Costa Rica Seeks IMF Credit
Line to Shield Economy
By Jose Enrique Arrioja and
Andrew J. Barden
(Bloomberg) - Costa Rica is seeking a credit line of as much as
us$750 million from the International Monetary Fund to shore up
confidence in the country’s economy, Francisco de Paula Gutierrez,
president of the central bank, said.
“We are talking with the IMF to see the possibility of getting some
sort of precautionary stand-by agreement,” Gutierrez, 59, said in an
interview in his office in San Jose.
As part of a recovery plan announced last month, Costa Rica is
moving to borrow more from multilateral lenders such as the
Inter-American Development Bank, while raising pensions 15 percent
and building schools and roads to create jobs. The government is
negotiating with the IMF for a stand-by credit of $500 million to
$750 million, he said.
“We are trying to bulletproof the economy,” Gutierrez said.
Costa Rica’s economic growth may come to a standstill this year as
foreign direct investment plummets and demand for its exports wanes,
President Oscar Arias said in a Feb. 24 interview. He forecasts
growth will be zero to 1 percent.
Costa Rica is the second Central American country to turn to the IMF
this year as the effects of the global financial crisis intensified
in the region. In January, El Salvador obtained an $800 million line
of credit.
‘Be Prepared’
The country’s international reserves stand at about us$4
billion, Gutierrez said. “We feel comfortable with this level, but
we would like to be prepared in case the economy turns more
negative,” he said.
The central bank’s current forecast is for growth of 2.2 percent in
the us$30 billion economy. Gutierrez said yesterday the bank will
review its projection because of deterioration in the global
economy. He, too, said growth may now be zero to 1 percent.
“We are being hit and we will be hit,” Gutierrez said. “It’s not
possible for an economy as open as Costa Rica to escape a decline in
external demand.”
Costa Rica’s exports dropped 19 percent in January from the year-ago
month, according to the trade ministry. Exports to the U.S., Costa
Rica’s largest trading partner, were down 17.6 percent during that
time, the ministry said.
Shrinking Exports
Exports from Intel Corp.’s Costa Rican unit fell 32 percent to
$485 million in the fourth quarter from a year earlier, company
figures show. Exports will likely drop through the first quarter of
this year, San Jose-based spokeswoman Karla Blanco said in a Feb. 23
interview. The plant accounts for about a fifth of Costa Rica’s
exports.
The government will ask Congress next week for approval to borrow
$500 million from the Inter-American Development Bank, a
multilateral lender to the Caribbean and the Latin America. The
funds will be used to help banks increase financing for exporters.
“There hasn’t been any financial institution that failed, and there
hasn’t been any financial institution with major problems,”
Gutierrez said. Regarding lines of credit, “the financial system is
feeling some sort of restriction,” he said.
To contact the reporters on this story: Andrew J. Barden at barden@bloomberg.net;
Jose Enrique Arrioja in San Jose, Costa Rica, at jarrioja@bloomberg.net
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