Caribbean & Central America - March 2025

On 18 February President Rodrigo Chaves vetoed a bill that aims to improve connectivity between Costa Rica and its Central American neighbours by reducing the price of low-cost flights.

Bill 24,207 was introduced by opposition lawmaker Eliécer Feinzaig of the opposition Partido Liberal Progresista (PLP). Known as “the law to promote low-cost flights in Central America,” it was first debated by lawmakers on 8 October and again on 4 February. It aims to cut taxes on return flights that cost less than US$100 for a return ticket, and US$120 for return journeys to the Dominican Republic, making it cheaper to travel and boosting economic activity. “It is strange that President Chaves has chosen to be an obstacle to the Costa Rican people being able to obtain these benefits,” said Feinzaig.

However Chaves has argued that the law would not make flights more affordable, but only succeed in reducing the amount of tax revenue collected by Costa Rican authorities. He has also cited concerns that more flights to nearby destinations would affect Costa Rica’s tourism industry by encouraging visitors to spend less time in the country.

On 24 February Feinzaig wrote a column in local media outlet El Mundo in which he set out he set out his answers to the opposition to the bill. He called it “absolutely false” that tourists would spend less time in Costa Rica, citing the fact that the law would only reduce taxes on low-cost flights with no baggage allowance. As most tourists travel with luggage, they would not benefit from lower taxes, argues Feinzaig, who also uses this point to push back against suggestions that the bill would encourage Costa Ricans to holiday in Central America rather than at home.

In his column, Feinzaig also rejects the idea that the bill would be unconstitutional because it would regulate air fares. Instead, he argues, it offers an incentive, as airlines will not be obliged to offer return tickets without luggage for less than US$100. Claims that the law would lead to a massive reduction in tax receipts are also “absolutely false,” writes Feinzaig, as the deduction would only apply to tickets with a final destination in Central America, not those connecting to flights in other parts of the world. 

In addition, Feinzaig cites World Bank (WB) research published in April 2024 which found that flights within Central America are up to three times as expensive as similar journeys in South America. Researchers found that a one hour flight from El Salvador to Costa Rica cost US$500-$800 in March 2024, pricing most of the region’s population out of air travel, inconveniencing those who want to travel for pleasure but also hamstringing business and trade. 

Researchers found that high prices are due to limited competition and high rates of airport fees on regional tickets. While domestic flights are charged low fees, intraregional flights are charged similar fees to long-distance extraregional flights, limiting the entry or expansion of airlines and therefore the creation of new routes within the region. Reducing these fees would help to intensify competition and eventually reduce the cost of intraregional flights, according to the WB.

By taking action to reduce air fares, the WB argues that Central American nations could increase regional integration and boost economic growth by stimulating business activity. This would lead to job creation in manufacturing and services, including tourism and hospitality, it adds. The WB has been working with regional governments to encourage cooperation in reducing fees on intra-regional flights, and it cites Panama’s 2023 decision to cut departure fees at the Panama-Pacífico Airport, which primarily serves low-cost airlines. 

Further cooperation is needed in order to coordinate these efforts, but Costa Rica could make the first step. Although Chaves’ veto could mean that the bill is archived, Feinzaig is convinced that his bill has enough support to override the veto. This would require two-thirds of lawmakers to back the bill, equivalent to 38 votes. If the law is approved in this way, it could inspire similar efforts in other countries.