Ticos Fear Instability
Of Rising Dollar
Exchange Rate
The instability of the
U.S. dollar and the
rapid increase in the
exchange rate with the
Costa Rican Colon this
past week is leaving
many, especially, Costa
Ricans worried.
Whenn the exchange rate
dropped 4% overnight
last November, the price
of most goods and
services increased to
compensate for the loss.
However, now that the
exchange rate is almost
at the same level before
the drop, the prices
have not dropped.
The manager of the Banco
Central de Costa Rica (BCCR)
- Central Bank, Roy
González, is urging the
population not to take
quick action and that
increase is normal.
However, many don't
share the opinion of
González and have been
reacting.
The drop in the exchange
rate, for many Costa
Ricans, was seen as a
salary hike, as their
paycheck would not
stretch a little
further. However, with
the rise, the reserve is
occurring and many feel
that they are being hard
hit since the price of
consumer goods and
services is unlikely to
drop to reflect the
change.
The question being asked
by many, is why did the
dollar increase?
According to the
experts, the increase
was due to a higher
demand for the dollar to
pay for imports. The
explanation is that
during the first quarter
of the year, import of
goods rose 20% over the
same period last year
and 10% over 2006.
In addition, the Central
Bank intervened in the
market to purchase
dollars. The purchase,
according to the Central
bank, was to supply
public institutions with
the currency, and
although it is not known
how much of the U.S.
currency was purchased,
the price it paid is
known.
Another reason given for
the rise in the exchange
rate is the decelerating
amount of dollar income
from exports. In the
first quarter of 2008
exports grew only 8%
over the same period in
207, compared to the 13%
growth in 2007 over the
same period in 2006.
Notwithstanding, the
amount of dollars in
reserve has grown,
indicating other sources
of the currency coming
into the country that
could be coming in from
investments or capital,
which amounts are not
exactly known.
Yet another reason is
the expectations of the
increase in value of the
U.S. dollar which
generated a higher
demand and causing the
higher value.
The increase began with
the first move by the
Banco Nacional (BN) when
last Wednesday pushed up
the exchange rate by ˘5
colones overnight,
compared to the policies
of the Central Bank
where it has moved its
reference rate only
fractions of a colon
each day.
The other state bank,
Banco de Costa Rica (BCR),
followed suit, which was
followed by the private
banks and forcing the
Central Bank to up its
reference rate as well.
The U.S. dollar to the
Costa Rican Colon
exchange rate today is
at: buy ˘512 and sell
˘518 at the Banco
Nacional and ˘513 and
˘519 at the Banco de
costa Rica.
Scotiabank is buying
dollars today at ˘511
and selling at ˘521,
while at the BAC San
José the sell buy and
sell rate is ˘511.5 and
˘521.05, while the
Central Bank's reference
rate is set at: buy
˘511.41 and sell
˘518.71. |
