Costa Rica’s Steady Advance: A Model for Reducing Poverty in Latin America

Costa Rica, a Central American nation often celebrated for its environmental policies and stable democracy, has achieved a significant reduction in poverty, offering valuable insights for the region.

According to the National Institute of Statistics and Censuses (INEC), the poverty rate fell to 15.2 percent in 2025—the lowest since tracking started in 1986—down from 18 percent in 2024 and a high of 23 percent during the COVID-19 crisis.

This equates to 286,365 affected households, a decrease of 40,716 from the previous year, potentially benefiting around 414,000 people through improved access to essentials.

Extreme poverty, where households cannot cover basic nutritional requirements, declined from 4.8 percent to 3.8 percent, impacting 71,336 households—a reduction of 15,412.

Urban areas recorded the strongest progress, with rates dropping to 13.6 percent from 16.4 percent, supported by employment in sectors like technology and sustainable tourism.

Rural regions saw a smaller improvement, from 22.1 percent to 19.3 percent, with the Central area around San José maintaining the lowest levels at 10.8 percent overall and 2.2 percent extreme.

Higher rates persist in areas like Huetar Caribe (24.9 percent), underscoring challenges in indigenous and remote communities.

Costa Rica boosts incomes and cuts poverty with targeted reforms

This progress stems from deliberate policy shifts following the pandemic’s economic fallout, which caused unemployment to reach 25 percent and disrupted tourism, a key revenue source.

Under President Rodrigo Chaves, who took office in 2022, the government implemented fiscal reforms to achieve negative inflation of -1 percent and expanded programs such as family farming support and microloans.

As a result, average household income rose 8.1 percent in real terms to 1,209,825 colones (about $2,290 monthly), while per capita income increased 10.4 percent to 485,792 colones ($968).

Notable growth came from property rents (up 25.9 percent) and self-employment (up 16.2 percent), diversifying income sources.

Multidimensional poverty, encompassing deprivations in education, housing, and employment, remains at 9.9 percent, with 33 percent of children still facing risks.

For international observers, Costa Rica’s approach—integrating economic discipline with social investments—demonstrates how targeted strategies can lower regional averages above 25 percent in countries like Brazil. It highlights the potential for equitable growth, even amid global uncertainties.