Costa Rica’s Exchange Rate Set a Record, and Almost Everyone Reported It Backwards
COSTA RICA · ECONOMY
Key Facts
- —The level The dollar closed at 447.77 colones on the Monex market on Friday.
- —The streak A third consecutive record low, after 448.17 on Wednesday and 447.93 on Thursday.
- —The history The lowest level since the historical series began on 6 December 2007.
- —The reference The central bank published rates of 444.22 to buy and 450.06 to sell.
- —The intervention It bought US$43.86 million in stabilisation operations, plus US$87.99 million for public-sector needs.
- —The catch A record low for the dollar means a record high for the colón. Exporters and tourism operators lose.
Most coverage has this backwards. It is not the colon at a record low, it is the dollar, and a currency this strong is a problem for anyone selling abroad.
Costa Rica’s exchange rate set a record on Friday, and almost every summary of it has been written backwards. The dollar closed at 447.77 colones.
That is a record low for the dollar. It is therefore a record high for the colón, which has never been stronger since the series began.
It was the third consecutive record. The dollar closed at 448.17 on Wednesday and 447.93 on Thursday.
The Numbers
The figure is the weighted average on Monex, Costa Rica’s wholesale foreign exchange market. That is the reference price the market watches.
The central bank published its own rates alongside. They were 444.22 to buy a dollar and 450.06 to sell one.
The historical series began on 6 December 2007. Nothing in it is lower than Friday’s close.
The dollar has stayed below 460 colones since 5 June. This is a sustained move rather than a single session.
What the Central Bank Did About It
It bought dollars. The bank purchased US$43.86 million in what it calls stabilisation operations.
Its stated purpose was to reduce excessive pressures on the exchange rate. Buying dollars puts colones into the market and slows the appreciation.
It separately bought US$87.99 million to meet public-sector requirements. That is routine and not an intervention.
The intervention did not stop the record. A central bank leaning against a strong currency is fighting the flows that produce it.
Why a Strong Currency Hurts
A strong colón makes imports cheaper and foreign debt easier to service. Costa Rican consumers benefit and so does the inflation rate.
Everyone selling abroad loses. Exporters are paid in dollars and pay wages, rent and electricity in colones, so their margins compress with every record.
Tourism is the sharpest case. Costa Rica competes with Caribbean and Central American destinations on price, and a strong currency prices it out.
Coffee, pineapple and medical device exports face the same arithmetic. Costa Rica’s export profile is unusually sophisticated and unusually dollar-denominated.
That is why the central bank is buying dollars at all. A country with an inflation problem would be delighted by an appreciating currency.
How the Exchange Rate Is Set
Costa Rica moved to a managed float in 2015, replacing a crawling band. The rate is set on Monex, where banks and large firms trade dollars daily.
The central bank participates in two capacities and the distinction matters. It buys for the public sector as an ordinary customer, and it intervenes separately to smooth the rate.
Only the second is intervention. Conflating the two overstates how hard the bank is leaning against the market.
Its mandate is inflation, not the exchange rate. That limits how far it can go in defending exporters, whatever they ask for.
What Is Driving It
Costa Rica has attracted sustained foreign direct investment into services and medical devices. Those flows arrive in dollars and are converted to colones.
Tourism receipts do the same thing. So does a significant flow of remittances and of dollar income from Costa Ricans working for foreign employers.
On the other side, import demand has not kept pace. The result is more dollars offered than demanded on Monex, session after session.
Nothing in that describes a crisis. It describes an economy whose success in attracting dollars is now inconvenient for the people who earn them abroad.
The political pressure runs in one direction. Exporter associations want intervention and the central bank has limited appetite for more of it.
Costa Rica has been here before, in 2023 and 2024, when the same complaint produced the same response. The rate then stabilised without a policy change.
What is different this time is the duration. A currency below 460 since early June is no longer a fluctuation that exporters can hedge through.
More: Costa Rica news in English, every day from The Rio Times.
Frequently Asked Questions
Is the Costa Rican colón weak?
No, the opposite. The dollar is at a record low against it, which means the colón is at its strongest level since the exchange-rate series began in December 2007.
What was the rate?
The dollar closed at 447.77 colones on the Monex market on Friday, a third consecutive record low.
What did the central bank do?
It bought US$43.86 million in stabilisation operations to reduce pressure on the exchange rate, plus US$87.99 million for public-sector requirements.
Who loses from a strong colón?
Exporters and tourism operators, who earn dollars and pay costs in colones. Importers and consumers benefit.
Sources: La Nación Costa Rica, Banco Central de Costa Rica.
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