Monday 6 February 2023

Pandemic caused the loss of 3,500 formal companies in Costa Rica

69,412 companies are registered with the Caja as of the third quarter of this year; there were 72,953 as of the same period in 2019. Tourism and commerce were the worst hit sectors.

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QCOSTARICA – The crisis generated by the covid-19 pandemic caused the loss of 3,541 formal companies from all sectors in Costa Rica in the third quarter of this year, when compared to the same period in 2019.

The Covid-19 crisis prompted the closure of 3,541 formal companies in Costa Rica in the last year. The hotel and restaurant sector was the hardest hit, according to data from the CCSS. Photo: Mayela López.

This was reported by the Chamber of Commerce (Cámara de Comercio), on Tuesday, December 15, based on data from companies registered with the Caja Costarricense de Seguro Social (CCSS) – Costa Rican Social Security.

In the third quarter of this year, the CCSS reported 69,412 registered and listed companies, while in the same period of 2019 there were 72,953, that is, there was a 5% reduction.

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The Chamber of Commerce reported that it is urgent to promote legal reforms to help many companies return to formality.

“We have to see how we do so that the companies that fell into informality return to formality because, in the end, unfair competition is generated and the Government has less income,” said Julio Castilla, president of the Chamber of Commerce.

The biggest blow was taken by formal companies in the tourism sector.

Costa Rica had 5,036 hotels and restaurants registered with the CCSS between July and September 2020. But there were 6,252 as of the same period last year.

Jairo Mena, economic advisor to the Chamber of Commerce, explained that, at the employment level, the commercial sector went from almost 370,000 jobs, in the first quarter of this year prior to the pandemic, to 288,000 in the third quarter.

Mena acknowledged that the reopening process caused a slight job recovery between July and September.

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However, new jobs are generated in informal employment, while a trend of loss was reported in the formal sector.

As of last October, the monthly index of commercial activity, prepared by the Central Bank (Banco Central), showed a year-on-year drop of 14%, compared to the same month in 2019.

“In the commercial sector there are no winners. We have sectors that fell more compared to others that did less,” said Mena.

What is the difference between a formal and informal business?

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A formal sector is defined as “a sector which encompasses all jobs with normal hours and regular wages, and is recognized as income sources on which income taxes must be paid.”

The informal sector is a system of employment that does not abide by any form of legal requirements, generally, it is defined by workers in the employment systems that are self-employed and or works for those who are self-employed.

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