Q BLOGS – It is really hard not to join the global news outlets and write something about the Trump Administration if there is such a thing. But Q Costa Rica focuses on local issues. Damn, I want to get in on the D.C. drama!
We have a major issue here in Pura Vida and it is called bank liquidity, actually national liquidity.
It is difficult to accept that Bancredito, a government entity, needs to receive an infusion of cash from Banco Nacional (also a State entity) because one of its major projects (Sarcasm) a US$3.3 million strip mall went broke.
All national banks were downgraded to junk level by Fitch in fear of a cascading effect of the Junk Bond level of Costa Rica.
Bancredito needed to borrow money from another national bank, also on the ropes. It could be the “Peter Robbing Paul” syndrome. So, keep your money at home. Bancredito will receive injections of capital from the airport exit tax (now included in the price of the airfare) to stay alive which, in reality, belongs to Banco Nacional.
Remember, and never forget, there are no government guarantees of bank liquidity and guardian of your funds. We deposit based on convenience, good faith, and a prayer.
The latest proposal to keep Poora Vida solvent is to legislate that for every US dollar investment, there must also be offset bank liquidity in each bank also of equal amount of dollars.
Bottom line, we have inflation, we have a weak but forgiving banking system and a sovereign country downgraded to junk bond status.
Not a pretty picture.
And before commenters jump all over me, remember Banco Anglo, the government institution who closed its doors, froze accounts under the then president Jose Maria Figures Olsen (who is making a bid for the PLN party nomination to run again for president in 2018) in 1994 never paid depositors?
Not to cause any sort of panic, but with inflation, banks that have liquidity issues and a sovereign downgraded to “junk” then there are one of three things to do: bring no foreign currency into Costa Rica, spend the money you have or put it under the mattress and wait for better days.