North American investors in Costa Rica are usually surprised at the higher yields they can realize with plain-vanilla securities such as certificates of deposit (CDs). Once they get to learn a bit about how banking and financial systems work in this country, they understand how CDs can make them money with almost no risk. The following rundown of the banking system in Costa Rica is cordially provided by Asdrubal Zamora of national credit union COOPENAE:

The Financial System in Costa Rica

As of 2014, the Superintendent General of Financial Entities in Costa Rica (Spanish acronym: SUGEF) reported 51 institutions under its supervision.

Within the banking system in Costa Rica, there are ten financial institutions that make up 80 percent of the total CD market. The conservative mindset of Tico investors make the CD market particularly solid in Costa Rica. The CD market can be broken down into three segments by level of participation:

Bloc One

• Banco Nacional 17 percent
• Banco de Costa Rica 15 percent
• Banco Popular 15 percent
• Banco Credito Agricola 4 percent

The state-sponsored banks above handle 52 percent of the CD market in Costa Rica. Incidentally, the interest rates paid by these banks tend to be near the national rate of inflation, which means that investors don’t get too much. Banco Nacional pays the lowest rates despite having the lion’s share of the market.

Bloc Two

• BAC San Jose 7 percent
• Scotiabank 7 percent

These two private banks, which together hold 14 percent of the CD market in Costa Rica, are generally more aggressive in their marketing of these term deposit investment products. Interestingly enough, BAC San Jose is known to offer the lowest CD rates among private banks.

Bloc Three

• Banco Davivienda 3 percent
• Banco Promerica 3 percent
• COOPENAE 4 percent
• Mutual Alajuela 4 percent

This bloc holds 13 percent of the CD market “share of wallet” in Costa Rica. Here we have two private banks and two community credit unions. Within this bloc, COOPENAE usually offers the most competitive rates. For example, back in April when this information was provided, COOPENAE was leader of the pack with the following  rates.

• 7.50 percent for six-month CD
• 10 percent for one-year CD

It also helps to know that financial institutions such as COOPENAE also tend to offer very competitive currency exchange rates; on August 25th, this credit union was accepting U.S. dollars at 534.43 colones. The 41 remaining financial institutions in Costa Rica only represent 20 percent of the term deposit investment market in Costa Rica, which is quite lucrative.

Why Invest in Certificates of Deposit in Costa Rica?

This is a country of savers and depositors. Costa Rica may be a consumer economy, but her values of working, saving and only taking out short-term loans that can be quickly have made CDs the investment vehicle of choice. These instruments can be purchased by means of a deposit in United States dollars or colones. Their terms range from a single month to five years. Interest payments can be made monthly, quarterly or at the maturity and settlement date.

CDs in Costa Rica can be purchased physically or electronically; they can be taken home or kept under the custody of the bank at no additional cost. Expat investors in Costa Rica have been warming up to these instruments over the last few years; particularly when rates were extremely favorable to compound a couple of years ago. Some of the factors that are attracting expats to COOPENAE, aside from the alluring CD rates, include:

• They are not subject to the long lines of the state-sponsored banks.
• Less red tape.
• Documents and disclosures that are easy to read and do not require an attorney to decipher.
• Helpful customer service in English and other languages.
• Solid financial standing from an institution in which their deposits are essentially shares.

For more information on CDs and other investment options at COOPENAE, please contact Asdrubal Zamora today: [email protected]