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.
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.
"This is because, according to the vice minister of the same portfolio, Randall Garcia, they have not yet officially named the new team for the Treasury Commission, which manages the topic", reported Prensalibre.cr.
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.
A bill to discourage influxes of speculative capital in Costa Rica, gives the Central Bank power to change the tax.
In savings certificates at a state bank income tax could reach 38%, when the 30% is added to the current 8%. For returns of mutual funds, which incur 5%, the amount to tax could be set at up to 35%.
Nacion.com reports that "The bill to discourage the inflow of foreign capital which was sent by the Executive to the Legislature yesterday granted authority to the Central Bank to define the conditions of the income tax regarding earnings from shares. "
A bill is being prepared to impose taxes on money which enters the country seeking to exploit the gap between interest rates in local currency and in dollars.
Furthermore President Chinchilla has issued a directive to state banks to stop competing with each other to attract investments from large institutions, such as the Instituto Costarricense de Electricidad, the Social Security Department, or the National Insurance Institute.
The recent increase in the value of the Costa Rican colon versus the dollar is worrisome, not only because there are no clear reasons to explain it, but also because it would be hard to contain it without causing greater problems.
In the past weeks, and without apparent reason, the price of the U.S. dollar in Costa Rica dropped considerably.
Last week we surveyed some financial operators as to why these movements where occurring, the general answer being: “we don’t know”.