This is a loosely list of questions and answers relating to the security interest law in Costa Rica from a foreign creditor´s perspective. 

1. Where are security interests regulated?

The security interests are regulated in Book II, Title VI (De la hipoteca y de la prenda) of the Civil Code of 1888, as reformed in Articles 409 - 447. Book II, Title VII (Del Registro Público) of the Civil Code governs the public registry for such interests in Articles 448 - 479. Articles 530 - 581 of Costa Rica's Commercial Code of 1964 also govern security interests.
 

2. What types of security interests are available to creditors in Costa Rica to guarantee the performance of a principal obligation?

Three types of security interests have traditionally been available to creditors in Costa Rica to guarantee the performance of a principal obligation:

a) Mortgage (hipoteca), Articles 409 – 425 of the Civil Code

The Costa Rican mortgage only grants a security interest in real property. It gives the creditor the right to bring about the judicial sale of the mortgaged property.

b) Pledge or Chattel Mortgage (prenda), Articles 441 – 447 of the Civil Code

The pledge functions like the real property mortgage, but the object which is pledged cannot be real property. Property traditionally covered by pledges includes: vehicles, machinery, bonds, stock certificates, lease rights and mortgage bonds. Pledged property must be held by the creditor or by a mutually agreed-upon third party.

c) Mortgage Bonds (cedulas hipotecarias), Articles 426 – 440 of the Civil Code

Mortgage bonds are generally considered a form of real property mortgage. However, they have a hybrid nature which combines a right in real property and a negotiable instrument. They operate as a more agile alternative to the common real property mortgage because of their ability to circulate.
Mortgages and pledges are considered to be "accessory" to a principal obligation: once the obligation for which it is created terminates, the mortgage's or pledge's legal effect terminates. Any person creating a mortgage or pledge must own the property and be capable of disposing of it, or be a representative legally authorized to do so. 

3. Can a loan agreement be created in a foreign currency?

A loan agreement can be created in any foreign currency. Nevertheless, if an obligation has been characterized in foreign currency, it can be paid in domestic currency (colones) at the option of the debtor according to Article 48 of the Organizational Law of the Central Bank of Costa Rica (Ley Orgánica del Banco Central). If the debtor pays a foreign currency obligation in colones, the obligation's value is converted using the average rate of exchange for the foreign currency calculated by the Costa Rican Central Bank for the operations of its Currency Exchange Market. There are no restrictions on the purchase and sale of foreign currency in the Currency Exchange Market.
The Organizational Law of the Central Bank of Costa Rica provides exceptions to the above rule. According to Article 49 of said law a debtor cannot exercise the option to pay in colones in certain situations where the obligation was incurred in a foreign currency, including "obligations and contracts that must be paid from Costa Rica [to an entity] outside of the country or vice versa," "operations and obligations made in foreign currency with funds coming from abroad," payments to persons and entities domiciled outside of Costa Rica for services rendered to Costa Rican persons and entities, and obligations that are due to public institutions whose special laws require payment in foreign currency. Since these exceptions were  established not so long ago, there is not much precedent related to their interpretation. The legal department of the Central Bank has indicated that the first exception above applies whenever a creditor's domicile is outside of Costa Rica and that the reference to "funds coming from abroad" is meant to apply to funds coming from public institutions which must register their loans in the Central Bank.

4. What about the costs of security interests which are registered?

To be enforceable, contracts must carry legal stamps evidencing payment of taxes by the parties. In the case of security interests that are registered, there is a significant cost in registration fees and legal stamps, as well as Notary Public fees (for mortgages and mortgage bonds). Such taxes are calculated according to the value of the transaction. Notarial fees are 1.25 percent of the value of the transaction. A series of special stamp duties apply at different rates depending on the type of transaction. For instance a mortgage for greater than 5 years must carry different kinds of stamps representing .004 percent, .002 percent, and .002 percent of its value to satisfy all of the taxing entities.
A withholding tax of 15 percent is levied on general interest payments abroad. However, interests payments and other types of financial expenses are excepted from the withholding tax when they are made to foreign "financial institutions" recognized by the Costa Rican Central Bank. The Tax Code also excepts interest payments on loans made to Costa Rican companies for industrial, agricultural, or ranching activities by foreign institutions "dedicated to such operations" and recognized by the Central Bank as being "first-rate."

5. What are the requirements for public registration of a security interest?

For public registration of a security interest, the parties involved must be physical persons (foreign or national), domestic corporations, duly-registered branches of foreign corporations or foreign corporations with a duly-registered legal representative with sufficient powers of attorney for the transaction. 
It is not necessary to report or register a loan or security interest, the enforcement of a loan or security interest, or any aspect of a transaction for a related obligation to be enforceable between the parties. However, mortgage and mortgage bonds must be created in a document recorded in a Notary Public's Protocol Book and must be registered in the Public Registry to affect third parties acquiring rights in good faith and to hold priority over common loans and obligations and any subsequent transactions.
Pledge agreements need not be recorded in a Notary Public's Protocol Book, and can be registered for the same purposes as a mortgage. Pledges that are registered must cover identifiable property, such as vehicles and large machinery.
The Public Registry is located in San José and covers the entire country. Its two sections relevant here are the Mortgage Registry (for mortgages and mortgage bonds) and the General Chattel Mortgage Registry (for pledges). Mortgages and mortgage bonds can only be registered if the underlying real property is registered in the Property Registry.

6. To what extent does publicity of registered securities exist?

Both the Mortgage Registry and the General Chattel Mortgage Registry are public registries so that any person can access the information recorded in them. However, the parties need only include the most basic terms of an agreement establishing a security interest when registering it (i.e., parties, price, place of payment, interest rates, etc.). Information recorded in a Notary Public's Protocol Book is available to the public at the National Archives, where it is updated on a periodical basis.

7. Is it necessary to be registered or otherwise qualified as a lender?

In general, a lender is not required to be registered or otherwise qualified in Costa Rica to make a loan, receive a security interest, or enforce the loan or security interest. However, several requirements, including registry with the General Superintendency of Financial Institutions (Superintendencia General de Entidades Financieras), are imposed if the activities performed by the lender involve receiving funds from the public on a regular basis and resemble "financial intermediation" as defined by the Organizational Law of the Central Bank of 1995.

8. Can the contracts be made in a foreign language?

In general, contracts which are enforceable in Costa Rica may be in any language, provided the parties involved understand their content. However, instruments that must be recorded in a Notary Public's Protocol Book or in the Public Registry must be in Spanish. If any of the parties do not speak Spanish, the Notary must attest that either he or she speaks a language understood by the non-Spanish speaker and translated the document or that another translator did so. All adhesion contracts must also be in Spanish. All non-Spanish documents being enforced in a Costa Rican court must be officially translated into Spanish by a translator appointed by the Ministry of Foreign Affairs.
A Costa Rican Notary Public must authenticate signatures on private documents creating a pledge, or else the signatures must be made before 2 witnesses. 

9. What about mortgages in foreign currencies?

Mortgages in foreign currencies have been allowed by a Constitucional Court decision. The requirement of an authorization for a mortgage in a foreign currency has been declared unconstitutional by the Constitucional Court (vote N° 27-95 of January 5, 1995, published in the Boletín Judicial N° 22 of January 31, 1995). Nevertheless the debtor retains by law the right to pay in local currency at the current real value of the foreign currency specified in the mortgage.

10. What are the requirements for mortgages or mortgage bonds constituted outside of Costa Rica?

Mortgages or mortgage bonds constituted outside of Costa Rica must be recorded by a Costa Rican Consul, acting as a Notary Public. Pledges created in private documents signed abroad may be authenticated by a foreign Notary Public, whose signature must then be authenticated by the Costa Rican Consul and then by the Costa Rican Ministry of Foreign Affairs. Costa Rica does not accept apostilles.

11. Do loans secured with registered mortgages, pledges or mortgage bonds have priority against the mortgaged or pledged property?

Under normal circumstances, loans secured with registered mortgages, pledges or mortgage bonds have absolute payment priority against the mortgaged or pledged property. Nevertheless, if the debtor is an insolvent entity involved in commerce which has been declared bankrupt or a private individual subject to a "creditors' meeting," which is similar to bankruptcy, the payment of taxes owed to the national and local governments corresponding to the year prior to such declaration shall have priority over security interests.

12. Is it possible to submit a loan agreement to foreign law?

There is no general principle prohibiting the submission of a loan agreement to foreign law. 

13. Will rulings by a foreign court with respect to real estate matters be recognized and enforced in Costa Rica?

According to Article 47 Section 1) of the Code of Civil Procedure matters related to real property located in Costa Rica are under the "exclusive competence" of Costa Rican courts. Under Costa Rican law, Costa Rican courts will not accept any ruling by a foreign court with respect to matters over which they hold exclusive competence.

14. How does the creditor enforce his “executive title”?

When a creditor has an "executive title," in which there is an obligation to pay a specific liquid amount on demand, the creditor has the right to initiate an "executive procedure." Executive procedures are regulated by Book III of the Code of Civil Procedure. In the "simple executive procedure," where the creditor has no secured interest, the creditor files an action against all "seizeable" property of the debtor. Costa Rican law establishes two types of special executive procedures for the enforcement of a mortgage or pledge.

Generally, in both types of special executive procedures, the debtor has waived the procedural formalities of the executive procedure. Such a waiver permits the creditor to skip the first, evidentiary stage of the procedure and directly initiate the enforcement of the security interest with a court auction of the underlying property. In special procedures, there is no need to previously seize the goods given as security in order to auction them, but such a seizure may be ordered at any time during the procedure if it is requested by the interested party. In the case of mortgages and mortgage bonds, the waiver must be made in the document in which they were created (in the Notary Public's Protocol Book). For pledges, such a waiver is automatically assumed to have been granted.

Under Costa Rican law, it is generally not possible to take possession of the property subject to a security interest without the approval of a court. Such property also cannot be sold or negotiated, as it continues to be considered to belong to the debtor, regardless of any mortgage or pledge. If the debtor does not comply with its obligations, the creditor may  initiate a special executive procedure leading to a court auction. The Commercial Code provides that in the case of default on pledges only, the debtor can waive its right to judicial procedures in the pledge contract and authorize the creditor to put the pledged goods up for auction through a "sworn broker." The creditor is always paid from the proceeds of the auction, depending on its priority with respect to any other creditors.