Wednesday, 5 August 2020

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.

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.

- paying the bills -

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.

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.

- paying the bills -

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.

Juan Sebastian Campos
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

Is State Banking Inefficient?

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

It’s Been 80 Years Since Costa Rica Had An Indigenous Person On Its Banknotes

It's been 80 years since Costa Rica had an indigenous person...

MOST READ

Americans can after all arrive in Costa Rica starting August 1, but they really, really have to want to

(Rico's TICO BULL) As I've expressed it before, "everything simple made difficult" is the Costa Rican Way of things. Especially when it comes to...

The rebellion has begun: Escazu, Santa Ana and Mora evaluate lifting restrictions

(QCOSTARICA) The municipalities of Escazú, Santa Ana, and Mora would allow their businesses to operate without the restrictions established by the government during the...

Expensive insurance policy and COVID-19 test increase the cost of traveling to Costa Rica

(QCOSTARICA) Costa Rica has become a much more expensive destination for foreign tourists starting August 1, when the country reopens its air borders. The cost...

EU once again excludes Costa Rica

(QCOSTARICA) For the third time, Costa Rica was excluded this Friday from the list of countries authorized to send passengers on commercial flights to...

Costa Rica President admits that police violated protocol by arresting protesters

(QCOSTARICA) President Carlos Alvarado admitted this Friday that the Fuerza Publica (police) did not abide by the protocol agreed to in attending demonstrations, when...

Paraguay: Protesters Reject Heading Back To Quarantine

(Q24N) Protesters from Ciudad del Este and neighboring towns mobilized on Wednesday to oppose the return to quarantine mandated by the government of Mario...

Let's Keep This Going!

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