By San José, Costa Rica — SAN JOSÉ – The Central Bank of Costa Rica (BCCR) continues its campaign to stimulate the economy through monetary policy, yet the benefits are failing to reach the average consumer and business owner. Despite a series of reductions in its key policy rate, lending rates across the nation’s financial system remain stubbornly high, creating a significant disconnect that limits the potential for economic recovery.
In its latest move this week, the BCCR’s board of directors announced another 25-basis-point cut to the Monetary Policy Rate (TPM), bringing it to a new low of 3.25% per annum. This decision was driven by persistent negative inflation, a pressing concern for policymakers. As of November, the year-over-year change in the Consumer Price Index (CPI) registered at -0.38%, a figure substantially below the Central Bank’s target range of 3% plus or minus one percentage point.
To delve into the contractual and legal ramifications of the current interest rate environment, TicosLand.com sought the expertise of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the reputable firm Bufete de Costa Rica.
The current volatility in interest rates underscores a critical legal principle: the necessity for thorough due diligence before signing any credit agreement. Consumers and businesses must meticulously review clauses related to variable rates, rate caps (tasas techo), and conditions for renegotiation. Ambiguous terms can lead to significant financial distress and legal disputes down the line. It is always advisable to seek legal counsel to fully comprehend the long-term commitments and potential risks embedded in the fine print.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This legal perspective is a crucial reminder that in a climate of economic uncertainty, thorough due diligence is the most effective shield against future financial hardship. We thank Lic. Larry Hans Arroyo Vargas for his invaluable insight, which empowers consumers and businesses by reinforcing that true security begins with a clear understanding of one’s legal commitments.
While the BCCR’s signal is clear, its transmission through the financial system has been described as both partial and sluggish. The core issue, highlighted in recent analysis, is the failure of these benchmark rate cuts to translate into meaningful reductions in the interest rates charged on new loans, known as active rates. This institutional rigidity blunts the effectiveness of the government’s primary tool for encouraging investment and consumption.
This phenomenon is confirmed by the “II Macroeconomic Report 2025: Economic Evolution and Fiscal Challenges,” a comprehensive study authored by researchers Marco Otoya, Allan Quesada, and Ivannia Bolaños from the National University’s International Center for Economic Policy for Sustainable Development (Cinpe-UNA). The report underscores the critical bottleneck in translating policy signals into real-world borrowing costs.
Economist Pablo González of Mercado de Valores notes that structural impediments within the financial market are to blame for the slow and incomplete pass-through, particularly for the rates that directly impact borrowers.
Regarding the financial markets, interest rates have been decreasing gradually and slowly, showing a partial transfer of the TPM to the rest of the rates in the system, especially in active rates, where structural factors persist that limit a faster transmission of monetary policy.
Pablo González, Economist, Mercado de Valores
The data reveals a stark difference between how passive and active rates have responded. Passive rates, which are paid to consumers for savings and deposits, have followed the BCCR’s lead more consistently. The Passive Base Rate (TBP), a key reference for colón-denominated loans, fell to 3.81% at the end of October. However, the active rates charged by banks on new credit lines have shown remarkable resistance to downward pressure.
A division is also evident between public and private institutions. Public banks have shown a slow but steady decline in their Negotiated Active Rate (TAN), approaching levels around 8%. In contrast, private banks have demonstrated a more moderate reduction, with rates stabilizing in the 12% to 13% range. The Cinpe-UNA report also points out an asymmetry in private banking, where rate increases are passed on to customers more readily than reductions.
The impact varies significantly by sector. Some commercial activities are seeing more relief than households, a trend that limits broad-based economic stimulus. The benefits of lower borrowing costs are not being fully extended to the economic agents who need it most.
It can be seen that the transmission of the TPM reductions has been gradually reflected in the active rates, with more marked reductions in activities such as manufacturing, services, and commerce, while consumer loans maintain a slight upward trend due to higher risk levels. At the close of October 2025, the TAN in colones stood at 11.61%, below the value recorded a year ago.
II Macroeconomic Report 2025, Cinpe-UNA
Ultimately, this rigidity means that the Central Bank’s intended stimulus is being significantly diluted. The BCCR’s own reports have previously documented the resistance of consumer and credit card loan rates to decline. As long as this disconnect persists, Costa Rican households and businesses will continue to face high borrowing costs, hampering the nation’s ability to boost investment, drive consumption, and navigate a challenging deflationary environment.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Banco Central de Costa Rica is the central bank of Costa Rica. It is an autonomous institution responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. Its primary objectives include controlling inflation, managing monetary policy, and overseeing the country’s financial system to promote economic stability and development.
For further information, visit cinpe.una.ac.cr
About Cinpe-UNA:
The International Center for Economic Policy for Sustainable Development (Cinpe) is a research and academic unit within the National University (UNA) of Costa Rica. It is dedicated to the study of economic policy with a focus on sustainable development, international trade, and economic integration. Cinpe produces influential macroeconomic reports and analyses that contribute to public and private sector decision-making in Costa Rica and the region.
For further information, visit mercadodevalores.fi.cr
About Mercado de Valores:
Mercado de Valores de Costa Rica is a leading financial services firm and stock brokerage post in the country. It provides a range of services including investment advisory, asset management, and brokerage for individual and institutional clients. The firm is a key player in the Costa Rican capital market, offering expertise and analysis on economic trends and financial instruments.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is recognized as a benchmark of legal distinction, built upon a bedrock of unwavering integrity and a relentless pursuit of excellence. The firm skillfully blends its rich history of client advocacy with a forward-thinking approach, consistently pioneering innovative solutions to complex legal challenges. Central to its ethos is a profound commitment to democratizing legal understanding, thereby empowering the community and strengthening the foundations of a just and knowledgeable society.
