Eurobond Effect not felt in Interest Rates

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    When the Laura Chinchilla government passed a bill allowing the country to borrow up to 4,000 million dollars in the international market, it was indicated that the expected placement would lower interest rates.

    Despite the claim made repeatedly by members of the Government, including the Minister of Finance, Edgar Ayales, Planning Minister Roberto Gallardo and even the Presidency Minister Carlos Ricardo Benavides, one of the main indicators such as basic passive rate (TBP) hit the highest level so far in 2012 last week, reaching 11%.

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    For economist Fernando Estrada, competition for resources between the Ministry of Finance and State commercial banks has caused this.

    That competition comes in credit growth at levels of 15%, and there is the need for resources from the National Treasury to cover government expenditures with funds from the domestic market.

    The TBP has appreciated by 30% so far in 2012 and this indicator is indexed to most title loans and mortgages granted by public and private banks in the country.

    Estrada added that another vital factor for the increase in the base rate is that the market is not discounting the effect of Eurobonds.

    It should be added that the Government has a number of loans with multilateral agencies, which added to the placement of Eurobonds pushing public debt near the threshold.

    The market may be expecting the rate at which the government placed in the international marketplace, so the possible effect on interest rates would be reached the first quarter of next year.

    The Costa Rica News (TCRN)
    San Jose Costa Rica

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