Risk of Devaluation in Costa Rica?

Credit growth in dollars is causing concern about possible risks of devaluation and a rise in interest rates.

Friday, December 6, 2013

Nacion.com reports that: "Guillermo Quesada, President of the Chamber for Banking and Financial Institutions said that banks have been proactive and have already taken steps to address the risks."

"The president of the Central Bank is concerned about the further widening of the gap between total external liabilities of banks (debt that banks have bought in from outside) and assets (its holdings in the currency)."

Stress tests and other assessments are being undertaken by banks before granting credit in dollars to companies or individuals that do not generate income in that currency.

In addition to the potential risk of devaluation of the colon against the dollar, companies must also consider in their credit risk analysis potential increases in interest rates, a scenario that could occur if the U.S. economy continues to recover.

"An increase in international interest rates could lead to a foreign exchange outflow from our country and a subsequent raise in the dollar, says Nacion.com."



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