Costa Rica: Strong Growth in Dollar Loans

State banks are leading this growth, although private banks still retain 61% of the total loan portfolio in the U.S. currency.

Thursday, September 20, 2012

An article in Nacion.com reports that "The growth in dollar loans from public banks is striking because it is a market that traditionally is dominated more by private financial institutions."

As an explanation for the growth in dollar loans, one point mentioned is the lack of perception exchange risk due to the behavior of the exchange rate, which for a long time has been very close to the lower limit of the exchange rate band set by the Central Bank, this coupled with the relatively low interest rates for loans in foreign currency.

"Mario Rivera, manager of the Banco de Costa Rica, said dollar credit growth is returning to the annual average experienced in the 2001-2008 period, before the international financial crisis and, if there are no significant changes in the environment, this boom will be sustainable and in line with the country's capacity. "

For his part Jean-Luc Rich, CEO of Scotiabank de Costa Rica, said that "conditions of stability and rates have been much better in foreign currency. 'For now interest rates in colones are at very high levels for people to encourage long-term purchases, where their contributions can grow by up to 30% as the base rate has done in recent months”, said the manager.

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More on this topic

Costa Rica: Loans in Dollars Get More Expensive

May 2015

Arguing an attempt to control credit growth in dollars, the Central Bank will apply a reserve limit of 15% to banks that receive lines of foreign funding in that currency.

The banking sector has opposed the measure, asserting that it will result in an increase in the cost of credit in dollars, affecting the business sector, especially exporters and importers who normally resort to credit lines in dollars to finance their operations abroad.

Costa Rica: Bank Lending Slows

August 2014

The scare liquidity of colones explains the lower growth of loans in this currency, while credit growth in dollars continues to lose strength.

Added to the diminished liquidity in colones putting downward pressure on credit growth in that currency, is uncertainty at enterprise-level over recent changes in the exchange rate and lower credit demand for real estate projects, power generation and tourism, as explained by bankers to Nacion.com.

Greater Supply of Forex Hedge in Costa Rica

November 2012

The Banco Nacional has been added to the list of financial institutions offering currency hedges to Costa Ricans.

Nacion.com reported that "The Board of the Central Bank authorized the Banco Nacional to start offering exchange derivatives."

The Central Bank endorsed three kinds of products: fixed term contracts, foreign exchange swaps and currency swaps.

Dollar Credit Up 15%

May 2012

In Costa Rica, the current stability of interest rates and dollar exchange rates favor loans in U.S. currency.

Dollar loans have recovered from the downward trend in 2010 to show positive growth rates since 2011, according to the Central Bank of Costa Rica.

In August 2010, a low of 15% was recorded, compared to 2009, but in September 2011, there was an increase of 20% compared to September 2010.

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