Tuesday 06 November 2012 |QPura Vida
President Laura Chinchilla took on the public banking system this week, drawing a sharp defense from Central Bank president Rodrigo Bolaños. She thinks Ticos are paying too high of an interest rate.
Meanwhile, the Central Bank announced Wednesday that interest rates would remain unchanged at 20.25%, slightly lower than the private banks’ 10.5%.
The President, incensed at the public banks for ignoring her, insisted in a meeting Wednesday with the bankers in the public sector, who wanted the meeting next week.
The announcement of the basic interest rate is made every Wednesday and this may have accounted for the reason they would postpone the meeting. At the gathering, Chinchilla continued to lobby for lower rates.
Costa Rica’s interest rates are far higher than the unprecedented rock-bottom ones in the United States, a clear effort of the U.S. Federal Reserve to encourage business and stimulate an economy only now showing signs of rejuvenation.
The President apparently hopes to begin the 2013 new year with a slash of interest rates. But Central Bank president Rodrigo Bolaños thinks the President has it all wrong.
The reason that the public banks pay out a lower rate on deposits, he says, is that they are more secure, being backed by the government. La Nacion questioned Bolaños on the current rate which has been said to be higher than the Libor rate.
But the Central Bank president was unmoved. “I’ve heard this,” he said calmly, “but this is happening in all finances, not just the prime rate.”
The disagreement with the President comes on the heels of another controversy about Central Bank control of the country’s financial mechanism. The squabble appears to be a power struggle between regulation agencies and the Bank.