Several industrial sectors in Costa Rica have called on the Central Bank of Costa Rica (BCCR) to implement a series of changes to bolster the country’s economic stability. Their demands include adjusting the exchange rate of the dollar to around ¢620, accelerating the reduction of the Monetary Policy Rate (TPM), and maintaining both internal and external stability of the national currency, among other issues.
Despite these calls, the Board of Directors of the BCCR has rejected the sectors’ petitions. On the matter of maintaining the internal and external stability of the national currency, the bank emphasized that it already adheres to these objectives, which are mandated by its Organic Law, without any bias.
In response to the request to adjust the exchange rate, the BCCR clarified that there is no concept of a neutral real exchange rate. Additionally, the bank highlighted that neither from a legal nor an economic perspective can an annual devaluation trend be guaranteed. The entity further noted that since 2006, Costa Rica abandoned the regime of crawling peg, which had induced inflationary inertia and necessitated recurrent adjustments to align with varying economic scenarios.
Regarding the request to lower the monetary policy rate from 4.75% to 3.5%, the board indicated that this proposal would not move forward. According to the bank, the TPM has already been reduced multiple times since March 2023, with the goal of eventually bringing inflation back to its target.
“These reductions are moving closer to a more neutral stance. The transmission of monetary policy is not immediate, so we must wait for the adjustments to fully pass through to the economy,” the bank stated.
Representatives from Costa Rica’s productive sector expressed concerns that the bank’s stance is creating uncertainty within the private sector.
“The position of the Central Bank only increases the uncertainty of thousands of workers. In recent days, layoffs and closures of companies have been announced, where hundreds of families have lost income to cover their basic needs,” said Oscar Arias Moreira, interim president of the National Chamber of Agriculture and Agro-industry (CNAA).
The CNAA noted that for several months it has been warning the Central Bank about the potential adverse effects that the current behavior of the exchange rate could have on the agricultural sector, which generates approximately 500,000 direct and indirect jobs.
As the debate continues, the Central Bank remains steadfast in its policies, while various sectors urge for reforms that they believe are necessary to protect competitiveness and jobs in the country.
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Ileana Fernandez
