www.CostaRicaTicas.com

I had to go to the bank today and decided to ask some hard questions about deposit insurance and financial stability. I use BAC San Jose. I was immediately referred from the CAJA normal to some manager in the back office. Probably because I told them I was thinking of wiring a good chunk of change, if I have confidence in their bank.

When I asked her what kind of insurance guarantees my deposit, she looked at my cross-eyed. Granted - this was in Spanish, but mine is decent enough. Then I explained how in the US all banks deposits are guaranteed by the FDIC up to 250k. Then she asked me how much I wanted to deposit and I said $30K. She began shuffling through some paperwork.

Her response was "We are the most financially solid bank in Costa Rica. But, the government doesn't provide any insurance." So, I asked if they were some brochure or something that discusses the matter or if I could see some financials. She said - No we have nothing to give you. Then I asked her if she was familiar with the financial crisis in America. Finally.... I got a yes out of her. I asked her - if that happens here, what kind of security do I have if your banks falls (I didn't know the word for insolvent or liquidity). This also got her a little upset.

After digging around her computer, she finally said "We are owned by General Electric." I think asked "Entonces, estan guardando su espalda?" Are they watching your back? In spanish that makes sense. She said yes, but still had no documentation. Finally she referred me to the internet.

I was like great - so I google your bank and GE and I should know??? I left and googled and sure enough GE bought 50% of BAC in 2005 and S&P recently gave them a rating of 'BBB/A-2' - Affirmed. I then googled Citibank and S&P and learned that they also have a rating of BBB. Then for shits and giggles, I googled S&P and Wachovia and learned that in August this year, S&P lowered their rating from a 'A+/A-1' to 'AA-/A-1+'. Both of which are higher ratings than a BBB/A-2 which was given to BAC San Jose.

So, who is full of shit here??? Obviously the bankers and politicians in America are. Are the equivalent any better? I don't know. Does S&P need to take their job and shove it. Yes. Does this chica who is managing a bank need to remove her head from her ass? Yes.

I suppose I should use some of that money, to buy a sharp knife and cut a giant gash in my mattress and stuff it with $1 bills. Or perhaps I should invest in Iraqi dinars???? Where is Mr. Villaloba when I need an investment idea?

For those that feel safer in Banco Nacional. I beg to differ. The chronies and dummies that run this government probably are more suited to managing a deep-fryer at McDonalds. On a scale of 1-10, with 1 being dishonest and stupid, and 10 being honest and incredibly smart. I would give bankers and politicians in CR a 3. I would give the same in the US maybe somewhere between a 4 and a 5.

Maybe my money should go in Indian roopies?

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http://TipsCostaRica.com for pratical advice on living in Costa Rica.
In order to write about life, first you must live it! - E. Hemingway.

I used to feel confident about banking in CR. But over the past couple years, I've lost that confidence, and I've been withdrawing $$$ from my account(s) every trip to CR.
Chi - your "mattress" idea seems to be the way to go nowadays!

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You ALWAYS have an option ....... "NEXT" !!!

Chi,
Your rating of BAC San Jose is off a little. The BBB is the rating to the parent company, BAC International. The San Jose bank itself is rated BB+ or BB, depending on which currency you are looking at, and that puts it below investment grade, not that I'd put any money anywhere near it if it was BBB.


Banco BAC San Jose 'BB/B' Ratings Affirmed; Outlook Stable

MEXICO CITY (Standard & Poor's) Sept. 24, 2008--Standard & Poor's Rating
Services said today that it had affirmed its 'BB/B' foreign currency and its
'BB+/B' local currency counterparty credit ratings on Banco BAC San Jose S.A.
The outlook is stable.
The ratings on Costa Rica-based BAC San Jose reflect its dollarized
balance sheet and expanding lending activities in a small economy, the
challenges imposed by a market in which commercial public banks have a 50%
penetration, and a pressured capital ratio. The ratings are supported by good
financial performance, low delinquency levels, adequate liquidity, and the
benefits from the ownership by one of the most important financial
institutions in Central America, BAC International Bank Inc. (BIB;
BBB/Stable/A-2).
Despite the loan portfolio's good performance, BAC San Jose is highly
exposed to foreign exchange movements because approximately 50% of its loan
portfolio is dollar-denominated, and it is not all related to net dollar
generators. Since the 2007 exchange regime in Costa Rica is driving the
economy toward free trade, there might be an impact on results, with larger
volatility especially through treasury income. We believe that despite this
change of regime, the country's operating dynamics and competition will still
provide impetus for credit in dollars.
Competition is strong, and comes mainly from public banks with more than
half of market share. Liquidity and funding are satisfactory. BAC San José's
liquidity is supported by an ample and stable deposit base that represents 75%
of total liability. The ratio of loans to deposit is slightly above 1x, but we
expect it to return to below 1x as assets growth goes slower. We also consider
that the bank would be supported by Credomatic International Corp. (CIC;
BBB/Stable/A-2).
Capitalization is adjusted even after a $10 million capital injection
during the second quarter of 2008. Standard & Poor's Ratings Services expects
capital ratios to be pressured due to possible volatility of foreign exchange
income.
The group displays strong financial ratios across the board. Thanks to
tight risk management, nonperforming loan ratios have been kept under control
and stood below 1% on June 30, 2008. When considering charge offs, the
restructured ratio reached a little bit more than 1% by June 2008. We expect
profitability to be stable, with return on assets close to 2.5% despite
foreseeable higher funding costs due to a liquidity squeeze on a global basis.
Profitability is supported by BAC San Jose's business mix and relatively low
funding costs. We expect competition from large public banks and global banks
to add pressure to interest margins.
The ownership of BIB and Credomatic International Corp. (BBB/Stable/A-2)
provides BAC San Jose with access to a common brand and regional presence,
increasing its position in the growing retail sector in Costa Rica, mainly in
the high-end mortgage loans and credit cards segments. This is a definite
competitive advantage, given the increasing and tougher competition in Central
America. We expect BAC San Jose to continue benefiting from its current
ownership structure.
The stable outlook reflects BAC San Jose's commercial position in Costa
Rica and its adequate financial profile, which could support it through
probable inflation pressure. If the bank's performance deteriorates,
especially liquidity, or if there is a negative rating action on the sovereign
ratings on the Republic of Costa Rica, the rating on the bank could be
pressured.

Private banks in Costa Rica do not have insurance to protect their depositors no matter what a bank officer may tell you if you should ask. Most depositors hope, and that's all it is, that the franchiser bank will step in and rescue their franchisee to protect their brand name. In Argentina, when the banking system collapsed, some did but most did not.

The Costa Rica government does insure the deposits that are in the National banks so when Banco Anglo Costarricense failed in 1994 depositors got their money.

Some of this was covered in this thread.

https://costaricaticas.com/phpBB2/viewtopic.php?t=26015

_________________
Pura Vida
Only Irish coffee provides in a single glass all four
essential food groups:
alcohol, caffeine, sugar and fat.
Alex Levine

With the interest rates offered at the banks these days....I agree...but tuck it in there GOOD ...and don't tell the chica on top of the mattress

_________________
Why settle for just one woman when you can enjoy them all?

If you are worried about the chica on top of the mattress, I suggest you park your fortune in a coffee can.... deep in the ground. In my days, I can remember a few TLNs where I had to sleep with one eye open and bolt all my valuables to the floor and the walls.

_________________
http://TipsCostaRica.com for pratical advice on living in Costa Rica.
In order to write about life, first you must live it! - E. Hemingway.

Anybody who puts a lot of faith in ratings agencies should do a little study. S & P, Moody's and Fitch are a joke. They bravely downgraded Lehman Brothers, Bear Stearns, Wachovia, Washington Mutual, Countrywide, and all the rest as soon as everybody else in the world knew they were crap.

I don't put my life savings in Banco National, but I don't think a tin can full of dollars buried in the back yard is a better choice for that money. First of all, my money is in the same place that the rich Ticos have their money. I strongly suspect the powers that be will find a way to repay their depositors.

Beyond that, if we get into a period of serious inflation such as the late 70s and early 80s, and interest rates skyrocket to 20%, buried dollars will be losing value at an alarming pace. In my opinion, if you think the national banks here are likely to fold, you really shouldn't live here. Switzerland might be the destination of choice.

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"The only normal people are those you don't know very well." Joe Ancis

Didn't someone just say in another thread that those who went long on the Japanese Yen made a killing? Haven't they had their time of trial (more like a decade +) and are now on the upswing? Just wondering.

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

where is this place?

The state run banks, Banco National for example. I don't say they put ALL their money there, but neither do I. The point is that if a bailout is needed, the people who pull the strings here will make it happen. I hope.

_________________
"The only normal people are those you don't know very well." Joe Ancis

FYI----The Friday before the weekend that AIG "nearly" went Belly Up AIG and American General (one of AIG's subs) had Moody's/S&P short-term debt ratings of A1+/P1 and A1/P1. A1+ short-term is equivalent to "AAA" Long-term. I'm also pretty certain that both Lehman's and Bear Stearns bond ratings were in the Single "A" category (far from Junk level ratings) up until the time they went under. Moral here is that Moody's & S&P are WORTHLESS!!

I have some money in BAC, San Jose and some in HSBC. I wonder whether I should transfer all to HSBC ? Is it safer ? Do not really have the MATTRESS option as I am presently not living in Costa Rica !!
Any guidance would be helpful. Thanks

I recently learned that all businesses (exports) are owned by 4 families in Costa Rica. Furthermore, most all major economic decisions are made and approved with consent of representatives of these families. In contrast, Nicaragua is run by one - the Sandistas. At least there are 4 in CR. The Sandistas tend to run their country into the shitter, at the benefit of the family.

Guess who is a part of the Ogilopoly in CR ? Big - surprise - the family of Presidente Arias. Arias apparently owns all the coffee and sugar cane plants in Heredia. What does this mean in terms of financial security and banking??? Not sure. But, you can bet that these guys are smart and super conservative with their nest eggs.

I imagine that they have their short-term money in Banco Nacional. But, I'd be willing to bet the bulk of their money is spread-out between banks in Switzerland AND I'M WILLING TO BET NOW - the Bank of China. Arias is getting super cozy with those Chinos.

If anyone knows how to open a Bank of China account from abroad, please post here. They own all of our USD. From an economic standpoint, we are their bitches. I'd rather have my money with them, than just about any other bank in the world.

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http://TipsCostaRica.com for pratical advice on living in Costa Rica.
In order to write about life, first you must live it! - E. Hemingway.

Chi,

Interesting thought, but there is a lot more involved than who holds a lot of dollar reserves. First of all, dollar reserves are only as good as the dollar. There is a large contingent of people who believe the dollar will either be devalued or inflated. Either way, your dollars will buy less. There is also the issue of China's economy, which is so heavily dependent on exports. As the global economy enters a period of deep recession, these exports will decrease along with China's GDP. China's GDP needs to grow something like 7% a year just to keep up with population growth. You may be too young to remember Tienanmen Square, but civil unrest is not out of the question in China if the economy tanks. If you have built your economy on selling cheap crap to a country that is now going broke... well, you get the picture.

If you really have enough money to make it worthwhile, I believe Switzerland is the place to put your money. And I'd do it in Swiss Francs, myself, not dollars.

_________________
"The only normal people are those you don't know very well." Joe Ancis

Young, but not too young to remember Tienanmen square. LOL... I visited that place about two years ago when I was in China. It was surreal to think about the revolt and the government gunning people down.

For those interested.... There is a Bank of Cathay in the main Pavas shopping center near Mas X Menos. The reason why I like Chinese banks...... I heard they are the only banks that don't allow the US government to "peak" inside. For example, I know a person in CR who was late on taxes. He had a checking account with HSBC. He went to the bank one day and learned that the US government had frozen his account.

I'm not trying to hide money. I just don't want those jerkies near my money when I know we just signed a $700+ billion bailout, without EVERY figuring WHO or HOW we will pay for it. Ooopsss forgot the $18 billion that went to the autos. When or if the government goes broke, I don't want to offer the freedom of access to my accounts. I also learned that they can access ANY account from ANY bank that is Costa Rican. I heard the only safe place is chinese bank. Am I being paranoid?

_________________
http://TipsCostaRica.com for pratical advice on living in Costa Rica.
In order to write about life, first you must live it! - E. Hemingway.