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."
A proposal has been made to extend the concept of real estate development funds to cover public and private projects for all types of infrastructure.
If the reform to the General Regulations on Management Companies and Investment Funds is approved, any investment project, from building houses to hydroelectric stations, will be able to be financed and developed through a special investment fund, that fund which would be called the Fund for Investment Infrastructure Projects.
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 visible part is the red tape and high costs of participation. The hidden part is the conflict of interest of its owner, the same commercial banks that offer loans for greater profit.
A recent Costa Rican executive decree, which declared the stock market to be of public interest, raises the need to examine why its development has stagnated, as it is vital to economic growth in terms of a source of financial resource allocation for businesses.
The proposal to finance small enterprises using venture capital remains stalled.
Since last year, authorities have been analyzing financial market regulations that support the creation of the framework and its use for small businesses.
The delay, they say, is because they want to analyze every aspect of it, especially with regard to the risks, believing it could its use could become popularised among investors that do not meet the profile.
Despite the international financial crisis, assets have grown by 8% in 2010 and the number of investors increased 10% to 33.432 customer accounts.
Among other options, stock funds won over many investors reappearing as an investment option with over 200 investors. Also open Growth Funds increased 12%, Megafunds with an 11% increase and Money Markets with 12%.
A court decision removed the obligation to collect commission on early fund recovery or to enforce minimum periods of investment for those funds.
The measure had been adopted by the Supervisory Board of the Financial System (CONASSIF), amending the General Rules on Mutual Funds Investment to prevent investors without the appropriate profile from entering into long-term funds.
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.
In Costa Rica, investment funds grew 16% in 2009, in spite of losing almost 10% of their investors.
During the past financial crisis, the Costa Rican market turned out to be more stable than international markets, making it a relatively safer place for storing capital. Because of this, assets managed by investment funds grew to $2.48 billion.
However, the crisis affected small local investors, who were forced to abandon their investment funds.
In Costa Rica, 55% of the total in investment funds is in extreme liquidity instruments.
The fear caused by the financial crisis has prompted investors to abandon growth and income investment funds which typically offer better returns and put their money in highly liquid, low return funds, where the money can be withdrawn in less than 24 hours.
According to the article by Esteban Ramírez Castro, published in elfinancierocr.com, this has caused low levels of performance similar to that obtained with bank certificates: "Money market funds in colones remained close to 7% for the last 30 days, two points down from the inflation projected for 2009. As a reference, overnight certificates from the Central Bank with a one-day term are paying 7.75% and even 30-day rates can go as high as 9%."