Arguing that there is a temporary need for liquidity in colons, on October 26 the Central Bank of Costa Rica decided to participate in the secondary market by buying two different series from the Ministry of Finance, with a maturity of 9 and 10 years.
On April 13, 2020, the Board of Directors of the Central Bank of Costa Rica (BCCR) authorized its Administration to participate in the secondary securities market of the Ministry of Finance and defined the conditions under which these transactions would be executed, with the objective of mitigating situations of systemic tension caused by temporary liquidity needs in colones, informed the monetary authority.
The Costa Rican Stock Exchange is preparing a bond plan for companies that seek to finance renewable energy, agriculture, and waste management projects, among others.
The aim of the authorities at the National Securities Exchange (BNV), is to have the first issue of bonds of this type ready in the last quarter of 2018.The plan is to provide financing alternatives through the stock market for projects"... new or existing ones that qualify as green projects, that is to say, that contribute to mitigating the effects of climate change or adapting to them."
Between January and November 2017, the volume traded on the stock exchange was $43,153 million, 4% less than the amount traded in the same period in 2016.
According to figures from the National Securities Exchange (BNV), as of November of this year 78,836 operations were recorded for a total of $43.153 billion, 4% lower than the $44.911 billion transacted in the same period in 2016.
The restaurant company Tsunami Global Group is preparing to raise funds through the Alternative Stock Market, part of the National Stock Exchange.
With the funds obtained through the Alternative Stock Market (Mercado Alternativo de Acciones or MAPA in Spanish), the restaurant group intends to open four new premises in 2018. MAPA is a private investment platform that allows small and medium-sized companies to obtain capital from investors privately, not as public issuers in the regulated stock market.
Banks authorized by the Superintendency of Securities may perform operations of clearing and settlement of securities in the stock market, which until now has only been done by brokerage houses.
With this modification in the regulations banks may provide more support for trading by its investors, providing the service of clearing and settlement of securities transactions which previously were only handled by brokerage houses.
The proposal to create a market for direct trading of securities has been rejected by the authorities, yielding to pressure from industry participants themselves.
Although the World Bank itself proposed analyzing the creation of a market where investors could directly buy and sell securities, the government bowed to pressure from the National Stock Exchange and stock brokers, and chose not to include the proposal in the initiative for modernization of the Law Regulating the Securities Market.
A draft bill on the stock market currently being discussed may not be consistent with what has been planned for the development of the financial sector.
Incorporating mechanisms for access to the stock market for small savers is part of the initiatives contemplated in the reform bill sent for consultation in December, one which industry representatives considered difficult to implement, because of the costs involved.
The adjustments to the rules that will come into force will make the financial sector, which had become stagnant, more attractive.
Among the major changes is a minimum of two people making up the members of a mutual fund, rather than 50 as stated in the aforementioned regulations. This has been questioned as being a loophole whereby economic activities with few investors, which should be incorporated as a company and consequently pay a rate of income tax of 30%, could now register as investment funds, paying only 5% by way of the tax.
The Superintendency of Securities projects there will be adjustments to regulations on investment funds, IPO, market intermediaries and infrastructure.
Elfinancierocr.com reports that "... the changes have goals such as modernizing the market, trying to make it more dynamic and giving appropriate treatment or investor protection."
"... Some of the adjustments include changes to the marketing of investment funds and the administration performed by management companies. The proposal opens the possibility for Sociedades Administradoras de Fondos de Inversión (Safis) to subcontract market analysis services, products and issuers. "
The fall in interest rates has caused an increase in bond prices, encouraging holders to make profits.
During the first quarter of 2013, the stock market in Costa Rica grew by 18%, with the secondary debt market being the best performing, going from $1.34 billion in the first three months of 2012 to $3.459 billion in the same period of 2013.
Data from the National Stock Exchange (BNV), reveals that for the entire secondary market (including bonds and other instruments) there was also a rise of 39% (data dollarized).
Starting March 13 there will be a negotiation floor for bills of exchange endorsed by a bank, which will be issued as a payment commitment in exchange for resources.
Elfinancierocr.com reports that "The National Stock Exchange (BNV) also reported that on March 11 the ACEP will unveil instructional operations which will detail that the transactions will be in colones and dollars, the negotiation and valuation will be conducted by simple discount mechanism, the issuing bank will be guarantor and the seller will be the brokerage firm which offers the sale. The selling amount will be the face value amount. "
These instruments would prevent banks from filling up their credit portfolios as the funds are provided by investors.
"The National Stock Exchange (BNV by its initials in Spanish) and the Costa Rican banking sector are reviving a type of share called "bankers acceptances" as a way to provide short-term funds to companies that need them, without having to apply for a formal loan," reported Elfinancierocr.com.
The bill for the Efficient Management of Public Finances contains reforms that would make the system inviable.
The law intends to make the cost of supervising the securities market be fully covered by its participants (Stock Market, Ceval, Brokerage Houses and Mutual Funds), who currently contribute 20%.
José Rafael Brenes, head of the National Stock Exchange in Costa Rica, argues that this provision would be lethal to the system, since the cost of monitoring would represent 53% of market participant’s profits, which currently represents 10%.
Although the Central Bank denies liquidity problems in the Costa Rican economy, rates of 23% in the money market indicate nervousness on the part of financial operators.
Concerns about the potential illiquidity of the Costa Rican economy have been reinforced by the judgment by the rating agency Fitch on 14th February.
Fitch warned that a sudden erosion of liquidity is risk born by the country, when justifying the sovereign debt rating in Costa Rica, which remained unchanged.
The increased demand for bank credit from consumers and businesses plus the financing needs of the government, is putting pressure on the capital market and interest rates.
The competition for liquidity can be seen in the activity of the National Stock Exchange, where the amounts being released on the exchange are increasing because of the concurrence of the state banks - Banco de Costa Rica, Nacional and Popular, and of private banks like Scotiabank, and by other entities such as Grupo Mutual y la Compañía de Fuerza y Luz.