Thousands of Costa Rican small businesses closed in 2020

More than 7% of Costa Rica’s microenterprises closed in 2020, according to the National Institute of Statistics and Census (INEC).

The number of microenterprises — Costa Rica’s smallest businesses, as defined by a formula that takes into account annual revenue and the amount of people employed — dropped to 367,911 in 2020. This represents a decrease of 28,885 microenterprises compared to 2019, or -7.3%, per INEC’s annual survey on the topic.

INEC says the Covid-19 pandemic provoked the creation of about 22,500 new business, the majority “out of necessity” — because the individuals lost their previous job, couldn’t find salaried employment, or needed additional household income.

Some 200,500 microentrepreneurs received financial support related to the Covid-19 pandemic. About half (50.2%) received the “Bono Proteger,” while 14% reduced their payments into Social Security and 8% received other subsidies.

Microenterprises are characterized by having at least one aspect of informality. For 2020, INEC estimated that 79.5% do not maintain formal accounting records. Most microenterprises (73%) employ a single worker; just 10.5% employ three or more people.

The latest INEC figures, released in December, placed Costa Rican unemployment at 21.9%, nearly 10 percentage points higher than the same period in 2019.

About 45% of the working-age population is in a condition of informal employment; that is, they perform jobs without being registered with the State and without contributing to social security.