COSTA RICA NEWS – Public institutions are now required make investments only with state banks and at interest rates set by the Central Bank, by an executive order of the Central Government, on December 3.
The publication of the order by Ministerio de Hacienda (Ministry of Finance) in La Gaceta, the official government newsletter, requires state institutions like the Instituto Nacional de Seguros (NS), Refinadora Costarricense de Petróleo (RECOPE), Junta de Pensiones y Jubilaciones del Magisterio Nacional, Fondo de Capitalización Colectiva del Magisterio Nacional, Fondo de Pensiones del Poder Judicial, Fábrica Nacional de Licores and municipalities, among others, have to keep their deposits and financial investments in state banks.
In total there are 321 state institutions affected by the order.
State banks in Costa Rica are the Banco Nacional de Costa Rica (BN), Banco de Costa Rica (BCR). the Banco Crédito Agrícola de Cartago (Bancredito) and the Banco Popular y de Desarrollo Comunal (Popular).
In addition, state agencies can only invest to a maximum of 10% of their portfolio, reduced from 15% set by the previous administration.
Among the reasons for the change in the guidelines is that the competition between private and state banks to attract investments from state agencies has left “inconveniences for the economy and the public interest (…) influencing the overall structure of yields and rises above levels dictated by supply and demand.”
The government document continues to say that “those higher interest rates represent a distortion imposed on the functioning of the economy and the quality of life in Costa Rica because they are a product of bargaining power of institutional savers (…).”
The previous administration had issued an order with a similar objective to prevent state and private banks to compete for state agencies investment and elevating interest rates.
In October 2012 the “basic passive rate” peaked at 12%, today it is a t 7.25%.
Source: El Financierocr.com