La Economia Politica de la Nacionalizacion Bancaria en Costa Rica: 1948-1990

Abstract

This paper explores the motivations for and consequences of the nationalization of the Costa Rican banks in 1948, in a political economy context. It first identifies the ostensible objectives for the nationalization and the institutional evolution of the financial system since then. The state-owned banks evolved into bureaucracies dominated by their employee unions and by rent-seeking borrowers. The supervision of the system by the Central Bank became increasingly vulnerable to pressures from interest groups and political interference. Regulatory avoidance eventually challenged the monopoly of the state-owned banks. Results with respect to financial deepening, credit allocation, access to financial services, portfolio concentration, transaction costs, loan default and bank efficiency are reviewed. Recent efforts of financial reform are explored in detail.