Millions of dollars earmarked for developing banking are standing idle in Costa Rica, because of legal, administrative and financial oversight problems.
The very laws that created these credit instruments are the reason of their lack of use. They end up not fulfilling their role of providing low cost financing for small and medium companies.
One of the reasons is that financial entities are limited to an interest spread of 2% in the Development Banking System (SBD). This makes the market unattractive for banks: only $96 million are available for loans.
A number of coffee associations have reacted to the sector’s losses by requesting the activation of a $71 million Coffee Trust.
The National Coffee Association (Anacafé) agrees with the Federation of Coffee Cooperatives (Fedecocagua) that this is the optimal time for the government to activate this trust, after the eruption of Pacaya Volcano and Agatha tropical storm damaged plantations.
Commercial credit institutions lack the necessary information to innovate and provide new financing schemes for clean energies.
Most of Central America’s banking institutions manage limited information and systematized criteria when financing renewable energy and energy efficiency ventures. This is a significant drawback for the development of this industry in the isthmus.
Growers explained that banks are not using the special credit line created specifically for them by the Government, which is channeled through the Multi-sector Investment Bank (BMI).
Coffee growers explained that they are unable to start sowing for this season because they lack credit. They expect the government to find a solution, and make these funds available to farmers, stated Ernesto Lima, president of the Union of Salvadoran Coffee Unions (Ucafes).
Banks in El Salvador remarked they have resources to boost the country’s economic recovery and lend them to companies.
Armando Arias, president of the Salvadoran Banking Association (ABANSA), explained they now have enough liquidity to assist the country in its economic recovery, thanks to being very cautious during the crisis.
“We have between $800 million and $1.000 million ready, we need investors to submit viable projects”, said Arias.
Consumer budgets are still healing from the economic crisis, delaying a recovery in credit card lending.
Almost 60.000 credit cards were cancelled during 2008 and 2009, half of them for delinquency by their owners. Many others maxed out their credit and cannot use their cards anymore.
The new credit card law seems to make things even worse, as it requires consumers to have a certified income of at least $500 in order to apply for a credit card.
The National Registry Center requested Congress to pass the Treaty for Creating and Implementing Central American Mortgages.
This type of regional mortgage could make it easier to obtain capital, especially for indirect investments and loans.
“Guatemala, Honduras, Nicaragua, Costa Rica, Panama, the Dominican Republic and El Salvador are included in the treaty, which aims to ease mortgage loans in each of the member nations, by being able to use as collateral real estate located in other member countries”, explained Diariocolatino.com.
Asomif will submit a plea for unconstitutionality at the Supreme Court of Justice.
René Romero, president of Asomif, the Nicaraguan Association of Microfinance Institutions, assured that despite presenting this plea, they will observe the new law known as “Moratory Law”, which sets conditions for negotiating debt covenants between debtors and microfinance institutions.
At the end of February the loan portfolio of Salvadoran banks was 4.6% smaller than the same month of 2009.
In February 2010 banks had a combined loan portfolio of $8.09 billion, down from $8.47 billion in February 2009.
Claudio de Rosa is the former CEO of ABANSA, the Association of Salvadoran Banks. He told Elsalvador.com: “this sharp reduction in credit to private individuals and companies is a result of less demand and lack of confidence, in addition to lower remittances, higher unemployment and less exports”.
The so-called "Moratorium Law", passed yesterday in Nicaragua, could have a strong negative effect on the availability of credit for the productive sector.
One of the criticisms of the new regulation is that it sets interest rates by law. Opponents argue that the cost of money changes with the variations of the international financial markets.
José Adán Aguerri, President of the Private Enterprise Council, stated that the passing of the law carries dire consequences for the country's production, as it risks the capacity of micro-financing institutions to offer loans.
During 2009, the banks’ credit portfolio lost $583.5 million; it is the first reduction in 5 years.
By the end of 2009, banks had $8.6 billion in loans, down from $9.2 billion at the end of 2008.
“Armando Arias, president of the Salvadoran Banking Association (ABANSA), explained that the contraction is relative higher than the performance of the economy, which shrank 3.3%”, reported Laprensagrafica.com.
There are issues complicating the practical execution of the Treaty for the Creation and Implementation of a Central American Mortgage.
In Guatemala, the Banking Superintendence warns on the problems that would take place in that country should the regional mortgage become a reality. They argue that the "text of the treaty does not specify how to apply regular legislation in unforeseen situations, which could lead to complications in form and matter when applying the treaty". They also complain that it specifies that the States should "name a Central American Registry, but does not detail its functions, jurisdictions, competences or location".
In the first 11 months of the year, Salvadoran companies sold 24.57% less in average.
9 out of each 10 businessmen were affected by the economic crisis, according to a study conducted by Luis Membreño, independent economist.
From Laprensagrafica.com: "The drop ranges from 10% to more than 50%. 'It is a result of the population earning less money; less income and jobs', explained Membreño".