For 2021, some of the financial institutions competing in the Costa Rican market are betting on placing loans for the purchase of homes, consumer loans and business financing.
In Costa Rica, home purchase loans were already showing positive signs at the end of 2020, since in November of last year the amount of the loan portfolio in question reported a 7% year-on-year increase.
The doubts generated by the fiscal proposal with which the Costa Rican government plans to discuss a loan with the IMF, would be the main cause of the recent upward trend in the dollar's price, which as of September 29 was quoted at ₡604,52.
The figures of the Central Bank of Costa Rica (BCCR) report an upward trend in recent days, since between September 11 and 29 the price has risen from ₡595,41 to ₡604,33, which is equivalent to a 2% variation.
The Costa Rican Legislative Assembly approved in first debate the bill that creates a deposit guarantee fund and resolution mechanisms for the banking system.
The objectives of the deposit guarantee are to protect depositors, particularly small ones, and to strengthen financial stability in the event of a bankruptcy of an intermediary, through timely payments to insured depositors and maintaining confidence in the financial intermediation system is critical to avoid bank runs and protect financial stability, the legislative body explained.
Favorable financing conditions for the purchase of this type of vehicle and lower rates for freight services are part of the actions proposed by the government of Costa Rica to boost sales of electric vehicles.
The state-owned Banco Popular, Banco Nacional and Banco de Costa Rica are the financial entities that will offer attractive conditions in their credit lines for the purchase of electric transportation units.
Although the downward adjustments made months ago in the bank reserve and monetary policy rate do not yet appear to have had an effect on the loan portfolio in Costa Rica, banks expect credit to be reactivated soon.
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.
Faced with the Costa Rican government's plans to issue $6 billion in debt over six years, the productive sector demands that "parallel and complementary actions for economic reactivation" must be implemented.
Currently, the deputies of the Legislative Assembly of Costa Rica have in their hands the bill that would authorize the government to issue debt securities in the international market (Eurobonds), a proposal that contemplates that in the first two years $1.5 billion are issued each year, and that in the remaining four $3 billion are issued.
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 slowdown in the issuance of loans, in 2018 the profits of banks in Costa Rica grew just 3% over what was recorded in 2017.
Figures from the Central Bank of Costa Rica show the deceleration reported in loans granted during the first nine months of last year, detailing that up to December 2017 the credit portfolio to the private sector registered an 8% year-on-year increase, while the indicator concerned up to September 2018 dropped to 5%.
Because of fiscal uncertainty, in the first months of 2018, banks operating in the country reduced by 16% the amount invested in public debt securities in the local market.
Against the backdrop of doubts about the future of public finances in Costa Rica, it was reported that from January to September, 14 local public and private banks invested $3.190 million in government bonds.
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%.
The Legislative Assembly has approved the absorption of Bancredito by Banco de Costa Rica, which must take on both the entity's assets and its obligations.
After determining that Banco Crédito Agrícola de Cartago (Bancrédito) was not financially viable, last March the National Council of Supervision of the Financial System (Conassif) recommended the absorption of the financial institution, a process that was completed yesterday when the Assembly voted in favor of the suggestion.
In Costa Rica, six out of eight banks are opposed to the possibility of lending the $35 million required to finance technical studies for a new highway between San José and San Ramón.
Nacion.com reports that "... Since November 29, the Bank of Costa Rica, administrator of the trust for the highway, knocked on the doors of Banco Nacional, BAC San José, Davivienda, Banco Internacional de Costa Rica (BICSA), the Banco Interamericano de Desarrollo (BID) and Instituto Nacional de Seguros (INS) to raise the money. However, those institutions rejected the request for different reasons."
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.
In 2017, profits of Banco de Costa Rica fell by 30% compared to 2016, and those of the Banco Nacional fell by 22% in the same period.
The reduction in profits was due to a decrease in the margin of financial intermediation, due to an increase in interest rates in both dollars and colones, as explained by the authorities of the entities to Nacion.com.