The U.S. dollar has been steadily losing value in Costa Rica. On Thursday, November 28, the buying rate was ₡506.55, and the selling rate was ₡513.17, down slightly from the ₡505 and ₡510 observed the previous Wednesday. Experts suggest that this downward trend might continue, potentially pushing the dollar below ₡500.
Miguel Cantillo, an economist and professor at the University of Costa Rica, advises that such a scenario, while uncertain, is not out of the question. “We should not be surprised if it happens,” he says. While his models show a dip below ₡500 is unlikely, Cantillo recommends mental preparedness as external factors could influence the exchange rate.
Seasonal and Economic Influences on the Exchange Rate
December introduces several factors that could affect the value of the dollar in Costa Rica. Transnational companies pay out Christmas bonuses, often converting dollars into colones, increasing demand for the national currency. Meanwhile, December marks the start of Costa Rica’s high tourism season, with sunny weather drawing international visitors. However, while tourism generates dollar inflows, it pales in comparison to foreign direct investment, which remains the country’s primary source of U.S. dollars.
Costa Rica’s inflation trends also play a role. Historically, the country’s inflation outpaced that of the U.S., but this trend reversed during the pandemic. Since February 2020, U.S. inflation has accumulated to 12% more than Costa Rica’s. As a result, the exchange rate, which was ₡571 per dollar in early 2020, now reflects the colón’s recovery. Adjusted for this inflation differential, the rate should be around ₡510, according to Cantillo.
Costa Rica’s favorable conditions for U.S. companies—such as improved risk ratings, geographical proximity, and a skilled workforce—help attract foreign investment, further supporting the colón. Cantillo also points to a possible reclassification of Costa Rica as a “high-income” country by the International Monetary Fund, signaling economic growth and stability.
What Could Strengthen the Dollar?
While the current trajectory suggests stability, several factors could lead to a stronger U.S. dollar. These include rising global oil or grain prices due to geopolitical conflicts, a crisis driving investors toward the dollar as a safe haven, or fiscal mismanagement by Costa Rica’s government resulting in a larger deficit.
Cantillo predicts that despite these potential challenges, the exchange rate will remain stable with only minor fluctuations in the weeks to come.
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Tico Times
