Saturday 16 January 2021

Put it Under the Mattress – Or Spend it!

Salen billetes de 20 mil colones en Bancredito ( BACC ). Photo: ElFinancierocr.com

Q BLOGS – It is really hard not to join the global news outlets and write something about the Trump Administration if there is such a thing. But Q Costa Rica focuses on local issues. Damn, I want to get in on the D.C. drama!

We have a major issue here in Pura Vida and it is called bank liquidity, actually national liquidity.

- Advertisement -

It is difficult to accept that Bancredito, a government entity, needs to receive an infusion of cash from Banco Nacional (also a State entity) because one of its major projects (Sarcasm) a US$3.3 million strip mall went broke.

All national banks were downgraded to junk level by Fitch in fear of a cascading effect of the Junk Bond level of Costa Rica.

Bancredito needed to borrow money from another national bank, also on the ropes. It could be the “Peter Robbing Paul” syndrome. So, keep your money at home. Bancredito will receive injections of capital from the airport exit tax (now included in the price of the airfare) to stay alive which, in reality, belongs to Banco Nacional.

Remember, and never forget, there are no government guarantees of bank liquidity and guardian of your funds. We deposit based on convenience, good faith, and a prayer.

- Advertisement -

The latest proposal to keep Poora Vida solvent is to legislate that for every US dollar investment, there must also be offset bank liquidity in each bank also of equal amount of dollars.

Bottom line, we have inflation, we have a weak but forgiving banking system and a sovereign country downgraded to junk bond status.

Not a pretty picture.

And before commenters jump all over me, remember Banco Anglo, the government institution who closed its doors, froze accounts under the then president Jose Maria Figures Olsen (who is making a bid for the PLN party nomination to run again for president in 2018) in 1994 never paid depositors?

Not to cause any sort of panic, but with inflation, banks that have liquidity issues and a sovereign downgraded to “junk” then there are one of three things to do: bring no foreign currency into Costa Rica, spend the money you have or put it under the mattress and wait for better days.

- Advertisement -

FACT CHECK:
We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Juan Sebastian Campos
An expat from the U.S., educator and writer in English and Spanish since 1978 with a doctorate in business administrations (DBA) from the United States and Germany. A feature writer for ABC News, Copley Press and the Tribune Group with emphasis on Central America.

Related Articles

Attempted bank robbery in Sarapiquí leaves security guard dead

QCOSTARICA - An attempted robbery of the Banco Nacional de Río...

Is State Banking Inefficient?

It's not uncommon to hear phrases such as: “State banking is...

MOST READ

If the IMF option fails there would be no plan B

QCOSTARICA - On Monday, January 11, the central government began negotiations with the International Monetary Fund (IMF) without a plan B to address the...

Ford announces the closure of its factories in Brazil

Q24N - Ford Motor Co announced this Monday, January 11, the end of all its vehicle production operations in Brazil, in 2021, as part...

Legislators urge President Alvarado to present the bill on medicinal cannabis and hemp

QCOSTARICA - Given the economic boost that the bill on Cannabis for Medicinal and Therapeutic use and Hemp for Food and Industrial use (Ley...

United Airlines opens two new routes to Costa Rica

QCOSTARICA - The Daniel Oduber Quirós International Airport (lLIR), in Liberia, Guanacaste, received this weekend two new routes from the United Airlines airline from...

Covid-19 in Costa Rica: Latest report for Januay 10

QCOSTARICA - It's been some days since I have posted a new report on the covid-19 situation in Costa Rica. It's not for the...

Let's Keep This Going!

To be updated with all the latest news and information about Costa Rica and Latin America.

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.