The Banco Central has decided to freeze 15 percent of any foreign short-terms loans to Costa Rican individuals or companies. The bank announced the details of this decision Thursday. The plan met with immediate opposition from the business sector.
The central bank plans to freeze the money in stages. Foreign funds coming into the country in August will face a 5 percent freeze. In September the amount will be 10 percent. In October the full 15 percent will be assessed.
The ruling is supposed to only affect short term loans from foreign sources and longer-term loans that have a clause the allows a payoff within 360 days. The action is not supposed to affect transfers of money by expats from their accounts in other countries. However, it would appear that a short-term loan from a parent company to its subsidiary in Costa Rica would be affected.
Amount other reasons, the frozen money is supposed to help stabilize the dollar exchange rate and maintain liquidity, said the central bank.
However, the freeze also is applied to colons coming into the country from foreign sources. The central bank will pay no interest on the money it holds. There was no explanation on how central bankers will know the terms relating to money coming into the country or even be able to distinguish between a loan and a payment.
Among those criticizing the measure was the Unión de Costarricense de Cámaras y Asociaciones del Sector Empresarial Privado.
The organization said the decision would affect everyone because it would result in higher interest rates.
The central bank’s explanation of why it has the power to do this seemed tenuous, and a legal challenge is possible.