Dollar borrowers with colon income have more difficulty repaying their loans – Q COSTA RICA

QCOSTARICA — Dollar borrowers earning settlers are having greater difficulty repaying their loans as they have suffered two blows: a rise in the dollar exchange rate and a drop in income due to the pandemic.

This was explained on Thursday by the financial authorities during the presentation of the Semestral de Estabilidad Financiera 2022 (Half-year Financial Stability Report 2022) at a press conference.

The increase in the dollar exchange rate has affected the payment capacity of those who have debts in dollars and receive income in colones.

In said conference, the Superintendent General of Financial Entities, Rocío Aguilar, indicated that in the case of debtors who have loans in a currency other than the one in which they receive their income (the authorities call them “non-generating”), delinquency (credits with arrears greater than 90 days or in judicial recovery compared to total credits) in March 2022 was 3.40% and in the case of generators it was 2.21%.

“Indeed, that is felt in the non-generators, which are those people who don’t have their income in that currency, that higher delinquency and basically here there is an element that has to do with the increase in the exchange rate,” Aguilar commented.

“That, of course, also compounded by the pandemic, and then it’s a combination of loss of ability to pay in many of these households, they’re mostly non-generators, who in some cases have lost their sources of income, partially or even completely and which is also aggravated, as Doña Rocío said, by the increase in the exchange rate has generated a lot of pressure on their ability to pay,” added the President of the Central Bank, Rodrigo Cubero.

By March 31 of this year, for example, the dollar was up 8.9% from the same day a year earlier.

Loans to non-producers are reduced

The amount of dollar loans granted to non-producers has decreased over the years compared to the total portfolio, from 31.6% in December 2015 to 22.3% in March 2022.

As Cubero commented at the conference, between February 2020 and February 2022, the total non-producer dollar loan balance was reduced by $1 billion, from $9.4 billion to $8.4 billion. billions of dollars.

However, as noted in the semi-annual report, dollar loans to non-producers still represent a significant percentage of the loan portfolio.

“Although dollar lending to debtors that do not generate foreign exchange has recorded negative growth rates over the past five years, the balance of loans to these debtors still represents a significant percentage of the total loan portfolio of regulated financial intermediaries. in the country,” the report said.

In the future

In perspective, according to Juan Carlos García, an official of the Central Bank’s financial stability department, the rise in external interest rates could affect non-generating households more.

“You have to look at this risk forward-looking in the sense that the global economic environment also reflects that there could possibly be an increase in interest rates abroad which, if transferred to the local market, would make the more expensive credit for those debtors, for example, when they have interest rates that are adjusted periodically, then that’s an issue that also comes into that language that we think increases the risk for them and also trends events that have occurred in the foreign exchange market, which, if continued, could worsen the ability of these debtors to pay,” Garcia explained.

In addition, said García, as has been pointed out in previous reports, the level of indebtedness of Costa Rican debtors is relatively high and this therefore reduces their room for action, when these exchange rate and interest rate variables interest increase, much more reduced and this is particularly important in the case of households and individuals.

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