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The chief executive of Costa Rica’s central bank, Francisco Gutierrez stated that the country should not experience major economic impact from the global financial crisis that is presently affecting most world markets. Costa Rica has minimum involvement in international securities markets and the state banks maintain substantial reserves and tangible investments. However, the country will undoubtedly be affected by less export volume to foreign trading partners, because of worldwide credit restrictions. Furthermore, imports should also decline, keeping pace with the changing international marketplace.
Additionally, the Costa Rican stock exchange has not experienced any major changes as a result of the turbulence affecting world financial markets. The chief executive of Costa Rica’s stock exchange, Jose Brenes, asserted that no major effect has been felt locally because the local exchange concentrates on fixed-yield, debt securities, and not shares of public companies that have been degraded in most global markets.
The bad news is that the country has experienced 15.77% inflation over the last 12 months. Prices of beans, rice, eggs, cooking oil and diesel fuel increased over 50 percent since last year at this time. Bean prices have increased 70%, according to the National Statistics and Census Bureau (INEC). Overall food costs have increased 28% and this directly affects poor families who spend most of their income on basic food. Central Bank chief, Gutierrez believes that the inflation rate will stabilize in the coming months and basic food price increases will slow down.
They say that ‘great minds think alike’ and it looks like Tom is reading the same important stuff that I am and has inadvertently duplicated the information included in my most recent article:
Costa Rica Real Estate Investors Market Update – Finance Minister says Costa Rica is in a “very strong and very favorable” financial position.
Which you can read at: [ https://www.welovecostarica.com/members/1944.cfm ]
Scott Oliver – Founder
WeLoveCostaRica.comThe trend is also for commodities to come down in prices, but I do think some of the coastal tourist regions will see an impact, including some of the big projects that are in the works. I think some of the growth with the big hotel and condo/resort projects will see a slow down, simply because the US banks are no longer handing out money for anything speculative.
I dont know what portion of CR’s economy is tourism, but the train wreck in progress here will to some extent impact travel and vacation, even rich folk are reigning in, my retirement account lost 15grand in September, October will be just as bad!Really:
15.77% inflation and food cost 28% which affects POOR families. Let me tell you minds that those # affect everybody in CR. Are you sure you are reading the market correctly. Maybe 1/4% inflation on “la canasta basica” is nothing to you but for my son and family it is more than .25% increase in expenses and with no increase in their pay.
Who gets a .25% increase in their paychecks to stabilize these costs.
Dream on people, you are not the average Tico.
Warren
You are correct ‘aguirrewar’ 99% of our VIP members are not “average Ticos” and they are NOT earning Costa Rica colones or investing in Costa Rica colones investments so that 15% inflation really does not affect them in the same way
We should however remember that due to increased commodity prices the cost of living has increased dramatically all over the world and not just in Costa Rica and with the latest monetary base in the US jumping 16.8% year-to-year, even with falling oil prices the real rate of inflation is MUCH higher than we are being told.
Scott Oliver – Founder
WeLoveCostaRica.comThere’s no doubt in anyone’s mind that the prices of the basics have gone up. One only need go shopping! And even with the increased cost most recently relocated expats are still in good shape… the same cannot be said for folks on tight budgets that have been here a while and of course our Costa Rican friends and neighbors!
No matter what the government says… there will be less tourist this season… and less money coming into Costa Rica in their pockets. Since a good portion of Costa Rica’s income is tourism generated there’s going to be some pain. Crime will become a larger issue. Business will suffer.
The good part is that the Costa Rican people are much better situated and self reliant to ride out the rough water ahead.
I can attest to what Scott is saying. There are no increases in wages this year unless you are a union employee and raises were granted as a result of collective bargaining, but as an owner of a construction company and a resident of the area that builds Boeing aircraft, the end result of ridiculous union demands = higher unemployment in the future. As far as food, I can verify that in my grocery store bananas have gone up 41%, rice 35% and corn 50% all in the last year. Meat is no longer affordable; seafood is a luxury. Being that food costs are at least three times higher annually than gasoline, the drop in gas prices only makes up a fraction of the difference and they are temporary. Also, our electricity costs have increased 20% and unemployment has risen 35% (4.8% to 6.5% in 6 months). The only silver lining is that property taxes have decreased thanks to a decrease in assessed value of our homes and I would rather take the higher value in the home so I can sell and execute my own bailout plan. The financial crisis will affect foreign investment in CR, with the exception of the wealthy.
Found this interesting… from Inside Costa Rica this morning….
Costa Rica’s Outlook Cut To Stable Due To Fallout From Credit Crisis – S&P
Standard & Poor’s Ratings Services revised its outlook for Costa Rica to stable from positive citing the diminishing prospects for an upgrade because of deteriorating global financial markets and the growing risk of external volatility affecting the country’s financial system.The rating agency warned that the impact of the global economic slowdown, especially a recession in the U.S., is likely to keep Costa Rican GDP growth low in 2009, partly because of weaker exports of goods and services as well as reduced inflows of foreign direct investment.
The agency affirmed its ‘BB/B’ foreign-currency and ‘BB+/B’ local-currency sovereign credit rating.
Caught this morning also; part of my daily read. You are right about the Tico’s being much more self-sufficient. The average American cannot live without a mall near by, hot water in every faucet or flush toilets.
The range of the fall in living standards between the average American in the US and the average Tico in Costa Rica is what should be examined. The American is going to fall further and so fall much, much harder. The Tico living standard starts its fall from an already lower level and cannot fall too much more. The level of suffering has to be much less in Costa Rica.
I liquidated all my stocks 5 months ago and with the exception of a property in Costa Rica, I am all cash now. For some, those who went to cash in time, these hard times will be an opportunity. I am eager to see what the Costa Rican real estate market looks like one year from today.
I don’t think most Americans can handle the fall. As a population, Americans are fixated on maintaining their luxury status quo and the politicians keep promoting the lies, but life here has become much too complicated, full of stress and very pessimistic. Maybe that is why the US is now ranked #45 in longevity and not high on the happiness scale.
Good move on liquidating and right now is an opportunistic time with so many stocks at all time lows … if you have the cash and were smart enough not to get overextended with debt.
Credit is hard to get these days here and debt is being viewed differently now. People who have taken second mortgages which are now worth more than the collateral are just walking away from their homes either because of forclosure or voluntary abandoment of an untenable position…keeping the cash from the refinance.
In the stock market, one would experience a margin call if this happened and the account and positions would be closed until the leveraged amount could be paid back. In the real estate market, the banks got stuck with these deficits and now it appears the tax payer will get stuck with some of it as well.
As a real estate broker in Manhattan I can tell you mortgage money is tight on our little island. I had someone who use to work for me call up and ask if I had ever heard of this happening; the day before her closing the bank called up and said it had no money to loan. In 16 years in this business I never heard that one?
I can understand some readers prefer the convenience of English speaking news services. For those who prefer to increase their knowledge of Spanish, there’s a world of accurate information and statistics published every day in La Nacion. http://www.nacion.com/ln_ee/2008/octubre/18/economia.html. Here’s positive news published this week about Costa Rica’s growing economy.
Growth: The International Monetary Fund has stated that the output of Costa Rica will grow a little more this year than what the Central Bank had previously forecast. It also added that inflation will be lower than expected. In the recently published World Economic Outlook, the IMF expects growth of the Gross Domestic Product to be 4 percent this year, more than the 3.3% estimated by the Central Bank. This 3.3% Costa Rican growth is almost at the level of entire worlds projected growth of 3.9%.
Inflation: The IMF also predicts 13% inflation in Costa Rica during 2008. According to the Central Bank, predicted 14.2% inflation this year. During first three quarters of 2008, inflation was 11.83%. In 2009, both the IMF and the Central Bank agree that inflation will be 9%.
Production: According to the Central Bank, production has increased 3% in August as compared to the same month last year. This increase reflects the annual variation of the Monthly Economic Activity Index, which records the goods and services made or provided in Costa Rica. This Index indicates that production has slowed down since early 2007 when it increased to almost 8%.
Competitiveness: According to the 2008 global competitiveness index, published by the World Economic Forum, Costa Rica has improved four positions, from 63rd to 59th. This increase indicates that in Latin America, only Chile (28th), Puerto Rico (41st) and Panama (58th) improved greater than Costa Rica.Please see new thread related to the overall financial crisis entitled: ARE YOU NOT YET SCREAMING HYSTERICALLY ANGRY! at [ https://www.welovecostarica.com/members/forum/openthread.cfm?forum=1&ThreadID=2474 ] I would love to hear your feedback, especially from our American friends.
I can tell you quite bluntly that I am most definitely screaming bloody angry about it!
Scott Oliver – Founder
WeLoveCostaRica.com
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