QCOSTARICA — Unidentified individuals or companies (Others) became the third largest group to trade dollars in the foreign exchange market, accounting for almost an eighth of the US$11.112 billion purchased by authorized foreign exchange intermediaries between April and August 2024.
A total of US$1.407 billion passed through the hands of clients to whom the intermediaries cannot prove their domicile or specific regime, behind the US$6.813 billion traded by units belonging to the definitive regime and US$2.739 billion attributed to free zone operations.
This is stated in the most recent Monthly Economic Situation Report issued by the Central Bank of Costa Rica (BCCR), which allows us to determine that, despite the fact that an attempt has been made to make transparent the information of those who carry out purchase and sale transactions in the foreign exchange market, those who are not identified still have weight.
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Since last April, the Central Bank established new requirements for exchange intermediaries to request additional information from those who carry out transactions with dollars at bank counters, to know more clearly where the money comes from.
Now, transactions must be classified according to the type of identification, the institutional sector, the economic activity and the trade regime of the persons (physical and corporate) who buy and sell dollars and it was the result of an effort to make the information transparent, in the face of a series of doubts in the public opinion about the movements of dollars that were carried out and recorded under the category “Others” and whether they could be linked to “hot money” (investment resources that arrive in a country in the short term and then leave again) or even linked to organized crime.
Specifically, the “Other” category was clearly growing, as during the first quarter of the year it had increased by 53% and represented 48% of the total transactions. With this change, it was reduced to a percentage of 19%, but as can be seen in the data, it is still very high.
An area that is not yet controlled
For economist and representative of the Market Observatory and Consumer Defense (Omercon), Welmer Ramos, the idea was to know where the dollars came from, but there are still many transactions whose origin is unknown, so he believes that the “Other” category is still not controlled despite the efforts.
“They do not have individualized information, because the General Superintendence of Financial Entities (Sugef), the Costa Rican Banking Association and part of the financial system have not wanted to give the Central Bank the power to access this data. That raises suspicions, because, if anything moves the financial system, it is trust; and we know that organized crime can take advantage of any loophole to move their money,” Ramos analyzed.
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For his part, economist Luis Carlos Olivares indicated that it is striking that the clients who cannot be identified are surpassed only by the definitive regime and the free zones, which could be opening loopholes for organized crime “although this could be related to the fact that the entities are not fully applying the policy of knowing the client, it is not justifiable that we continue to see these figures.”
Another fact that raises suspicions: for the period between April and August of this year, the inactive or deregistered units transacted in purchases made by financial intermediaries a total of US$621 million, which is very questionable, since, being inactive, they should not move capital, according to Welmer Ramos.
And when there are so many dollars in the economy, which even exceed demand, it is necessary to see what to do with those resources, which is why the Central Bank has repeated on several occasions that it has taken advantage of the opportunity to increase the International Monetary Reserve, that is, its dollar reserve.
Atypical growth of dollar reserves
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The Central Bank managed to accumulate a record dollar reserve, since by August 2024 it had a total of US$14.22 billion, one of the highest figures in seven years. In January 2022 it had a reserve of US$6.8 billion, which puts the country in a good position in the event of a contingency with the outside world, but is not synonymous with more wealth.
What it does show is that there is an excess of dollars in the economy, which is ultimately not related to the State injecting foreign currency, but is the product of private sector transactions.
“We are talking about the fact that in 2019 the injection of dollars by the private sector was US$2.17 billion and for 2023 we closed with US$7.36 billion, while, in the same period, the State was in deficit with -US$920 million for the first year and -US$2.1 billion last year. This shows that the public sector is the great demander of dollars, not the one that is injecting dollars into the reserves and the economy,” Ramos added.
The expert added that it is urgent to focus on the injection of dollars into the economy, with tax, customs and financial intelligence to see where these movements are coming from, because, from his perspective, the money moved by organized crime is a very sophisticated matter, since they operate with experts in the financial market and pass the currencies through normal financial channels.
“Having individualized information would allow for greater traceability, knowing if certain exporters of goods are selling their products four or five times more than their competitors sell, or, for example, if there are hotels that report being full in the low season, while all the others are empty, or there are construction agents that build projects very often and without financing,” warned the specialist.
Ramos said that the issue of transparency in the tax system and the movement of dollars in the market requires more than including new boxes in the forms for the sale and purchase of foreign currency; what is needed is to have individualized information to be able to cross-check data, and see if small businesses are invoicing industrial amounts, to know who gets rich overnight or to determine where the money comes from.
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