Some 650,000 people have been affected by financial interventions in the last 15 years

QCOSTARICA — Investing is a risky business. These risks could include disappointing earnings, changes in leadership, outdated products, or wrongdoing within the company. In Costa Rica, the perceived failure of financial institution regulators.

A count of the people affected by the closures of financial institutions in Costa Rica during the last 15 years reveals a shocking figure: at least 650,000 people saw their resources at risk.

This is a compilation of estimates of those potentially affected by the interventions, starting with Coopemex in 2010, and including the figures for Coopeaserrí, Bancrédito, Aldesa, and, most recently, Coopeservidores. See more below

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Read more: Costa Rica’s financial system registers 14 interventions in 3 decades: almost 1 every 2 years

It should be noted that, however, the initial estimates were reduced by around half a million, given that in several cases actions were taken that allowed for significant recoveries: in the case of Coopemex, Banco Popular acquired the credit portfolio and that prevented the case from escalating; in the case of Coopeaserrí, a fund of the cooperatives Coopenae and Coopealianza allowed 97% of those potentially affected to recover their funds; with Bancrédito, the BCR absorbed this institution.

In the case of Coopeservidores, Banco Popular once again enters the list, in a portfolio purchase that, they assure, will allow 97% of savers to recover their savings, as long as they do not exceed ¢6 million colones.

The saver pays

However, there is controversy over the number of people who could be seriously affected, apart from these 163,000 savers who were assured of a recovery of all their funds.

It should be considered that to the 5,511 savers who exceeded those ¢6 million and lost half of their investment for that additional amount, around 140,000 members of solidarity associations must be added who see their entity’s investment affected. And these numbers only include the savers incorporated in the purchase of the ¢411 billion colones portfolio made by Banco Popular, so these assessments may fall short.

To this assessment must be added those involved in the fall of Aldesa, around 25,000 people, for whom no type of rescue was presented.

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In this way, the compilation of investors with losses based on these figures points to at least 170,000 people with different levels of affectation, and with a tendency to increasingly severe repercussions on people, even though it would seem elementary that the accumulation of these closures would cause better levels of protection for people’s savings.

Costly lessons

These are not minor issues: the losses added up in these 15 years have exceeded ¢500 billion colones, and with an upward trend: from ¢25 billion in Coopemex and ¢4 billion in Coopeaserrí, to ¢52 billion in Bancrédito, ¢140 billion in Aldesa and an estimate of more than ¢280 billion, at the moment, in Coopeservidores.

Gonzalo Meza, legal advisor of the Federación Costarricense de Asociaciones Solidaristas del Sector Privado (Fecaspri) – Costa Rican Federation of Private Sector Solidarity Associations, representing 350 associations that invested nearly US$75 million in Coopeservidores, questions the country’s lack of learning in this period, arguing that the situation of Coopemex was similar to that of Coopeservidores: signs of situations that needed to be corrected that were not addressed by the supervisory entities until it was too late.

Indeed, there are similarities to highlight: in both cases, they were solid and trustworthy entities (Coopemex was the third savings and credit cooperative, Coopeservidores, the fourth). For its part, Aldesa was a recognized stock corporation, and Bancrédito, although it had been losing business since 2016, had been in existence for almost a century, with the backing of the state guarantee.

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Despite this, none of them managed to avoid intervention, which the representatives of those affected claimed was late, and basically a process to put the lock on the door.

Thus, the balance of these 15 years suggests that these situations have not served to prevent the risks of collapse in financial institutions, nor to recover them after the problems have been detected by the supervision.

However, what does seem to be constantly increasing is the effect on savers, who seem to have fewer and fewer options to recover their money, once the intervention is decreed, with the shadow of imminent closure.

It is no coincidence: the project of the Rodrigo Chaves government to even eliminate the State guarantee on public banks shows that there is a tendency to increasingly place the risks of savings on people’s pockets, instead of seeking ways to protect them.

The interventions

During the last 15 years, there were five financial interventions that shook the Costa Rican market:

1. Coopemex, 2010: It was intervened after the Superintendencia General de Entidades Financieras (SUGEF) – General Superintendence of Financial Institutions – concluded that they hid information. Losses of ¢25 billion colones were estimated, and 88,000 savers and 220,000 members were affected. However, Banco Popular acquired its credit portfolio.
2. Coopeaserrí, 2015: Intervened in February due to insufficient equity levels, reduced equity and risk of security and financial solvency. Embezzlement of ¢3.95 billion colones was reported and 7,000 people were affected, but a fund created by Coopenae and Coopealianza allowed 97% of those affected to recover their savings, and Banhvi had to assume ¢452 million to finance housing bonds that were in progress.
3. Bancrédito, 2017: Its figures had been weakening since 2016. It was intervened in 2017 after seven months in which it tried to disengage from financial intermediation, affected by an increase in default and loss of businesses such as Development Banking. The estimated losses at the close were ¢52 billion colones.
4. Aldesa, 2021: The Consejo Nacional de Supervisión del Sistema Financiero (CONASSIF) – National Council for the Supervision of the Financial System, ordered its intervention in August, following a recommendation from the Superintendencia General de Valores (SUGEVAL) – General Superintendence of Securities, due to non-compliance with the investment policy in one of its four investment funds. It was declared bankrupt in July 2022. The amount of its debts exceeded ¢140 billion colones, with more than 25 thousand people affected.
5. Coopeservidores, 2024: Conassif accepted the recommendation of SUGEF in May, which argued that the information on the cooperative did not reflect the credit quality of its portfolio. On June 21, it was declared “unviable.” Around 170,000 people had savings that could be affected, but Banco Popular reported, after submitting an offer to acquire the portfolio, that 163,823 would receive all their funds, and 5,511 (3%) the base of ¢6 million colones plus 50% for the additional investment to that base. However, in the case of solidarity associations, 140,000 more people could be affected by not recovering the investment made. The share capital of the affiliates, of ¢46.9 billion colones, is considered unrecoverable. This would add to the losses that those affected have estimated at ¢235 billion colones.

Translated and adapted from the original article in Spanish at Semanariouniversidad.com.

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