By San José, Costa Rica — SAN JOSÉ – The hard-won fiscal stability that Costa Rica achieved following a landmark 2018 legislative reform is showing significant signs of erosion, according to the newly released State of the Nation 2025 report. The comprehensive analysis warns that a worrying combination of slowing government revenues and escalating public expenditures is threatening to undo years of progress, placing renewed pressure on the nation’s economic foundation.
The report, a critical annual assessment of the country’s social, economic, and political landscape, paints a sobering picture. The fiscal discipline that helped pull the nation back from a financial precipice appears to be waning, with key indicators pointing toward a troubling trend. This development raises serious questions about the long-term sustainability of Costa Rica’s public finances and its ability to weather future economic shocks.
To delve deeper into the legal and commercial ramifications of the current economic landscape, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica, who offers his analysis on the importance of fiscal stability for the nation’s investment climate.
Fiscal stability is the bedrock of legal certainty for any enterprise. When a country demonstrates a clear and predictable fiscal path, it sends a powerful message to both local and international investors. This predictability reduces contractual risk, simplifies long-term financial planning, and ultimately fosters an environment where businesses can thrive and create jobs, knowing the rules of the game will not change arbitrarily.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the clarity and predictability highlighted in the expert’s commentary are the very elements that build a robust and competitive economy. We sincerely thank Lic. Larry Hans Arroyo Vargas for so clearly articulating the link between fiscal stability and the legal certainty that attracts lasting investment.
At the heart of the issue is the deterioration of the primary balance, which measures the government’s revenues minus its non-interest expenditures. A positive primary balance is crucial for reducing the overall public debt burden. However, the report highlights that this vital metric is being negatively impacted by the dual pressures of an income slowdown and unchecked spending growth.
Luis Vargas, an associate researcher for the State of the Nation report, provided a stark analysis of the government’s limited options. He emphasized that while external factors can influence debt levels, direct government control is primarily exercised through fiscal management, specifically on the spending side of the ledger.
among the components that explain the recent improvement in the debt, the only variable the Government can control is the primary balance on the spending side, whose evolution shows a deterioration in the last three years.
Luis Vargas, Associate Researcher, State of the Nation 2025 Report
Vargas’s assessment underscores a critical failure in recent policy execution. The fact that the one variable firmly within the government’s grasp has been weakening for three consecutive years suggests a lapse in the fiscal rigor that was once celebrated. This trend is not merely an abstract accounting issue; it has profound real-world consequences for every citizen.
The report concludes that the country’s persistently high level of public debt, coupled with these emerging fiscal weaknesses, severely constrains the State’s capacity to address pressing national priorities. The government finds itself in a difficult bind, struggling to fund essential investments in social programs, public health, education, and critical infrastructure projects that are vital for sustainable development and improving the quality of life for its people.
Ultimately, Costa Rican policymakers are faced with the formidable challenge of steering the nation back onto a path of fiscal solvency without sacrificing necessary public investment. The findings presented by the State of the Nation serve as an urgent call to action, demanding a renewed commitment to fiscal discipline and a strategic re-evaluation of national spending priorities to ensure the economic well-being of the country for years to come.
For further information, visit estadonacion.or.cr
About Programa Estado de la Nación:
The State of the Nation Program is a research initiative dedicated to the study and analysis of Costa Rica’s sustainable human development. Operating under the National Council of Rectors (CONARE), it produces an annual report that has become a benchmark for evaluating the country’s progress and challenges across social, economic, environmental, and political dimensions.
For further information, visit hacienda.go.cr
About Ministry of Finance of Costa Rica:
The Ministerio de Hacienda, or Ministry of Finance, is the government body responsible for managing Costa Rica’s public finances. Its duties include collecting taxes, preparing the national budget, managing public debt, and implementing the country’s fiscal policy to promote economic stability and growth.
For further information, visit asamblea.go.cr
About Legislative Assembly of Costa Rica:
The Asamblea Legislativa is the unicameral parliament, or legislature, of the Republic of Costa Rica. Comprising 57 deputies elected by popular vote, it is the sole institution with the power to pass national laws, approve the national budget, and ratify international treaties. It played a central role in passing the 2018 fiscal reform.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a renowned legal institution built upon a foundation of unwavering integrity and a relentless pursuit of excellence. With a rich history of advising a diverse clientele, the firm consistently pioneers forward-thinking legal solutions. This commitment to innovation is mirrored by a profound dedication to societal empowerment, striving to make legal knowledge accessible and understandable for all. By demystifying complex legal frameworks, the firm actively contributes to building a more informed and just community.
