More Debt, But with Economic Recovery

Faced with the Costa Rican government's plans to issue $6 billion in debt over six years, the productive sector demands that "parallel and complementary actions for economic reactivation" must be implemented.

Monday, March 18, 2019

Currently, the deputies of the Legislative Assembly of Costa Rica have in their hands the bill that would authorize the government to issue debt securities in the international market (Eurobonds), a proposal that contemplates that in the first two years $1.5 billion are issued each year, and that in the remaining four $3 billion are issued.

See "Ambitious Plan for External Debt"

The government presses for the debt project to be approved. Nacion.com reports that on March 18 "... Gustavo Vargas, manager of the Banco Nacional; Douglas Soto, manager of the Banco de Costa Rica (BCR); Magdalena Rojas, manager of the Banco Popular; and Elian Villegas, executive president of the Instituto Nacional de Seguros (INS); explained the negative effects on interest rates, credit reduction, increase in delinquency and unemployment if the Eurobonds bill is not approved in Congress."

The article adds that "... The officials held the atypical joint press conference because they felt that the situation in the local economy would be far more damaging without this financing instrument. Vargas explained that only in rates they foresee a 2.35 percentage points (p.p.) increase based on current levels, given the government's need to capture $1.5 billion this year."

For their part, the businessmen understand the need for the government to make effective the issuance of these securities to refinance the maturities of the public debt, but assure that it is urgent and vital that, together with the increase in the debt, parallel actions are implemented. complementary activities to reactivate the economy and improve the country's competitiveness.

Read full article (In Spanish).

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More on this topic

Costa Rica Postpones Eurobonds to 2021

March 2020

Treasury authorities announced that plans for this year are to negotiate with the Legislative Assembly for approval to issue debt in the international market, and if approved, the issuance would take place in 2021.

Last year the executive branch's plans were to issue $6 billion in Eurobonds, but the Legislative Assembly approved the issuance of only $1.5 billion, arguing that the amount proposed at the beginning was too high.

Costa Rica: Government Urges to Issue More Eurobonds

September 2019

The Ministry of Finance plans to present a new bill in the Legislative Assembly to issue $4.5 billion in foreign debt bonds next year.

The amount that will be requested is what is needed to reach the $6 billion that was requested this year before Congress, of which only $1.5 billion was authorized.

Approval to Issue Eurobonds

July 2019

The Legislative Assembly of Costa Rica approved in second debate the bill that authorizes the government to issue up to $1.5 billion in bonds in the international market.

The Ministry of Finance (MH) reported that with the approval of Bill No. 21.201, which was made on July 16 as planned, the Executive is authorized to administer, issue and manage financing operations in the international market up to an amount of $1.5 billion (one thousand five hundred million U.S. dollars), during the following year after the law was approved.

Costa Rica is Closer to Issuing Eurobonds

July 2019

The Legislative Assembly approved in first debate the issuance of $1.5 billion in debt securities in the international market, which in the opinion of the rating agencies, helps to reduce uncertainty about the government's ability to meet its financing needs.

The Treasury Department's initial plan was to issue $6 billion within six years, however, the committee in charge of the file modified the text so that the limit would be $1.5 billion.

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