Thursday 29 September 2022

Government sets BCR value at US$1.78 Billion Dollars

Both national and international interests can make an offer through auction with a reserve price for the BCR

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29 September 2022 - At The Banks - BCCR

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QCOSTARICA – The government of Rodrigo Chaves has set an initial value of US$1.785 billion dollars in the legislative bill for the selling off of the Banco de Costa Rica (BCR) – Costa Rica’s State bank.

The Executive Branch extracted this figure from a calculation made by the Departamento de Investigaciones Económicas del Banco Central de Costa Rica (BCCR) – Department of Economic Research of the Central Bank of Costa Rica (BCCR) – in 2022.

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“It is an estimate made with a series of limitations and strong assumptions, based on accounting information obtained from the annual audited and consolidated financial statements of the BCR financial conglomerate,” says the bill presented last week and is already in the hands of the legislators.

Read more: Government presents bill to sell off the Banco de Costa Rica

The bill takes into account some difficulties during the real calculation of the value of an entity of this nature, due to the protection of some data through banking secrecy.

“To determine the market value in a more reliable way, it will be required that at the time of the sale, a new determination is made based on the corresponding study,” says the bill presented by the Government.

The bill also recognizes that said bank is an “asset of great value for the Costa Rican State”.

“The BCR is a very corporate bank, which has good indicators,” said the Minister of Finance, Nogui Acosta, to questions from the press.

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The same document issued by the Central Bank and cited in the bill indicates that the BCR is a mature, stable bank with a high level of value compared to the market.

The bill presented by the Government establishes that both national and international parties, through auction with a reserve price, can make an offer for the purchase of the state bank.

It also orders the creation of a Sales Committee that will provide technical-financial advice, but not binding. And it will be this committee, made up of ministers, who will present the proposals to the Governing Council (Cabinet) for voting and final decision.

One of the functions of said advisory is “to issue written recommendations, non-binding, in relation to the expressions of interest and the technical offers that are presented,” says article 12 of the bill.

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The advice may be both public and private. In other words, there will be the participation of officials from the BCR and other entities, but the Ministry of Finance will also be able to contract people and firms.

Legislators Eli Féinzaig, of the Partido Liberal Progresista (PLP), and a strong critic of the sale of the BCR, pointed out that “the financial advisor hired in the process of preparing the sale must prepare a formal valuation study of the bank prior to the sale”.

“I take the value quoted in the bill as merely indicative,” he added.

Féinzaig has been emphatic that the process proposed by the government places “too much” responsibility on ministers who are politically appointed.

Others, such as legislator and head of the Partido Liberación Nacional (PLN) legislative group, Kattia Rivera, listed a series of concerns about the bill, among them are that the Sales Committee is political and not technical and expressed concern of the fate of the bank’s 4,000 employees.

 

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