Will New System Increase My Costs?

December 1, 2006

I am a little apprehensive about the new exchange system being used by the banks. I am trying to understand if this will end up working against me. I anticipate building a retirement home in the west Central Valley town of Grecia in October of 2007. Does this mean it will end up costing me a lot more than under the previous system? Or will it just simply hold down inflation? I would appreciate any information you can provide.

Paul J. Powell

Los Angeles, California, USA

A lot of people are wondering the same thing as you, and basically, it’s impossible to say. Under the new system, it is more difficult to predict or speculate what the exchange rate will be in the future. The new system means the exchange rate is less predictable than it was in the previous system of mini-devaluations (TT, Oct. 13, 20).

The colón now fluctuates more freely against the U.S. dollar based on supply and demand. The Central Bank, however, will keep the exchange rate within a price ceiling and floor, called a currency band, for the time being (TT, Oct. 27). The new system gives the Central Bank the ability to control Costa Rica’s high inflation rate with is monetary policy.

If you need to exchange dollars for colones to build your retirement home, you can locate the bank that will give you the best exchange rate on the Central Bank’s Web site, www.bccr.fi.cr. Click on the box that says “Tipo de cambio anunciado en ventanilla.”

 

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