La Reforma Financiera Costarricense: ¿Hacia Donde Ir Ahora?

Abstract

This paper discusses a framework of analysis for the financial reforms still needed in Costa Rica to guarantee a competitive financial system. It contrasts the earlier financial regulation, designed from an interventionist and protectionist perspective, with the view that finance's main role is to promote market integration. The attempts to control the prices and amounts of financial transactions failed because they pursued three unattainable objectives: to use formal credit to promote specific objectives (ignoring the fungibility of money); to rescue small borrowers from the grip of moneylenders (with credit programs that lacked competitiveness); and to redistribute wealth (credit is a regressive mechanism for distribution). The purpose of the reforms should not be to create another development bank (when all have failed), but to create an environment favorable to the efficient expansion of the whole system (multiple institutional types). Financial reform in Costa Rica has attempted to give market forces a greater role; this approach should not be reversed.