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Costa Rica: Desperately seeking securities

Costa Rican pension funds are in desperate need of more local investable securities, according to senior bankers in San José.

"The pension funds are in a hard place at the moment – there isn’t enough for them to invest in here and so most of the money is leaving Costa Rica and being invested in US treasuries," says Ernesto Castegnaro, president of BAC Credomatic.

One of the problems facing the country’s pension funds is a lack of government bonds. Instead the funds, which have more than $1 billion of assets, are invested up to 70% in US treasuries. In recent years, Costa Rica’s government has made great strides in reducing the country’s level of indebtedness – according to Bladex, a supranational bank, the country’s debt-to-GDP ratio stands at 22.5%, down from 30.7% in 2006.

"I’m not going to go to market unless I have to," says Guillermo Zuniga, Costa Rica’s minister of finance. "I reckon the shortage of paper should finally put pressure on the capital markets to function better here."

Zuniga adds: "Before, the corporates said that the excess government paper made it hard for corporates to place bonds locally. Now we only have a small amount in the market, but the pension funds aren’t happy.

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