QCOSTARICA – Total private sector loans grew at a rate of 5.4% in the first quarter of this year, with a 4% rebound in loans in dollars, a trend that experts believe should be paid attention above all for those who do not receive their income in dollars.
According to the most recent Monetary Policy report of the Banco Central de Costa Rica (BCCR) – Central Bank, there was a slowdown in operations in colones that went from 8% in December 2022 to 6.1%, contrary to the behavior of loans in dollars, which have been growing for six consecutive months now.
In a press conference, the president of the Central Bank, Róger Madrigal, indicated that the greater demand for dollars is consistent with the increase in the cost of loans in colones, since there has been an increase in interest rates in local currency.
“In March, compared to the previous month, a reduction in passive interest rates in colones was observed, which together with the increase in passive interest rates in dollars and the increase in expectations of variation in the exchange rate (according to the market), led to a reduction in the premium for saving in national currency,” said Madrigal.
In this sense, economists Luis Paulino Vargas and Fernando Rodríguez were emphatic in indicating that it is expected that people and companies take advantage of the drop in the price of the dollar to borrow in this currency, because obviously, the reduction in the exchange rate has benefited the rates in dollars.
But it is important that people who opt for this option (loans in dollars) take into account that most of these financial transactions establish their interest rates in line with international interest rates, which have continued to rise in recent months.
On May 3, the United States Federal Reserve voted unanimously to increase interest rates by 0.25%, making it the tenth increase that the US central bank approved since its battle against inflation began in March of the year.
The increase in May led the reference federal funds rate to go from a level of 5% to 5.25%, the highest in more than 15 years, and occurs amid the fragility that the banking sector is going through as a result of the collapse of three regional banks.
“But it is not only that international rates are high, it is also necessary to understand that the exchange rate could rise, that is an implicit risk when requesting a loan in dollars and although the forecast is that it will not rise too much, we cannot predict it; six months before the pandemic, we did not know everything that we would go through or that there would be a war between Ukraine and Russia, the risk is latent,” explained Rodríguez.
This means that if a person takes out a loan in dollars and does not have enough slack in their personal finances to face an unexpected rise in the exchange rate, their financial situation in the future may be hit hard.
“This incentive to take out loans in dollars is perverse and dangerous, at an international level interest rates are rising and it is possible that the dollar will go up because the Central Bank has many reserves, it is a risk for those who earn in colones and take on debts in colones,” added Luis Paulino Vargas.
Read the original article published in Spanish at Semanario Universidad, here.