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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The greater interest in studying social sciences and the lesser inclination for training in technical or scientific areas may be partly because of the preference of professionals for employment in a government institution rather than in the private sector.

According to data from the National Council of Rectors (Conare), between 2006 and 2016, in Costa Rica the careers in the area of Social Sciences registered the highest growth according to the proportion of graduates, going from 36.2% to 45.5% of the total number of students.

Doing Business in Costa Rica Is Difficult

September 2017

Eight out of ten entrepreneurs claim that an excess of formalities and the high costs of formalization are the main difficulties they face when starting a business in the country.

From a statement issued by theUccaep:

28 September 2017.  Setting up a business in Costa Rica and operating formally and under the protection of the law, is becoming more difficult for entrepreneurs. This was revealed by the Third Quarterly Business Survey "Pulso Empresarial", carried out by the Costa Rican Union of Chambers and Associations of the Private Business Sector (UCCAEP).

Barriers to Business in Costa Rica

January 2017

The procedures for obtaining operating permits and municipal licenses are the things that cause the most difficulty for companies who are trying to formalize their operations in the country.

Despite constant complaints by entrepreneurs, excessive bureaucracy remains one of the main obstacles to the formalization of companies in Costa Rica.  According to a business survey developed by Uccaep, the procedures for obtaining operation permits from the Ministry of Health and municipal patents are the most difficult tasks to carry out and those which take the most time.

Costa Rica: Bureaucracy and Entrepreneurship

March 2013

Employers point to the thick web of paperwork that must be traversed in Costa Rica if you want to start a new business.

From a press release issued by the Costa Rican Union of Chambers and Associations in the Private Business Sector (UCCAEP):

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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