Bill to restrict foreign capital advances

A legislative committee Wednesday made amendments and then reported out a bill that would put restrictions on short-term investments in Costa Rica by foreigners.

This is the so-called  capital golondrina measure promoted by the Laura Chinchilla administration as a way to maintain stability in the financial market.

The executive branch would have the power to jack up the income tax rate on interest paid to foreigners by as much as 25 percent.

Foreigners who put their money here also would be required to put 25 percent of it in one-year bonds, under the proposed law.

None of this would happen without a decree by the Banco Central that the inflow of money was destabilizing the economy, said lawmakers.

Bank officials have complained that the higher rates, mainly in colons being paid in Costa Rica, attract transient foreign capital.

There has been no determination yet if the bill violated the economic clauses of the Central American Free Trade Agreement.

The measure now will be placed on the agenda for discussion and a possible vote by the full Asamblea Legislativa.  Golondrina means swallow in Spanish, and the nickname of the bill suggests a bird flitting around without loyalty to any particularly place.

This entry was posted in Costa Rica News. Bookmark the permalink.