In Costa Rica, funds destined to finance projects of the Ministry of Transportation and Public Works (MOPT) are usually managed by national banks where deposits are unconditionally guaranteed by the government. For this reason, the MOPT Minister is now being questioned as to why he chose a private, international bank to handle more than $450 million.

Minister Carlos Villalta has explained that he chose Scotiabank to manage funds loaned by the Inter-American Development Bank (Spanish initials: BID) because its management fees are far more reasonable than state-sponsored banks.

Specifically, Minister Villalta mentioned that the fees charged by Scotiabank were $500K, significantly lower than the next higher proposal of $4 million by Banco Crédito Agrícola de Cartago (Spanish acronym: Bancredito).

Private and international banks doing business in Costa Rica are not usually invited to bid in money management projects for government projects, and this has to do with the fact that only state-sponsored banks such as Bancredito, Banco Nacional, Banco de Costa Rica, etc., guarantee deposits. This deposit assurance is backed by the government, and it often comes at significantly higher fees charged to depositors.

Minister Villalta added that Scotiabank, a financial institution where deposits are not guaranteed, was included in the bidding under the recommendation of the BID. The Minister also said that MOPT decided to include private and international banks in the bidding for a greater diversity. Not many banks applied since $450K destined for public works is an amount that is quickly spent.

As reported earlier this year, by The Costa Rica Star, Scotiabank acquired Citigroup’s consumer and commercial banking operations in Costa Rica and Panama. The signing of these acquisitions was announced in July 2015 and the transactions are valued at approximately $360 million.

Scotiabank and other international banks that do not enjoy deposit guarantees in Costa Rica usually enjoy better credit ratings despite lower capitalization.