Withdrawal of Capital from Costa Rica Due to Lower Interest Rates

The steady flow of investments that came into the country in 2012 and part of 2013 has been reversed.

Friday, March 28, 2014

This was indicated by the president of the Central Bank of Costa Rica, without giving details of the extent of the phenomenon.

Rodrigo Bolaños told Elfinancierocr.com that "... Capital inflows into the Costa Rican economy between 2012 and early 2013, to take advantage of high local interest rates, have begun a process of gradual withdrawal ... The shorter-term securities in which some of that money was invested are due and are not being renewed. "

"... Studies by the Central Bank determined that between 2012 and early last year revenue of $265 million was received by foreign investors through Global Depository Notes (GDN). "

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Costa Rica: Tax Discretion for Central Bank

March 2014

The mere name of the bill approved by Congress "An Act to Discourage Entry of Capital from Abroad" reveals how dangerous this regulation could be for the Costa Rican business climate.

An article in Nacion.com reports that "...This bill was submitted to Congress a year ago, promoted by the Government, after the central bank detected a wave of speculative capital attempting to take advantage of interest rates in the country and then take it abroad."

Costa Rica: A law Too Late

February 2014

A year after first being proposed, and under different economic conditions, progress has been made on the adoption of the law to discourage "hot" capital.

From a press release issued by the Legislative Assembly of Costa Rica:

MPs voted in a first debate, to put a brake on the entry of speculative capital into the country, known as hot money, with an initiative submitted for discussion by the Executive.

Costa Rica: No Progress For Law Against Speculative Capital

May 2013

The bill which taxes interest generated by speculative capital has been stalled because it respective Legislative Commission has not been formed yet.

Edgar Ayales, Finance Minister recalled the significance of the future law and added that the problem could take three or four weeks.

Costa Rica: Pressure to Approve Capital Inflow Control

April 2013

The business sector is calling on Congress to pass the bill which charges a 30% tax on interest gained by speculative capital.

From a press release issued by the Costa Rican Union of Chambers and Associations in the Private Business Sector (UCCAEP):

The Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP) is urging MPs to approve, as soon as possible, the bill which levies a 30% tax on interest earned on speculative capital, which was ruled on in February by the Committee on Financial Affairs.

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