Analysts Concerned about Returns on Colón Investments

July 16, 2004

ANALYSTS say low incentives forinvesting in colones could prompt CostaRican investors to take their money out ofthe country or invested in other currencies.This could reduce the Central Bank’smonetary reserves and threaten the country’seconomic stability, the daily LaNación reported.Investments in bonds and savingaccounts in colones on average onlyaward investors 3.3% a year in interests.The reward for investing is the additionalprofit in percentage points that financialentities award investors who invest incolones, compared to what they wouldreceive if they invest in another currency– in most cases the U.S. dollar.The Central Bank calculates the figurebased on the interest rate of six-monthgovernment or Central Bank colón debtbonds. The devaluation rate of the colónis subtracted and the amount is then comparedto the interest paid by U.S. Treasurybills for the same length of time.Since the beginning of 2003, thereward for investing in colones hasremained low, at an average of 3% duringthe entire year.According to Valentín Fonseca, managerof private bank Banco Cathay, wheninvestors perceive macroeconomic stability,they prefer to invest in colones.However, as a result of uncertainty overthe future of the Central American Free-Trade Agreement (CAFTA) with theUnited States and the Permanent FiscalReform Package, investors are showing apreference for investing in dollars.The economic uncertainty perceivedby investors is made worse by the highinflation rate reported in recent months,Fonseca said. The Consumer Price Indexincreased by 6.26% during the first sixmonths of the year.

Facebook Comments

You may be interested

Trump: US to begin cutting aid to Central America over migrant caravan
immigration
557 views
immigration
557 views

Trump: US to begin cutting aid to Central America over migrant caravan

AFP - October 23, 2018

President Donald Trump said Monday the United States will begin cutting aid to three Central American nations because of their…

The Tico Times Dispatch: An interview with journalist and economist David Ching
Politics
452 views
Politics
452 views

The Tico Times Dispatch: An interview with journalist and economist David Ching

Alejandro Zúñiga - October 23, 2018

Costa Rica’s Plenary Court rejected the proposed tax reform bill last week and asked that four sections of the initiative…

Soy pico rojo: the new form of protest in Nicaragua
La Prensa
670 views
La Prensa
670 views

Soy pico rojo: the new form of protest in Nicaragua

La Prensa - October 23, 2018

Social media has been filled with photos of men and women wearing red lipstick as a way of protest Daniel…