Thursday 28 January 2021

Reserve Limits On Dollar Deposits Could Make Financing In US Currency More Expensive

Twenty Dollar Bills Are Printed At The Bureau of Engraving and Printing

QCOSTARICA – Costa Rica Bankers say that the cost of financing in US currency will increase because of the application of a legal reserve limit on deposits taken the foreign currency for periods of over one year.

Market participants expect that once the measure has been implemented, interest rates in dollars could increase by between 0.75% to 1.25%.

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Gilberto Serrano, president of the Costa Rican Banking Association told Nacion.com that “… The measure affects businesses and individuals because it makes access to credit more expensive, and in particular medium sized firms financed in the local market, which goes against the Government’s interest in supporting the development of small and medium companies. ”

Leonardo Acuña, deputy general manager of Banco de Costa Rica, added “… This situation restricts the availability of funds for lending in foreign currency and could possibly translate into an increase in interest rates in dollars. ” It is noteworthy that “… Our country is a net importer of capital, especially long term, so this is of concern, because this route makes financing projects or investments in dollars more expensive . ”

Source: Nacion.com

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