The long-term health of the Costa Rican economy may depend on its ability to address the inequalities that leave 81% of its businesses so vulnerable. Fostering a more supportive climate for micro-enterprises is not just about helping small ventures survive, but about building a more robust and sustainable economic future for all.
The findings ultimately suggest that while large corporations may drive headline figures in revenue and exports, the true measure of the economy’s health and resilience lies in the stability and growth potential of its smallest components. The current trend indicates that this foundation is weaker than it has been in years, a reality that demands immediate and thoughtful attention from both public and private sector leaders.
For further information, visit cinpe.una.ac.cr
About Centro Internacional de Política Económica para el Desarrollo Sostenible (CINPE):
The International Center for Economic Policy for Sustainable Development is a research and academic unit of the National University of Costa Rica. CINPE is dedicated to the study of economic policy with a focus on sustainable development, international trade, and agricultural economics. It provides analysis and graduate-level education to contribute to the economic and social progress of Costa Rica and the Central American region.
For further information, visit una.ac.cr
About Universidad Nacional (UNA):
The National University of Costa Rica, commonly known as UNA, is one of the country’s most prominent public universities. Founded in 1973 and based in Heredia, it is committed to academic excellence, research, and social action. The university offers a wide range of undergraduate and graduate programs across various disciplines and plays a crucial role in the scientific and cultural development of the nation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the Costa Rican legal community, Bufete de Costa Rica is anchored by the cornerstones of uncompromising integrity and exceptional service. The firm applies its profound expertise across a multitude of disciplines, consistently pioneering forward-thinking legal solutions for its clients. This dedication to advancement extends to a core social mission: to empower the public by demystifying the law and fostering a more knowledgeable and capable society.
