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Costa Rica A Banking, Global Phenomenon

Article Summary:

Economist expect a technology transformation for the next 25 years in Costa Rica’s banking sector with a strong concentration in banking services. All of which will be used to serve the business market who now sees Central America as the place to under cut costs, do business and promote investment, and have access to the largest market in the world, North America. Thus, experts agree, banks will continue to experience purchases, mergers, sales and consolidations, and given the wisdom and strength of the financial system in the region today, encourages the development of these area on large, globalized scale.

Photo Credit: Mis Finazasenlina

Original Article Text From Mis Finazasenlina via Google Translate :

Costa Rica: “Banking, Global Phenomenon”

The economic crisis, originating bank, in 2008-09 led the developed countries, whose growth was driven through mergers and acquisitions in the sector, now focus on solving internal problems and move the spotlight from the banks of emerging nations.

According to the president of the Costa Rican Banking Association ( ABC ), Gerardo Corrales, the recent movements in local authorities reflect a more “great dynamism in American banks.” Those who see in Central America under to cut costs, do business and promote investment, with a strategic location as a source of access to the largest market in the world (North America).

Thus, experts agree, is expected to continue transactions (see box) and purchases, mergers, sales and consolidations, given the wisdom and strength of the financial system in the region, which today encourages the development of the area as a phenomenon of scale world.

Same criterion expresses economic adviser House Banks , Marco Garro, for whom the national dynamics, Costa Rica remains a small market, joins the international financial system . This, he argues, allows clients to available services, tools or products more integrated and efficient while promoting development of the activity. ( hear audio )

Performance 2011
Data from the Superintendent of Financial Institutions ( Sugef ) for the previous year, show that bank profits increased by 2011, with a useful public banks rose 11%, and in private was 55% increase . That, thanks to greater exchange rate stability and economic growth (around 4%), benefiting placement credits and improved results.

Rural employers say that in time past, his strategy was to compose the efficient balance of the portfolio. Consequently, products were cut little interest, but was significantly reduced delinquency and yields climbed.

According to Garro, total credit grew 13.6% prior, which after inflation meant a real development of 8 percentage points . Such progress, “relatively healthy portfolio,” expected to be about 10 points in 2012 . However, he noted, the banking system is a reflection of what happens in the economy and that is surrounded by some uncertainty.

Remains 2012
The projection of 10% is, for some analysts, a little optimistic about a decline in economic growth predicted by the Central Bank (3.8 pp), a rise in inflation (from 4 to 6 points) and accelerated fiscal deficit of government. That, in the absence of tax reform, resulting in increases in interest rates.
Estimates also manager of BAC San José, Gerardo Corrales, indicate that for every point increase in interest colones, families with loans must spend 2.5% more of their wages to pay debts. Also, the spokesman said that the impact on that sector without fiscal adjustment is greater than with him, so that would be beneficial. ( hear audio )

A further aggravating factor is the uncertainty that causes the debt crisis of the developed economies, among other damages, monetary liquidity could generate. That is why the proposed Central increase its international reserves in 1500 million dollars over the next two years . According to the director of the Economic Division of the organ, Roger Madrigal, this initiative will help the banks that require an eventual systemic insolvency . ( hear audio )
Vicious circle

However, the external slowdown, lower domestic exports, the Ministry of Finance capturing local market resources and intentions of the BCCR to increase their reserves, resulting in dwindling resources would push upward as the price of the currency as credits .

At the end of 2011 the balance of net international reserves (NIR) was of 4,756 million, equivalent to 4.7 months imports of general merchandise, 1.6 times the balance of the monetary base and 11.6% of GDP. With the proposed measure is expected that the ratio of reserves / GDP increased to 13.3 percentage points .

Lights of the Future
The National Bank manager, Fernando Naranjo, visualize, for the next quarter century, an economy that need strong banks and global reason believes that the country will target fewer highly globalized banks through strategic alliances large global banks.

In an opinion article for the journal Economic News, the economist sees a transformation for the next 25 years involving a production structure concentrated in banking services and more oriented to the use of technology . Investing heavily in networking and the mobile phone platform, with databases that will measure the credit risk of a person immediately.

Finally, the experts emphasized a shift in the needs of users, with greater focus on housing credit, services and consumption, and less on business investment . In this field, “the bank will have to start to specialize in the coming periods, for the purchase discount or cash flow through electronic payment pledge is a way companies get their working capital in the future” says.

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