by Rod Hughes

Anyone doubting that the dollar is slumping badly has only to have read the country’s leading newspaper, La Nación yesterday, with its banner headline that Banco Central has reduced the value of the dollar against the national currency by 4%.

Costa Rica’s Central Bank is notoriously cautious so the drop of the colon from ¢519.16 to ¢498.39 is for them a drastic step. “The winners are those who have dollar credit in dollars and the importers, the most affected are the exporters,” commented Banco de Costa Rica manager Carlos Fernandez. He might also have mentioned those having dollar bank accounts.

In the medium term, the adjustment will slow the inflation of the colon but the damage to the exports might offset that. Exporters will be paying salaries, materials and other costs in more valuable colones while earning dollars that turn into fewer colones. To offset this would mean selling merchandise abroad at a higher price, potentially reducing the number of buyers. Importers are smiling because the opposite is true with them.

As this reporter interviewed middle class Costa Ricans about the declining dollar yesterday, the only serene one was a lady who had a bank account in euros.