Preventive reasons for unforeseen expenses in the context of the pandemic and low liable interest rates are some of the factors that explain the increase in the balance of short-term savings instruments in the Costa Rican market.
In the context of the spread of covid-19 and the restriction of several productive activities, the broad money supply (including cash held by the public and highly liquid financial instruments in national and foreign currency) showed a 35.7% year-on-year growth rate in June 2020, considerably higher than the 2.7% recorded in the same month in 2019, while the balance of term instruments fell, reported the Central Bank of Costa Rica (BCCR).
Setting a maximum usury rate and preventing clients from getting into debt to the extent of reducing their income below the minimum wage line are some of the changes that have arisen due to the application of the new law that has been in force since June 20.
On June 20, 2020 the Usury Law was published in the scope number 150 to La Gaceta number 147, which establishes the methodology to be used to set the maximum interest rate, from which the crime of usury will be considered to exist, details an official statement.
In Costa Rica, a law initiative under discussion seeks to set caps on interest rates on loans, a measure that could lead to a reduction in the offer of credit for debtors classified as higher risk.
As part of a bill being discussed in the Legislative Assembly, the heads of the Central Bank of Costa Rica (BCCR) and the General Superintendence of Financial Entities (Sugef) were asked to give their views on the content of the proposal.
Although The Central Bank has been reducing the monetary policy rate to boost the issuance of bank credit, the speed with which the portfolio of loans in national currency grows continues to decrease.
Official data from the country's financial system indicate that by October 2017 the portfolio of loans in local currency grew to 14%, in the same month of 2018 the rate fell to 6% and by the tenth month of 2019 the increase was just 4%.
After last week in Costa Rica the rate rose to 6.65%, a level that had not been recorded since August 2015, on July 10 abruptly decreased to 6%.
Data published by the Central Bank of Costa Rica on Wednesday afternoon, July 10, show that the Basic Passive Rate (PBS) decreased by 0.65%, and will remain at 6% until next July 17.
Because savers in Costa Rica have moved their resources to longer terms, to avoid an increase in income tax, the Basic Passive Rate rose to 6.65%, a level not recorded since August 2015.
According to data published by the Central Bank of Costa Rica on Wednesday afternoon, July 3, the Basic Passive Rate (BPR) reports levels not reached since August 26, 2015, and will remain at 6.65% until next July 10.
In Costa Rica, the government's strong need for financing and the Central Bank's exchange rate interventions have been putting pressure on the local financial market, pushing up passive rates in Colones.
The decrease in liquidity in Colones generated by the pressure exerted by the government and the Central Bank in the local market is the main reason behind the upward trend in passive rates in local currency.
Because of the adjustments made by the Central Bank to interest rates in recent days, financial institutions in Costa Rica will be forced to raise interest rates on savings in local currency.
Arguing that forecasts suggest that inflation in 2019 could be above the upper limit of the target range, on November 1st the Central Bank of Costa Rica (BCCR) decided to raise the monetary policy rate from 5% to 5.25%.
For six-month term savings in colones, the Central Bank in Costa Rica is offering a return of 8.10%, a rate that is higher than that available at commercial banks.
In order to attract money from savers in colones in six months terms, the rates currently offered by financial institutions are 8.10% in the case of the Central Bank (Banco Central), 6.85% at Banco Nacional, 6.75% at Banco de Costa Rica and 6.40% in Promérica.
Claiming that in the last few months inflation expectations have increased, the Central Bank has raised the monetary policy rate from 4.75% to 5%, from February 1st.
The Central Bank argues that the price of oil has maintained a bullish behavior since July 2017. This situation, with a backlog, is transferring to the local price of fuels, with a potential transmission in the coming months towards other prices.
Entities have already registered increases in rates for loans and investments in local currency, adjusting to the increases that the Central Bank has made in the monetary policy rate and the rate for electronic deposits.
The increase has occurred in a generalized way in most of the interest rates offered by banks and financial institutions for loans and deposits in colones, days after the Central Bank raised the rate for deposits made through its electronic platform.
The Passive Base Rate has fallen to 4.35%, while the effective tax rate in Dollars dropped from 2.08% to 1.96%.
The Central Bank of Costa Rica (BCCR) released on Wednesday afternoon on December 7, news that the passive base rate reached a record low of 4.35%, very close to 4.25%, the lowest level reached by the base rate since records began in 2008.
The passive base rate fell back down to 4.55%, while the effective rate in dollars went down from 2.11% to 2.08%.
The Central Bank of Costa Rica issued on Wednesday afternoon, November 30, news that the passive base rate dropped to the same level it was at two weeks ago, meaning that the rate will remain at 4.55% until Wednesday 7 December.
The passive base rate rose from 4.50% to 4.60%, while the effective rate in dollars rose from 1.93% to 2.11%.
BancoCentral deCosta Ricareleased news on Wednesday afternoon on November 23 that the passive base rate rose by 0.10%, meaning that the rate will remain at 4.60% until Wednesday November 30.
The basic passive rate rose from 4.50% to 4.55%, while the effective tax rate in dollars dropped from 2.03% to 2.00%.
The Central Bank of Costa Rica (BCCR) released on Wednesday afternoon on November 9 news that the passive base rate rose by 0.05%, meaning that it will stand at 4.55% until at least Wednesday, November 16.
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