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Rocío
Aguilar, Minister of
Finance, President Carlos
Alvarado and Luis
Carranza, Executive
President of the
Development Bank of Latin
America. / Presidential
House courtesy
photo.
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The
government requested $500
million
loan from Latin America Bank
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By the
A.M. Costa Rica staff
Rocío Aguilar, Minister of
Finance and Luis Carranza,
Executive President of the
Development Bank of Latin
America, CAF, signed a $500
million loan for Costa Rica. The
loan has a term of 18 years,
with a grace period of three
years and a repayment period of
15 years.
President Carlos Alvarado was
present at the signing as a
witness, before leaving the
country to Germany.
According to President Alvarado,
this loan will help to stabilize
the fiscal and financial
situation of the country.
"We succeeded last year in
approving a reform (referring to
the new taxes law), and it was
not easy, but the government is
clear about what we need to do
to guarantee the financial
sustainability of our country,
and this agreement with CAF
today supports this work and we
hope to continue doing in the
future," said President
Alvarado.
"We are a strategic partner of
our member countries to provide
support in their development
processes, this time through the
Program of Strengthening Public
Finance of Costa Rica, which
allows the country to ensure
fiscal sustainability in the
long term," said Luis Carranza.
This loan is part of the
government's financing strategy
and will be used to cover the
government's budget for 2019 and
will also help lower interest
rates according to the Ministry
of Finance.
"This loan of support to the
budget will allow us to reduce
the pressure of interest rates
on the domestic market, it is a
loan that does not represent or
greater expense to the already
contemplated in the 2019 Budget,
nor more indebtedness, but will
allow us to make a better
management of debt, by
substituting some sources of
financing that imply a higher
cost, by a more favorable one
that will help us reduce the
issuance of securities in the
domestic market," said Rocio
Aguilar, Minister of Finance.
In addition to the loan, the
government also signed a
Subscription Agreement for
Capital Shares, so the country
could become a member of the CAF
and could access more loans.
"We are pleased to sign the
subscription for shares so Costa
Rica can move forward in its
process of becoming a full
member of CAF and have access to
more long-term loans," said
Carranza.
The Development Bank of Latin
America, CAF, is a bank that has
the mission of stimulating
sustainable development and
regional integration by
financing projects in the public
and private sectors in Latin
America and providing technical
cooperation and other
specialized services. Founded in
1970 and currently with 18
member countries from Latin
America, the Caribbean, and
Europe along with 14 private
banks, CAF is one of the main
sources of multilateral
financing and an important
generator of knowledge for the
region.
Before the CAF bank hands over
the money to the government, the
loan must be analyzed and then
approved by the deputies of the
Legislative Assembly.
According to Minister Aguilar,
in addition to this huge loan,
the government will continue its
efforts to ensure that the
deputies of the Legislative
Assembly approve the Eurobonds
law.
As A.M. Costa Rica reported on
March 27, the Minister
Aguilar, met with the deputies
of the National Liberation
political party to clarify their
doubts and request support for
the bill presented by the
government, known as “Eurobonds
Project: Authorization for the
issuance of securities in the
international market and
contracting credit lines”.
The government is requesting
that the deputies of the
Legislative Assembly provide
authorization for the issuance
of $6 billion in Eurobonds.
This bill requires the approval
of at least 38 deputies in
Congress.
The Eurobonds bill would allow
the government to issue bonds of
$1,5 billion per year in the
first two years, plus $1 billion
per year for following next four
years.
Minister Aguilar stated that
"the goal of the Eurobonds is
that the country can capitalize
on a fiscal reform that took
many years and turn it into
opportunities with better
financing for economic
reactivation."
The meeting with the deputies of
the National Liberation Party
was the last of the meetings
held by Minister Aguilar with
all the parties of the
Legislature.
Minister Aguilar said that the
bill to issue Eurobonds does not
mean more debts for the
government, only a renegotiation
of the part of the current
debts, "in much better
conditions, at rates much lower
than what we would be paying
here" (referring to local bonds
market), she said.
Minister Aguilar
continued by saying that the
main advantage of the
renegotiation of debt with
Eurobonds is a reduction of 1.15
percent of GDP.
In other words, the government
could renegotiate part of the
current debits at lower interest
rates, and reduce the fiscal
deficit that way.
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Is increasing loans to cover
budgetary expenses a positive
strategy for the
government? We would like to
know your thoughts on this
story. Send your
comments to: news@amcostarica.com
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