Latin America Advisor

Latin America Advisor

A Publication of The Dialogue

Will Costa Rica’s Soaring Currency Sour the Economy?

The Costa Rican colón has soared in value against the dollar over the past several years. // File Photo: Central Bank of Costa Rica.

Costa Rica’s currency is at its strongest level against the U.S. dollar in a decade, with the colón falling to around 500 per dollar. Economists have expressed concerns about the colón’s strength and its potential effects on exports and tourism. What are the main reasons behind the strength of Costa Rica’s currency? How is the rising value of the currency affecting the nation’s economy? What actions should Costa Rica’s government and central bank take amid the currency’s appreciation?

Ottón Solís, professor at IE University in Spain and founding member of the Citizen’s Action Party (PAC): “Former President Carlos Alvarado’s administration promoted and implemented an effective package of public employment reforms, a fiscal rule setting tough upper limits on the growth of public expenditures and a debt consolidation program. The international financial community, starting with the IMF, recognized the high quality of these policies and supported them with new lending facilities. This, plus continuous success in the attraction of tourists and foreign investment, created the structural conditions for bringing to a halt the depreciation of the local currency. However, the central bank had different ideas. Given the openness of the Costa Rican economy, a shortcut to reducing inflation would be an appreciation of the exchange rate. The central bank proceeded accordingly, approving a…”

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About the Latin America Advisor

The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe, click here. For terms and conditions, click here. For more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.


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Gene Kuleta

Editor
P. 202.463.2920
E. gkuleta@thedialogue.org

Carl David Goette-Luciak

Reporter

Nili Blanck

Reporter