Sugef Plots Movement of Debts
- Details
- Category: The Nation
- Published on Thursday, September 22 2011 04:52
- Written by Rod Hughes
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Some 10% of Costa Ricans devote 40% of their monthly income to paying off past indebtedness, the financial watchdog agency Sugef told the business publication El Financiero.
Tracing the patterns of Costa Ricans' personal debt was a monumental task for the agency because figures varied widely among lending institutions. Although SUGEF has yet to tabulate a comparison with patterns in other countries, their report cast a light on borrowing practices here.
The figures show that 62% of the economically active population owes 6.4 billion colones for debts incurred. This figure represents some 29% of disposable income in the country, that is, resources available for buying or savings.
Alarming as these figures may sound to those of us not abreast of financial affairs, Ticos are well below the debt habits of more developed nations, at least to formal lending institutions. Some household debts range from 80% of disposable income to a crushing 170%in some other countries.
Not surprisingly, household debt here rose during the world economic crisis in 2009 to 31.5% of disposable income. In 2006 while the local economy was riding high and unemployment was at 4.6%, the figure was just 23%.
Maurillio Agular, director of corporate affairs at Banco Popular, considers the average debt of 12% to 20% of income to his institution is moderate, taking into account that the average local income is 500,000 colones monthly.
It would appear from Aguilar's comment that Ticos do not practice the risky art of running up high debts, then hanging on to the brink of insolvency by their fingernails. But Banco de Costa Rica credit director Rodrigo Ramirez disagrees.
He says his perception is that Ticos are using credit cards to increase their short term debt in a risky manner. (The paper notes that the cited figures do not include other lenders such as domestic appliance dealers or credit card companies such as Credomatic.)
Economist Rodolfo Jimenez explains the apparent conservative attitude of Costa Rican consumers with the free spending consumers of more developed countries by the fact that lending institution in developed countries are more sophisticated, offering a wide variety of options.
Plus, he said, incomes are higher in those countries, offering consumers the chance to safely run up higher debts.
Economist Leiner Vargas adds still another factor--the generation gap. A Spanish study shows that persons 64 years old and older show very low percentages of debt while the major concentration of debt centers on the 35-44 year old age range.
Although he did not say so specifically, it is known that Costa Rica is an aging country with a low birth rate. Demographically, it may reflect a cautious way with money and a fear of debt.
Some thoughtful figures from El Financiero: If your indebtedness is more than 30%, you are in the danger zone. Formal lending institutions here refuse to grant loans if one is more than 40% of disposable income in the hole.
The 120% debt of households in developed countries was a major factor in the 2008 economic crisis. Even today, it affects such European Union nations as Spain, Greece, Portugal and Germany.
