SAN JOSE, Costa Rica-World Council of Credit Union (WOCCU) officials last week mounted an effort to head off anti-credit union sentiments among banks and other financial institutions in Costa Rica, at the same time mounting an international lobbying effort against the threat of taxation facing the Central American country's not-for-profit financial cooperatives.
Last week's contingent, which included officials from WOCCU and the Alabama Credit Union League, visited with Costa Rican government officials, including President Oscar Arias Sánchez, at the request of the Federación de Cooperativas de Ahorro y Crédito de Costa Rica R.L. (FEDEAC), WOCCU's Costa Rican member organization. The Alabama League and FEDEAC are partner organizations through WOCCU's International Partnership program.
Attacks by Costa Rica's banks stem from the fact that the country's credit unions have grown rapidly over the past decade, increasing their market share from 3% to 12% in terms of assets. The country's credit unions also are growing membership at a rate of roughly 15% per year and have evolved from small storefronts to more sophisticated and competitive financial institutions. A few credit unions exceed some Costa Rican banks in terms of asset size, and the banking industry has been lobbying the country's government, presenting the cooperatives as an untapped source of tax revenue, raising concerns among both credit unions and FEDEAC officials.
"No matter how successful they are and no matter where they're located, credit unions are member-owned financial cooperatives and should not be taxed," said Pete Crear, WOCCU's president and CEO who headed the group that met with Pres. Arias Sanchez. "Our goal is to help Costa Rican lawmakers understand the differences between credit unions and banks and then legislate appropriately."
The contingent, which included Gary Wolter and Vicki Williams, the Alabama League president/CEO and senior executive vice president/COO, respectively, met with Pres. Arias Sanchez, the 1987 Nobel Peace Prize winner, on April 23. The country's chief executive spoke favorably about credit unions as a way to extend service to the country's rural poor, said Victor Miguel Corro, WOCCU's International Partnerships manager, who escorted the contingent to Costa Rica. Pres. Arias Sánchez appreciated the solidarity shown by WOCCU in support of Costa Rica's credit unions, as well as how such external support might foster the growth of his country's financial cooperatives, Corro said.
"In Costa Rica, cooperativization is taught in school and is fully sanctioned by the government," said Corro. "However, as credit unions have grown, some government officials have made troubling comments that credit unions are similar to banks and should be taxed."
The contingent also visited Cost Rica's National Congress at the Blue Castle, the San Jose headquarters where the Congress meets. The four elected Congressional representatives present overwhelmingly supported the role credit unions plays in Costa Rican society.
"Credit unions have been exceptionally important for the development of rural indigenous communities in this country," said Jose Manuel Echandi, Congressional representative for Costa Rica's Independent Party. "Where previously communities were barely able to meet basic subsistence needs, they now have access to resources for building wealth and are expanding into new entrepreneurial activities."
Both Pres. Arias Sánchez and legislators expressed their support for credit unions and their potential to improve wealth distribution among rural population members. WOCCU and FEDEAC officials pledged to monitor activities within Costa Rica's legislature and respond promptly to further threats against the country's credit unions. Manuel Bolaños, FEDEAC's CEO, thanks WOCCU and the Alabama League for taking quick action.
"An international lobbying effort carries a lot of weight," Bolaños said. "We drove the point that credit unions aren't driven by profit, but rather by the philosophy to serve members."