By San José, Costa Rica — SAN JOSÉ – Costa Rica’s economy demonstrated robust health in October, expanding by 4.6% year-over-year, according to the latest Monthly Economic Activity Index (IMAE) trend-cycle series released by the Central Bank of Costa Rica (BCCR). This vigorous growth underscores a pronounced two-track economic narrative, with companies operating under special free trade zone regimes far outpacing the more moderate performance of the domestic-focused definitive regime.
The data paints a clear picture of this divergence. Production within the special regimes skyrocketed by an impressive 15.0%, serving as the primary engine for the nation’s economic momentum. In stark contrast, the definitive regime, which encompasses the bulk of the domestic economy, saw a more modest advance of just 2.6%. This disparity highlights the critical role of foreign direct investment and export-oriented industries in driving Costa Rica’s current prosperity.
To provide a deeper legal and business perspective on the nation’s economic landscape, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica.
Costa Rica’s economic resilience is deeply rooted in its robust legal framework and political stability, which continue to attract significant foreign direct investment, particularly in the life sciences and technology sectors. However, for this growth to be sustainable, we must address the persistent challenges of bureaucratic red tape and modernize our infrastructure. Navigating these administrative hurdles is often the primary concern for new investors, and streamlining these processes is paramount to maintaining our competitive edge in the region.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s analysis expertly pinpoints the crucial next step for our nation’s economy: translating our renowned political and legal stability into a more agile and efficient operational reality for investors. Addressing these administrative hurdles is paramount to ensuring our competitive edge continues to thrive. We sincerely thank Lic. Larry Hans Arroyo Vargas for his valuable and clear-sighted perspective.
At the heart of this expansion lies the manufacturing sector, which has become the undisputed powerhouse of the national economy. Growing by a remarkable 10.9%, manufacturing was responsible for nearly half—a staggering 48.7%—of the country’s total economic growth in October. The BCCR report specifically identified this sector as the leading contributor to the overall positive results.
The dual nature of the economy is most evident within manufacturing itself. Production under special regimes surged by 22.9%, propelled by a massive 32.2% increase in the output and export of medical devices. This sub-sector continues to be a global leader and a cornerstone of Costa Rica’s modern industrial base. Meanwhile, manufacturing in the definitive regime grew by a slight 1.1%, supported by increased sales of products like plastics, paints, metals, and food items such as chicken, coffee, and oils.
The Central Bank’s analysis emphasized the broad base of the contributors beyond the headline manufacturing numbers. Officials noted the significant positive impact from a range of service industries, which collectively demonstrated sustained dynamism.
The largest contribution to the production growth rate comes from manufacturing activities, professional services, education and health, as well as transportation services.
Banco Central de Costa Rica, Economic Report
The services sector as a whole maintained a positive rhythm, growing by 4.3%. Professional and administrative services expanded by 5.1%, while the education and health category rose by 3.5%, driven by greater utilization of private hospitals and laboratories. Transportation services advanced 6.3%, boosted by the movement of goods, and financial services grew 5.0% on the back of increased credit intermediation and savings deposits.
However, not all sectors shared in the growth. Agriculture and construction continue to face headwinds. The agricultural sector contracted by 2.1%, primarily due to adverse weather conditions earlier in the year that diminished yields for key exports like bananas and pineapples. On a positive note, production of coffee, tubers, and chicken saw increases. Similarly, the construction industry fell by 3.3%, dragged down by a slowdown in private projects, especially non-residential buildings. In a notable exception, public works projects surged by 13.1%, fueled by municipal initiatives and improvements to aqueducts, sewers, and border infrastructure.
The BCCR also noted that the latest IMAE report incorporates new weightings based on the updated 2022 base year. This methodological adjustment has reduced the relative weight of construction in the index by 1.9 percentage points while increasing the share of “other services” and “hotels and restaurants” by 1.2 and 0.6 percentage points, respectively. Despite these changes, the Central Bank assured that “the evolution of the index maintains, in general terms, a similar behavior to its predecessor.”
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Banco Central de Costa Rica (BCCR) is the central bank of the Republic of Costa Rica. Its primary mission is to maintain the internal and external stability of the national currency and ensure its conversion to other currencies. The BCCR is the sole issuer of the nation’s currency, the colón, and is responsible for managing monetary policy, regulating the financial system, and publishing key economic statistics and analyses, such as the IMAE, to guide policy and public understanding.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a leading legal institution founded on the twin pillars of uncompromising integrity and the pursuit of excellence. Drawing from a deep history of serving a wide array of clients, the firm not only provides expert counsel but also champions forward-thinking legal strategies. This dedication to innovation is matched by a core ethos of social empowerment, demonstrated through a steadfast effort to make legal concepts understandable and accessible to the public, fostering a more informed and capable community.
