Thursday 26 January 2023

Minister of Finance: ‘The Mortgage Is Killing Us’

The Ministro de Hacienda, Rodrigo Chaves, defends the need borrow to invest in public works; is in favor of lifting bank secrecy in Costa Rica

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26 January 2023 - At The Banks - BCCR

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In an interview with La Nación, the Minister of Finance (Ministro de Hacienda), Rodrigo Chaves, answers why his diagnosis of public debt differs from that projected by the Central Bank and explains the handling of Eurobonds money.

Rodrigo Chaves, Minister of Finance.

In addition, he defends the need to borrow to invest in public works amid a deficit situation and criticizes the creation of specific destinations that tie public finances.

What would happen if the debt exceeds 70% of GDP?

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The first thing we have to understand as Costa Ricans and the Legislative Assembly, the Executive, the business sector and the people of this country is that, if we do nothing, this year we will surpass 60% of the debt to GDP.

“And that will mean that the budgets of future years limit the growth of total spending, both current spending and capital spending. And that is not going to be good for the country, because it will slow the economy too quickly. It is very good for the country because it limits the explosion in which we were debt-GDP.

That means that there is less investment, less confidence, less consumption, and we could get into a vicious cycle of deceleration until we reach a crisis. Hopefully not”.

In the latter part of the interview, Chaves was asked about bank secrecy.

Why the idea of lifting bank secrecy?

“Bank secrecy sounds very scary,” replied Chaves.

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The minister explained that in 153 countries bank secrecy does not exist. “What is the difference? The privacy of knowing how much money a person has in the bank and the privacy of knowing how much the house in which you live is worth. Philosophically speaking, it is an asset, you can convert your cash in the bank into properties, you can convert it into vehicles …there is no privacy to know how much your car is worth, your home … but in money, yes, and look, the G20, the OECD, declared 2019 the year of the end of bank secrets.”

On the subject of bank secrecy, the bankers oppose total opening of customer information.

The Asociación Bancaria Costarricense (Costa Rican Banking Association) expressed its opposition to the proposal of the Minister to lift bank secrecy as one of the measures to reduce tax evasion.

Read the full interview (in Spanish) here.

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