Legal Market Overview
Costa Rica remains characterised by both political and economic stability, despite challenges posed by the Covid-19 pandemic. Following the March 2021 approval of a $1.778bn loan from the International Monetary Fund (IMF) with an immediate $296.5 release and a grant by the Inter-American Development Bank of two $250m loans (one ear marked for ‘assistance for households and businesses affected by the Covid-19 crisis’), the nation went on in May 2021 to become the Organization for Economic Cooperation and Development’s 38th member.
With over 80% of the population fully vaccinated (at the time of writing) and the March 2022 announcement by the UN International Trade Center that CINDES, Costa Rica’s investment promotion agency, had received its highest rating out of 85 organisations reviewed globally, it seems likely that Costa Rica’s recovery, and interest in the country as a haven for foreign investment, will continue. In addition, Costa Rica continues to be singled out for its commitment to sustainability and biodiversity, with the nation having been praised prior to the November 2021 UN Climate Change Conference (COP26) by the event’s president, Alok Sharma, for its leadership on the issue.
However, in April 2022, Costa Rica lowered its economic growth projections for the year from 3.9% to 3.4%, with newly elected president Rodrigo Chaves suggesting a need to re-negotiate the IMF’s loan, calling it ‘not ambitious enough’. Further economic uncertainty was caused by a pair of cyber attacks by Russian ransomware groups, which targeted the computers of 27 government institutions and the country’s national health service. The government refused to pay the $20m ransom and declared a national emergency – with Chaves stating, ‘We are at war.’ The attacks brought Costa Rica’s digital infrastructure to a standstill and severely affected essential services.
Cyberattacks and mixed economic projections notwithstanding, Costa Rica’s relative stability was reflected by the observations of the legal market.
In the banking and finance sphere, firms reported being more active post-pandemic, noting that, as a result of the war in Ukraine, major corporates were shifting focus to Latin America. Firms also pointed toward continued interest in the major target areas of tourism and real estate infrastructure, with continued growth in the areas of medical devices and fintech, encouraged by the country’s free trade zone regime.
In the corporate and M&A space, teams reported an active market, with a key transaction being the finalisation in August 2021 of telecoms multinational Telefónica’s sale of its operations in Costa Rica to Liberty Latin America for $538m. Firms also highlighted a continued surge in near shoring activity. Regarding compliance matters, firms suggested a renewed focus in the next 12 months on corporate self-regulation, particularly in the construction industry.
Firms in the environment practice area expressed a desire to be able to provide clients with greater legal clarity through involvement with the creation of future policies and governmental initiatives to enhance the nation’s waste management regulations. Firms also underlined the rising environmental risks surrounding the second home market, which has burgeoned in the wake of a new law on digital nomad visas, which confers such benefits as ‘legal residency in Costa Rica for one year’ and income tax exemption for all amounts declared as income, which was approved in July 2022. In addition to the continued growth in second home purchases, real estate teams report serious movement in the Guanacaste region on the Pacific coast, with investors putting millions of dollars into community developments.
In the dispute resolution space, teams underlined the importance of tackling the technical challenges related to the implementation by arbitration and mediation centres of digital platforms and the conducting of hearings in a completely virtual environment. Moving forward, firms envision a rise in disputes between shareholders, and over public bids.
In labour and employment, firms pointed to a rise in cases involving employee objections to mandatory vaccination policies. As a result of newly adopted hybrid working models, firms predict more matters surrounding employees’ right to disconnect.
Intellectual property teams cited the benefits of their newfound ability to file trade marks digitally. Future fields of IP exploration mentioned include the Metaverse, as well as the cannabis industry.
There have been a number of significant developments in the Costa Rican legal market, particularly major firm splits in the cases of Artavia & Barrantes Abogados and COLBS Estudio Legal. First, in August 2021, Artavia & Barrantes Abogados co-founder Jaime Barrantes Gamboa departed to form ABCQ Legal. Then in September 2021, after splitting the practice with partner Sebastián Jiménez, Javier Escalante left COLBS Estudio Legal with several associates to form Tactic Estudio Legal. At the time of writing, Jiménez and his team continue to operate under the COLBS Estudio Legal name.
In other news, May 2022 saw Arnoldo André Tinoco, the founding partner of Lexincorp‘s Costa Rican office and former President of the Chamber of Commerce of Costa Rica, join the Chaves government as the head of the Ministry of Foreign Affairs and Worship.
The market continues to be home to full-service regional firms such as Aguilar Castillo Love, Arias, BLP, Consortium Legal, Central Law Costa Rica, Lexincorp and Sfera Legal, while Alta Batalla (formed by the merger of domestic firm Batalla with firms in Guatemala, Honduras and El Salvador) is also a name to note. Global firms Dentons Muñoz and ECIJA are also building their presence in the market.