The new tax reform proposal being discussed in Costa Rica raises capital gains tax from 8% to 15%, and also excludes recognising as a debt deposits made by issuers in the securities market.
In the view of the National Stock Exchange (BNV), not recognizing deposits made in the stock market as debt leaves it at a clear disadvantage, compared to banks, as a source of financing for companies.Not only does it compromise access to investors' savings, it also significantly limits companies and individuals investment options.
The proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.
In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.
The government of Costa Rica announced that in the first semester it would issue up to $2.175 billion in debt securities in the local market, however, as of June it has already issued $3.633 billion.
In February of this year, the Ministry of Finance announced that in the first semester it would issue $2.175 million in debt securities through the auction mechanisms and electronic window in the local market.But according to data from the National Stock Exchange, from January to June, the amount awarded exceeded the initial estimates by 67%.
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.
The "Trump effect", added to the upward pressure caused by inflation in US interest rates, explains the upward trend in the performance of Costa Rican bonds and the fall in their price.
A resumption of the upward trend seen in debt securities traded on the international market could make it difficult for the government access external financing, in a context in which most bonds from emerging market countries are experiencing the same situation.If the government decides to resort to financing in the international market, the cost of doing so would be higher if bond yields continue to rise.
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.
Low interest rates, uncertainty and a declining share of securities issued by the government explain the 15% drop in the number of trades in 2014 compared to 2013.
A few days after the end of the trading year, the stock market is preparing to close 2014 with numbers lower than 2013, following the downward trend in the number of transactions seen since 2009.
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 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).
A group of executives of financial institutions are working with the Central Bank in search of solutions to the stock market stagnant growth.
As outlined in the article in Elfinancierocr.com, "The team is made up of José Rafael Brenes, director of the BNV, Roberto Venegas, financial advisor and ex manager of the Stock Exchange, Lanzo Luconi, president of the National Investment Fund Company , Jose Adrian Vargas, National Treasurer, Thomas Allen, chief financial officer of Florida Ice & Farm, Lucia Fernandez, manager of IBP Pensions and Frederick Ruzicka, Mutual Valores stockbroker."
The Securities Commission (Sugeval), is preparing regulation to enable venture capital funds to conduct public offerings.
In Costa Rica there are several venture capital funds, but they are private and cannot perform public offerings. The regulation to allow them to do it could be ready in a couple of weeks.
“José Rafael Brenes, CEO of the Costa Rican Stock Exchange, explained that Sugeval has the regulation almost ready, and could be ready in a few weeks”, reported Nacion.com.