Study of the Bill to Reform the FODEA Law: FODEA II
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Date
1989-09
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Ohio State University. Department of Agricultural, Environmental, and Development Economics
Abstract
A bill to amend the section of the FODEA Law that regulates the rescheduling of loans was introduced in the Costa Rican Congress in July, 1988 (FODEA 11). The main reforms featured in the bill are outlined in this paper, which also contains an analysis of the effects that the bill may have on the Costa Rican National Banking System and on the nation's farmers, on the basis of an evaluation of the consequences of FODEA I. The analysis reveals that the FODEA portfolio has been highly concentrated among a small number of farmers, particularly livestock producers of the Guanacaste region. Because of the low interest rates charged on the rescheduled loans, the subsidy granted to agricultural borrowers by the FODEA Law has also become highly concentrated. If implemented, the FODEA II bill would not only increase this concentration of the FODEA portfolio, but it may also contribute to further exacerbate the revenue and liquidity losses that the banks have already experienced as a consequence of the FODEA Law.