The cost of not making decisions about the serious fiscal problem affecting Costa Rica "is incommensurable and has the potential to affect not only the economic but also the social and democratic order of the country."
This is the emphatic and clear position of the Comptroller General of the Republic of Costa Rica regarding the serious and risky situation in which the public finances of the country find themselves.Furthermore, as is well mentioned in the report "Fiscal and Budgetary Evolution I semester 2018", published recently by the institution, if decisions related to solving problems of short-term liquidity and modifying the structure of public expenditure to the medium and long term continue to be delayed, the cost to the country will be much more than just economic.
Data for January 2013 shows that the arrears in loans in the three state banks in Costa Rica are close to the maximum allowable limit.
For the Banco de Costa Rica, the arrears indicator has reached 3.14%, exceeding the ceiling imposed by the Superintendent of Financial Institutions (Sugef), of 3%.
Nacion.com reports that "The delinquency indicator of the three state banks, together, came to 3.02% last month, up from the 3% allowed by Sugef.
Fitch Ratings has issued a special report entitled, "Central American Banking: After the Crisis, a Disparate Evolution"
In Fitch's opinion the banks have shown a mixed performance in Central America during the period of the global financial crisis. At the same time, banking systems have dissimilar perspectives on future performance, reflecting different economic growth prospects in the region.
Demand for credit is not growing as expected, as there are fewer investments in the country.
According to Roberto Orellana Milla, CEO of Banco Agrícola, "demand for credit has dropped 4%".
Elsalvador.com published more statements by Orellana: "Although we are in the midst of a slight economic recovery, we are still being affected by the 2009 crisis, and uncertainty and insecurity are contributing factors for the little demand for credit, 'because the crisis has affected a lot of companies and individuals'".
After completing inventory restocking, the activity of Costa Rican manufacturers shows a slowing trend due to lack of demand.
Investment strategy analysts from ALDESA report that the Monthly Index of Economic Activity (IMAE) for May shows a 3.74% increase year-on-year. The data from the deseasonalized series indicate that economic activity peaked in March before slowing in subsequent months.
Consumer budgets are still healing from the economic crisis, delaying a recovery in credit card lending.
Almost 60.000 credit cards were cancelled during 2008 and 2009, half of them for delinquency by their owners. Many others maxed out their credit and cannot use their cards anymore.
The new credit card law seems to make things even worse, as it requires consumers to have a certified income of at least $500 in order to apply for a credit card.
Fitch Ratings issued a special report: "Central American Banking: Evolution of the Crisis and Learnt Lessons".
In Fitch's opinion, the negative impact the international crisis had on Central American banks was very evident in 2009. The current economic context poses growing risks for the sector, as well as an important challenge for this year.
"Banking systems of the region have witnessed a sensible reduction in their cumulative results in the first half of the year, mainly caused by a considerable increase in delinquent loan reserves", states the report. "These results will continue under pressure in the following months, and their potential bounce-back will depend on an improvement of the economic environment, which Fitch does not expect before 2010".
Costa Rican banks are reporting an increase in loans, specially for industry, services, commerce and home building.
Event though stats for the first half of 2009 do not report an increase in the credit balance of the banking system, "bankers forecast higher loan growth than predicted by the Central Bank in its macroeconomic program revision. The Bank estimated credit growth at 4.3% in Colones and 3% in U.S. dollars."
Banks credit intermediation and its influence in the generation of goods and services on behalf of the productive system.
In a SECMCA report, Nelson Oswaldo Ramirez presents a brief analysis of the development of banking credit in comparison with the region's economic activity in the first five months of the year. In the way he studies relationships that may exist between the variables of Credit and GDP.
The special line of credit in colones that the bank offers to financial entities was extended until September 30th.
Last November the bank opened this special line of credit in order to confront temporary liquidity problems in the financial entities.
In an article in Nacion.com, reporter Patricia Leitón says: “The measure was effective until March 31st, and was later extended to June 30th, and now until September 30th… the bank argues that: ‘It is in our interest to maintain the credit per the before mentioned regulation, with the goal of maintaining stability in the national financial system and the normal functioning of the system of payments.”
The little bit of available credit comes from micro financers that charge very high interest rates for the current profitability levels in the industry.
The dairy industry is most in need of a financial system to support its development.
As requests were made for better access to credit, producers added to their protest because of the increase of the supply of meat and dairy products made from soy.
June shows 12-month growth in credit at 6.7%, below the 11.7% it had at the beginning of this year.
According to the president of the Chamber of Industry of Guatemala, Thomas Dougherty, uncertainty about the international economy and contingency plans brought about by companies are a few of the causes for the decrease in requests for lines of credit.
Profitability drops as asset liquidity increases, but liquidity is what ensures the life of the banking business and their customers' money.
Panamanian banks have not used the extra funds that the financial incentive program (PEF) made available to them in order to stimulate lending. In addition, it must be considered that said funds are very expensive, and they have simply not been needed.
Bank credit tightening makes it necessary to look for alternate private capital financing sources.
In the Elfinancierocr.com blog article "En numerous," Edgar Delgado Montoya outlined five options as a source of financing for both start ups and business expansion projects: Emerge Fund, Link Investment Caseif II, E + Co LAC, and E3 Corp.
Delgado Montoya said: "In addition to delving into very different sectors, investment banking operations are quite flexible as to how the manner in which resources can be administered to the receiving enterprise."