Remaining Calm
Over The Dollar
Exchange Rate
Fred Blaser,
vice-president
of the Republica
Media Group,
recommend
keeping calm in
the face of the
constant ups and
downs or "yo yo"
of the dollar
exchange of the
last several
months, that is
the cause of
concern among
consumers and
businesses
alike, making it
difficult when
to buy, sell and
what currency to
use.
"On the one
hand, in an open
economy there is
little that a
person or
organization can
do to keep the
exchange rate
stable. In
addition, the
behavior of the
Colon during the
past year has
been perfectly
acceptable",
writes Blaser.
Blaser added
that with with
regard to
exchange rate
controls are
concerned, Costa
Ricans must
realize that the
era of
predictability
is gone.
When the local
economy was
relatively
isolated from
global trends,
the Central Bank
would maintain
the value of the
colon against
the dollar. But
in recent years,
Costa Rica began
to experience
the movement of
capital on a
scale never
before seen.
Several large
multinationals
acquired local
businesses and
banks while many
foreigners
rushed to buy
real estate,
especially in
Guanacaste.
These
acquisitions
increased the
demand of the
colon.
According to
Blaser, to stop
the increase in
the value of
national
currency, the
Central Bank
would have had
to buy dollars
it did not need
at a price
higher than
anyone would
pay. This would
have meant huge
losses for the
Bank, or rather
to the public,
to which it
belongs.
As a result, the
Central Bank
opted for a band
system calls
that allows the
Colon, the value
goes up or down
within a
reasonable
range, while
giving
Costaricans a
sense that
things are still
under control,
as indeed are.
It is true that
the value of
colon rose 11.5%
against the U.S.
dollar from
early May 2009,
and the same
period this
year, making it
harder for
domestic
exporters to
compete in its
core market.
But a change in
the exchange
rate of this
size is neither
unusual nor
extreme. Mexican
exporters are
even more
dependent on
U.S. buyers in
relation to
Costaricans.
However, there
was no panic in
the Mexico,
where the Peso
went up by
almost 10%
against its U.S.
counterpart
between
September 2009
and last April.
Similarly, the
European Union
is a crucial
market for
Polish
exporters, who
remained calm
when your
currency gained
13.3% against
the euro between
last June and
earlier this
month.
Changing old
habits is often
difficult,
Blaser write.
But in the long
term, living in
the real world
which includes
the evolution of
exchange rates
makes Costarican
producers and
consumers become
more efficient. |
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