Costa Rica’s central bank is on the verge of changing the way foreign currencies are exchanged, and those with large cash holdings in colons are wondering how they will be affected by the new system of cambio.

The Banco Central de Costa Rica says it will institute a new policy of exchange bands without prior notice and at any time between now and the end of the year. The system in use now, called mini-devaluations, results in a slightly cheaper colon every work day.

The rates for purchase and sale of foreign currencies are established by the central bank for transactions with other banks and financial entities. The gap between buying and selling dollars is small now, about 2.5 colons or about a half U.S. cent. This is the rate that the central bank buys or sells dollars from or to authorized entities, like banks. Most banks maintain about a four colon difference in the buy and sell rates they offer to the public.

Under the new system, the gap for authorized sales or purchases will be larger and the Banco Central will not intervene to maintain an exchange rate until either the top or the bottom of the so-called band is reached. Bank officials are looking at a band that is at least 2 percent of the exchange rate. That would be a range of about 10.5 colons today or about two U.S. cents. But the band or range could be greater.

Business people can always set their own rates. Casinos, restaurants and hotels that deal with tourists always have done so. Under the new system, banks and other authorized entities can set their own rates as long as the buy and sell rate is within the bands established by the Banco Central. This is being called the ventanilla or window rate.

This means that individuals with significant amounts of money to exchange need to shop around. For merchants, the Banco Central is publishing an average of daily rates based on information from authorized traders, mostly banks and a few exchange houses.

This average is called the referencia or reference rate, and the rate will continue to be available on the central bank Web site. A.M. Costa Rica will continue to link to the reference rate.

Bank officials said that agreements involving foreign currency, according to the commercial code, must adhere to the published reference rate.

The central bank is doing this mainly to curb inflation, now about 11 percent. That has been the result in other countries that have let the currency float. The central bank has accumulated a $2.8 billion debt over the years protecting the colon.  Between January and July the bank lost 76 million colons or about $148,000 doing that.

Many of the prices now are quoted in dollars, as are rents and costs of imported goods. Even Radiográfica Costarricense S.A. quotes its Internet access charges in dollars.

A citizen just tried to challenge that practice before the Sala IV constitutional court, but the magistrates threw out the case.

About 55 percent of the debt in the country is in dollars or other foreign currency, according to August figures from the Banco Central.

The best guess of North American observers is that the colon will hold its own against the dollar, and that the bands provide short-term security for those who accept colons in day-to-day business.