QCOSTARICA — The general growth of debt in Costa Rica during the last decade exceeded at least three times the behavior of salary indicators used as a reference to evaluate the behavior of these sources of income.
According to data from the General Superintendency of Financial Entities (Sugef), the main balance of direct loans went from ¢15.8 billion Colones in December 2014, to ¢25.2 billion Colones in December 2023.
This data corresponds to the amount of direct loans from the National Financial System (SFN), reported by the regulated entities, so it does not represent the entire indebtedness of Costa Ricans.
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According to surveys by the Financial Consumer Office (OCF), five years ago, around 8 out of 10 Costa Ricans declared they had a debt; The figure rose to 9 out of 10 in the October 2023 measurement
However, the performance of formal loans allows us to approximate the way the country’s economy is behaving, particularly with salaries that are lagging far behind.
In that sense, the nominal growth of direct loans in the last decade was 59%, just below the growth of production (Gross Domestic Product, GDP), which from 2014 to 2023 increased by 68%.
For that same decade, the nominal behavior of the minimum wage index reported in the Central Bank of Costa Rica (BCCR), went from a level of 4,712 in 2014, to 5,962 in 2023, for an increase of 26%.
Additionally, in the reference of salaries by contributors reported in the BCCR’s Monthly Economic Situation Report (IMCE), there was a growth of 31%, going from a figure of ¢568,158 in 2014 to ¢747,890 in 2023.
However, given that in this period the increase in inflation, measured by the Consumer Price Index (CPI), was 17%, it is necessary to evaluate the real growth of these figures.
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Considering the real increase in these values, the country’s production grew by 43% in the decade, while credit in the financial system grew by 35.8%.
In contrast, the minimum wage index data in the decade was only at a 7.8% increase, while salaries per contributor barely reached 10.2%.
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Households in trouble
In general, it has not been a good decade for Costa Rican households: data on average household income, compiled by the National Institute of Statistics (INEC), shows that there has been a drop of 11%, in real terms.
And, although the COVID-19 pandemic, in 2020, has been a strong factor for this reduction, INEC data shows that the deterioration began in 2016, and this trend has not been reversed.
International records corroborate this impression of significant pressure on household incomes in Costa Rica, although in the latest available measurements (2022) they tended to report relative relief.
Despite this, debt grows. Sugef data show that debtors have gone from 897,477 in 2014 to 1,212,510 in 2023: an increase of 31.8% (see graph).
And, by May 2024, the figure had increased to 1,226,707, approximately one in four Costa Ricans would have a formal debt.
But even these data could fall short, according to the Office of the Financial Consumer (OCF), whose surveys show a more discouraging fact: people who declare they have debt went from eight out of ten in 2019, to nine out of ten in the present.
Two trends in the decade
There is another aspect that the figures show: two different trends in the decade, with very different behavior at the beginning, compared to the second half.
In fact, indebtedness flourished in the first five years and stagnated in the second five years: from 2014 to 2018, the balance of credits increased by 37.6%, while from 2019 to 2023 it barely increased by 1.9%. In these same periods, the number of debtors grew by 25% in the first part, and only 1.8% in the second.
It must be considered an effect associated with the pandemic, but other protagonists appear in the cast, from the usury law that came into force in 2020, to the laws on Strengthening Public Finances and the Framework Law on Public Employment, which established conditions more severe for salary adjustments in the public sector.
At the same time, the behavior of inflation was also different: from 2014 to 2018 there was an increase in the CPI by 4.6%, while from 2019 to 2023 it was almost double, 10.4%.
All this points to a panorama in which uncertain situations arise: with salaries that grow well below increases in production, and debt that is formally growing in ranges similar to that production, the pressure on household incomes , which are in negative figures, tends to increase.
A complicated country issue, faced with a labor market that is also not very dynamic, and inflation that tends to accelerate in recent years. Costa Rica faces growing and increasingly complicated challenges in this matter.
Costa Rica among the most suffocated countries in the region
According to international statistics, Costa Rica was among the Latin American countries whose households had the highest debt ratio.
This despite the fact that, in recent years, there has been a relative improvement, according to measurements by the International Monetary Fund (IMF), in the indicators of household debt, measured as a percentage of the Gross Domestic Product (GDP).
Precisely, an IMF report in 2016 warned of an acceleration in this debt, going from 15% to 20% in Latin America, in just three years. For that record, Costa Rica was cited as the third country with the highest level of debt, only surpassed by Chile and Panama.
IMF records indicate that, by 2014, household debt in Costa Rica represented around 27.17% of GDP. That is, around ¢7.6 billion colones.
This level of debt maintained a level of growth until 2020 when it reached 31.33% of GDP; That is, it grew 15% in these six years.
However, after this rise, a downward trend began, reaching 27.48% of GDP in 2022, according to the latest IMF record. This would represent around ¢12.3 trillion colones, a nominal growth of more than 60% since 2014.
However, it should be considered that other countries in the area have had a more worrying performance, to the point that Costa Rica was ranked sixth in the area, behind Chile (46%), Brazil and Honduras (34%), and Colombia and El Salvador (28%).
Article translated and adapted from SemanarioUniversidad.com. Read the original in Spanish here.
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