Direct Foreign Investment was insufficient to cover the external deficit
- Country received $2,016 million in investments and spent $2,669 million to cover deficit
- The country has to borrow on reserves to cover the gap
In 2008 Costa Rica received $2,016 million in investments made by foreign companies; however, this quantity did not cover the $2,669 million spent by the country’s current account deficit.
The current account deficit is the difference between the value of goods and services exported and the imported ones. Includes tourism and other services like those offered by call centers.
Foreign Direct Investment includes new businesses that come into the country, expansion of operations of foreign firms already operating in or purchasing land or property firms, among others.
In total, the resources for foreign investment accounted for 75% of current account deficit, a result very different from 2006 and 2007, when the resource investment made to finance the deficit and on.
This puts more pressure in the country to find other ways to finance the current account deficit and thus avoid additional pressures on the exchange rate.
This year, the Central Bank is forecasting that the deficit in the current account falls below an amount that represented nearly 9% of production in 2008 to 5.7% in 2009.
At the current exchange rate and the current forecast for production this year, a deficit that represents a 5.7% equates to about $1,803 million and the central bank expects foreign direct investment reaching $1,333 million, 33% less than in 2008.
One of the main reasons of the expected reduction in the current account deficit is the drop on oil prices.
The Central Bank President Francisco de Paula Gutiérrez, estimated yesterday that the oil bill this year could fall by nearly $1,000 million compared to what was paid last year.
However, everything depends on the behavior of the oil market.
To prepare for this, the Central Bank arranged to draw from external borrowing if needed to fill this gap.
These include a contingency agreement with the International Monetary Fund that would allow the country to use up to $750 million if needed.
Was also sent to Congress a $500 million loan to the Central Bank can supply liquidity in dollars to local banks if necessary.
The Central Bank carries out a revision of its forecast for this year, which appears in the middle of this month.
Source: La Nacion
