The Central Bank has confirmed the widespread perception of economic slowdown, with growth forecast for this year falling from 3.4% to 2.8%.
The president of the organization confirmed that an excess of dollars in the foreign exchange market explains the behavior of the exchange rate, which has remained relatively low and stable in recent months.
From a statement issued by the Central Bank of Costa Rica:
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.
The purchase of dollars by the central bank in order to prevent appreciation of the local currency is considered a form of subsidy for exporters.
From an interview in Nacion.com made by Patricia Leitón with the President of Banco Central Rodrigo Bolaños:
"I think it's very important that we continue with the gradual process of removing excess colones, we have already made a significant achievement, but of course these latest purchases of dollars have slightly increased the surplus".
For the third consecutive week the Central Bank of Costa Rica’s basic borrowing rate has fallen, now standing at 9.05%.
This indicator is a weighted average of the interest rates of gross deposits in colones, negotiated by resident financial intermediaries, and the interest rates of deposit instruments of the Central Bank and Ministry of Finance, negotiated both in the primary and secondary markets, each corresponding to periods of between 150 and 210 days.
Since late December last year, the Central Bank of Costa Rica has applied a new methodology for calculating the passive base rate.
From the website of the Central Bank of Costa Rica (BCCR):
Passive Base Rate
A. Definition
The base rate is a weighted average of the interest rates in colones on gross collections by financial intermediaries negotiated by domestic residents and the interest rates for deposit instruments of the Central Bank and Ministry of Finance negotiated both in the primary and secondary market, each corresponding to periods of between 150 and 210 days.
The BCR has imposed the highest rate since 2009, making the measure effective from Thursday 19th April.
The basic passive rate (BPR) has remained at 9.25%, for 7 consecutive weeks, which is the longest period without changes in the last four years.
"As usual, the change occurred because of the momentum of public commercial banks, whose average rates rose from 9.29% to 9.56% and took with them the BRR which carries the most weight in the calculation," reported Elfinancierocr.com.
Aldesa Group reports that given the decline in the Dollar's price at the wholesale market MONEX, the Central Bank (BCCR) is forced to buy dollars at the lower band of ¢500 per dollar.
During the first two weeks of February purchases by the public sector in this market have intensified absorbing the supply of dollars. However, given the recent decline in purchases by this sector, the dollar has moved to lower prices and it has been the Central Bank the one buying the dollars offered at ¢ 500.
Aldesa analyzed the Macroeconomic Program 2011-12, by the Central Bank of Costa Rica, with projections for 2011.
In our view, one of the most important elements of the program and to which attention should be paid, has to do with projections for public finances.
Given the relative similarity of economic conditions between 2010 and 2011, the most important is the role played by the Central Government in managing the growing fiscal deficit.
The Central Bank of Costa Rica (BCCR) reported the acquisition of $ 7.5 million to defend the lower limit of the band system governing the exchange rate.
The BCCR´s intervention on the foreign exchange market increased liquidity in Colones, which in principle, and given current conditions of the monetary system, it did not have the usual inflationary effect.
Starting Thursday, December 9, the passive base rate will rise a half percentage point.
This is the third consecutive increase by the indicator, thus reaching the value it had on November 24th.
"Although this is a new increase, the indicator is not yet near its yearly peak, which is 8.50%, recorded last May," Edgar Delgado in his article at Elfinancierocr.com reports.
The passive low base rate falls for the second consecutive week, from 7.50% to 6.75%.
Two weeks ago it temporarily located at 8.25%, showing the vulnerability of the indicator and transient conditions of liquidity as well as sector-specific needs, with the aggravation that this rate is used as the main reference for credit grants, so it has direct effect on financial planning for many businesses and families.
Markets closed with the dollar at ¢518.34, ¢7.88 higher than the day before, after the Costa Rican Central Bank's (BCCR) decision to increase foreign exchange reserves.
Since the BCCR announced the news, the dollar's price increased steadily, reaching a high of ¢523,01 before finally closing at ¢518.34.
Rodrigo Bolaños, president of BCCR, said that, "in the coming days it will be interesting to see what direction the exchange rate takes because just the announcement alone has caused it move up by several colones," reports Nacion.com.
The monetary authority has launched a scheme to acquire international reserves, immediately causing the exchange rate to rise.
In his blog for Nacion.com the analyst Jorge Guardia highlights that this intervention represents a trimming and sprucing within the limits and a fundamental change in Central Bank (BCCR) policy that lacked due transparency.
Central America may be directly impacted by the slowdown in the recovery of the world economy.
For the time being, the region's measures of external and internal demand do not seem affected by the threat of lower growth rates for the economies of partner developed countries. Some central banks had raised their expectations but, in view of the risks, they are likely to revise their growth predictions back to original levels between 2.0% and 2.7%.
The Costa Rican Central Bank, in its half yearly review of the Macroeconomic Program, held inflationary goals for December 2010 and 2011 constant at 5% and 4% respectively.
The document's prologue indicates that:
"Monetary policy remains focussed on consolidating the deflationary trend observed in the last 19 months. In the medium term the aim is that inflation will converge with levels in the country's main commercial partners.