• Costa Rica Real Estate

El Gallito stores close after 106 years in business; more than 200 employees dismissed

August 3, 2015

The iconic Costa Rican store Almacén El Gallito, which in recent years sold mostly party supplies and furniture, last Friday closed its seven locations in Costa Rica citing financial problems.

Managing director Carlos Vega said the closure of all locations was ordered last week and that staff over the weekend was packing all remaining merchandise.

The closure means the dismissal of over 200 employees from El Gallito stores located in the provinces of San José, Heredia and Alajuela.

Vega said there are several reasons for the closure but it mainly was prompted by a legal conflict with a supplier. The company was found guilty and ordered to pay a high compensation that prompted bank repossessions and also damaged the company’s image, Vega said.

The situation also affected payments to the Social Security System, the Tax Administration and several suppliers.

The El Gallito building, a landmark on the capital’s Second Avenue, was sold to pay the debt with the Tax Administration and the company is currently in negotiations with suppliers.

Vega told the Costa Rican weekly El Financiero on Friday that the country’s financial situation has been particularly bad for them in recent years. As an example he said in 2008 the company had some 200 distributors of their products, and by 2013 the number was 30.

He also said online stores offering similar products, street vendors and stores selling smuggled merchandise seriously damaged their business.

“We asked for help at both public and private banks, but they all said they do not have credits for our type of business,” Vega said.

Francisco Llobet, president of the Costa Rica Chamber of Commerce, said the news is evidence of the difficult situation businesses in Costa Rica are facing.

“The situation in the country is not the best, but we are hoping for a change,” he said.

The closure of El Gallito adds to those of local restaurant chain Bagelmen’s, kitchen and bath fixtures company Incesa Standard and four restaurants of the local franchisee of Burger King, which also closed operations this year. Tico food company Alimentos Jack’s in February announced plans to move 50 percent of its operation to the United States, El Salvador and Nicaragua.

According to the Union of Private-Sector Chambers and Associations, an organization that represents 50 businesses and major sectors of the economy, the wave of layoffs across several sectors of the economy last year culminated in more than 228,000 unemployed Costa Ricans at the end of the third quarter of 2014.

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