QCOSTARICA – Borrowers in dollars who earn in colones face greater difficulties in paying their loans because they have suffered two blows: an increase in the dollar exchange and a drop in income due to the pandemic.
This was explained on Thursday by financial authorities when presenting the Semestral de Estabilidad Financiera 2022 (2022 Semiannual Financial Stability Report) at a press conference.
At said conference, the General Superintendent of Financial Entities, Rocío Aguilar, indicated that in the case of debtors who have loans in a currency other than the one in which they receive their income (authorities call them “non-generators”), delinquency (credits with arrears greater than 90 days or in judicial collection with respect to total loans) in March 2022 was 3.40% and in the case of generators it was 2.21%.
“Indeed, it is being felt in non-generators, who are those people who do not have their income in that currency, that higher delinquency and fundamentally here there is an element that has to do with the increase in the exchange rate,” Aguilar commented.
“That, of course, also aggravated by the pandemic, then it is a combination of loss of ability to pay in many of these households, it is above all non-generators, which in some cases lost their sources of income, partially or even completely and that is also aggravated, as Doña Rocío said, by the increase in the exchange rate has generated a lot of pressure on their ability to pay”, added the president of the Central Bank, Rodrigo Cubero.
As of March 31 of this year, for example, the dollar had risen 8.9% compared to the same day of the previous year.
Loans to non-generators are lowered
The amount of loans in dollars granted to non-generators has decreased over the years in relation to the total portfolio, from 31.6% in December 2015 to 22.3% in March 2022.
As Cubero commented at the conference, between February 2020 and February 2022, the total loan balance in dollars to non-generators was reduced by US$1 billion, from US$9.4 billion to US$8.4 billion.
However, as indicated in the semi-annual report, loans in dollars granted to non-generators still represent a significant percentage of the loan portfolio.
“Although loans in dollars to debtors who do not generate foreign exchange has shown negative growth rates in the last five years, the balance of loans to these debtors still represents a significant percentage of the total loans portfolio of regulated financial intermediaries in the country,” indicates the report.
Into the future
Prospectively, according to Juan Carlos García, an official of the Central Bank’s financial stability department, the increase in external interest rates could affect non-generating households more.
“One has to see this risk prospectively in the sense that the global economic environment also reflects that there could eventually be an increase in interest rates abroad that, if transferred to the local market, would make credit more expensive for those debtors, for example, when they have interest rates that are adjusted periodically, then it is an issue that also enters into that language that we say is increasing the risk for them and also the recent trends that have occurred in the foreign exchange market, which if they continue could aggravate the ability of payment of those debtors”, Garcia explained.
In addition, García said, as has been pointed out in previous reports, the level of indebtedness of Costa Rican debtors is relatively high and therefore that makes their margin of action, when those exchange rate and interest rate variables increase, much more reduced and this is particularly important in the case of households and individuals.