Identifier
Created
Classification
Origin
08SANSALVADOR187
2008-02-15 14:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy San Salvador
Cable title:
SALVADORAN BANKS "VOLUNTARILY" REDUCE CREDIT CARD
how-toVZCZCXYZ0005 PP RUEHWEB DE RUEHSN #0187 0461424 ZNR UUUUU ZZH P 151424Z FEB 08 FM AMEMBASSY SAN SALVADOR TO RUEHC/SECSTATE WASHDC PRIORITY 9014 INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SAN SALVADOR 000187
SIPDIS
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN EINV ECON ES
SUBJECT: SALVADORAN BANKS "VOLUNTARILY" REDUCE CREDIT CARD
RATES
REF: SAN SALVADOR 80
UNCLAS SAN SALVADOR 000187
SIPDIS
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN EINV ECON ES
SUBJECT: SALVADORAN BANKS "VOLUNTARILY" REDUCE CREDIT CARD
RATES
REF: SAN SALVADOR 80
1. (U) SUMMARY. ABANSA, the Salvadoran banking association,
announced February 11 that Salvadoran banks had "voluntarily"
lowered the maximum interest rate for credit cards from 49
percent to 39 percent. The announcement concluded nearly two
months of intense negotiation between the banking sector and
the government and staved off government-imposed interest
rate caps. END SUMMARY.
2. (SBU) ABANSA Executive Director Carlos Caceres announced
the reduction of the banks' top rate to the press on February
11. President Saca's Alianza por la Familia had called for
an interest rate cap, a move the banks feared would come
through government fiat and potentially cap interest rates
below the "break-even" point for certain categories of cards.
The banks, through ABANSA, negotiated with the Secretario
Technico (President's Chief of Staff) Eduardo Ayala Grimaldi
and Superintendent of the Financial System for nearly two
months to produce an agreement for "voluntary" reductions and
new transparency measures, including a simplified interest
rate schedule that will be published more frequently. Post
maintained frequent contact with the banking sector and GOES
officials. The Ambassador raised the issue with Ayala in
late January (reftel).
3. (SBU) COMMENT: Both the Government of El Salvador and the
banks can claim some degree of victory. The government
appears to have "stood up" to the banks, and forced them to
lower rates "for the benefit of the consumer" in an election
year. The banks avoided a mandated interest rate cap, which
might have been difficult to lift especially under a new
government in 2009. The banks also kpt the rate high enough
to maintain profitabilit; otherwise, at least one major U.S.
bank had spculated about abandoning the Salvadoran market
etirely. While negotiations ended with both parties
satisfied if not happy, the attempt at interest ate caps
remains part of a troublesome policy trnd of sacrificing
long-term economic principles or short-term political gain
(reftel).
GLAZER
SIPDIS
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN EINV ECON ES
SUBJECT: SALVADORAN BANKS "VOLUNTARILY" REDUCE CREDIT CARD
RATES
REF: SAN SALVADOR 80
1. (U) SUMMARY. ABANSA, the Salvadoran banking association,
announced February 11 that Salvadoran banks had "voluntarily"
lowered the maximum interest rate for credit cards from 49
percent to 39 percent. The announcement concluded nearly two
months of intense negotiation between the banking sector and
the government and staved off government-imposed interest
rate caps. END SUMMARY.
2. (SBU) ABANSA Executive Director Carlos Caceres announced
the reduction of the banks' top rate to the press on February
11. President Saca's Alianza por la Familia had called for
an interest rate cap, a move the banks feared would come
through government fiat and potentially cap interest rates
below the "break-even" point for certain categories of cards.
The banks, through ABANSA, negotiated with the Secretario
Technico (President's Chief of Staff) Eduardo Ayala Grimaldi
and Superintendent of the Financial System for nearly two
months to produce an agreement for "voluntary" reductions and
new transparency measures, including a simplified interest
rate schedule that will be published more frequently. Post
maintained frequent contact with the banking sector and GOES
officials. The Ambassador raised the issue with Ayala in
late January (reftel).
3. (SBU) COMMENT: Both the Government of El Salvador and the
banks can claim some degree of victory. The government
appears to have "stood up" to the banks, and forced them to
lower rates "for the benefit of the consumer" in an election
year. The banks avoided a mandated interest rate cap, which
might have been difficult to lift especially under a new
government in 2009. The banks also kpt the rate high enough
to maintain profitabilit; otherwise, at least one major U.S.
bank had spculated about abandoning the Salvadoran market
etirely. While negotiations ended with both parties
satisfied if not happy, the attempt at interest ate caps
remains part of a troublesome policy trnd of sacrificing
long-term economic principles or short-term political gain
(reftel).
GLAZER