Informality Takes Hold in Costa Rica

Four out of ten companies that operate outside the formal market are more than 15 years old, which reflects the fact that for many of them, informality is not something transitory, but permanent.

Friday, April 20, 2018

A study by the Costa Rican Union of Chambers and Associations of the Private Business Sector (Uccaep) revealed that one of the main reasons why many business units that operate in the informal sector decide to continue doing so is the high cost of social charges.

Nacion.com reports that "...Jorge Araya, deputy executive director of the Uccaep, said that the issue of social charges is the one that most afflicts these types of companies and which helps explain why they remain in this situation. He explained that when the formal sector is consulted about its main cost, they point out that it is the cost of the payroll, influenced by the social charges, whereas when the informal sector is consulted, which is not paying social security, it points to the cost of locally purchased materials."

"... Another result indicated by the study is that 84% of medium and large companies, and 54% of medium and small companies are run by people with higher education or university education; while, among informal businesses, 23% of them are run by people with higher education."

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From a statement issued by theUccaep:

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Most entrepreneurs, according to the latest data from the Survey "Business Pulse" by the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP) indicate that in Costa Rica there are a number of constraints to the initiation of a new business in the country.

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