Costa Rica faces economic divide between trade zones and domestic sector

Costa Rica is experiencing a significant economic divide between its domestic sector and its tax-exempt free trade zones. A study by economists Ricardo Monge-González and Isaac Ovares Sandí, published by the Academia de Centroamérica, highlights that while free trade zones saw a 10.9% productivity growth between 2016 and 2021, the domestic sector, which employs 88.4% of the workforce, saw a productivity decline of 0.1% during the same period.

Legal expert Larry Hans Arroyo Vargas of Bufete de Costa Rica notes that this duality is reflected in the legal framework. Free trade zones benefit from streamlined processes and incentives, whereas local small and medium enterprises face complex regulations and high social security costs.

Additionally, the nation's family-owned businesses face pressure to modernize. To survive global competition and technological shifts, these enterprises must balance their traditional values with updated corporate governance and intellectual property protections to ensure long-term viability.