According to a recent report from the Central Bank, low interest rates in international financial markets are the main cause of loan dollarization in banks and other financial institutions in Costa Rica.
The entity thinka that the phenomenon is a consequence of the excess of international liquidity product of the expansive monetary policies applied by developed countries to stimulate their economies in the international crisis of 2008.
As a result, the gap between the granting of foreign currency credit and recruitment in that currency, held by the financial system through savings or securities, has increased since 2012.
In the case of private banks, this proportion has remained relatively constant (76% from January 2014 to October 2016), which contrasts with the decline in participation in foreign currency (63% in the same period).
This is even more evident in the case of public banks, whose relative share of credit in dollars increased after showing a decreasing trend in the period prior to the crisis.
The increase in the dollarization of the credit portfolio exposes commercial banks to a greater exchange rate risk, a situation on which the Central Bank and the General Superintendence of Financial Entities (SUGEF) have drawn the attention.
Both organizations believe that this situation exposes banks to various types of risk such as default, financial imbalances or sudden suspension of external financing.
Central Bank figures show that, from 2005 to 2011, foreign currency credit grew as inflation increased. That means that individuals and companies used dollar loans as a way to finance themselves with rates that could be lower than the internal ones and with exchange rate that were very unlikely to change.
According to the Bank, financial dollarization is also a consequence of the integration of the national economy into the international one.