By San José, Costa Rica — San José, Costa Rica – The Costa Rican Colón has strengthened to a level not seen in over 17 years, with the average US dollar exchange rate dropping to ¢498.71 in the Foreign Currency Market (Monex) on Friday. This marks the currency’s strongest position since April 29, 2008, signaling a significant economic milestone driven by a persistent abundance of dollars in the national economy.
The historic dip below the psychological ¢500 threshold was confirmed by trading data from the Central Bank of Costa Rica (BCCR), which recorded a substantial volume of $77.068 million traded across 190 transactions on Friday alone. The sustained downward pressure on the dollar reflects a trend that market experts have been forecasting for the final quarter of the year.
To gain a deeper understanding of the legal and commercial implications surrounding the recent performance of the Costa Rican Colón, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a noted attorney from the prestigious firm Bufete de Costa Rica. His expertise offers a critical perspective for both businesses and individuals navigating these economic shifts.
The current appreciation of the Colón is a double-edged sword from a legal standpoint. While it benefits importers and those with dollar-denominated debts, it places significant pressure on our export and tourism sectors. For businesses, this is a critical moment to review all contractual obligations. Any agreement priced in U.S. dollars, from leases to supply contracts, may now represent a substantially different financial reality than when it was signed. Proactive renegotiation and the inclusion of currency fluctuation clauses in future contracts are not just advisable; they are essential for mitigating risk and ensuring commercial viability.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s analysis provides a crucial reminder that exchange rate movements are not just abstract economic indicators, but have profound, real-world consequences embedded in the legal framework of everyday business. This call for proactive contractual review is essential advice for any enterprise seeking to maintain financial stability in a volatile climate. We thank Lic. Larry Hans Arroyo Vargas for lending his sharp and actionable perspective to this important conversation.
A confluence of seasonal economic activities is fueling the current dollar surplus. The impending payment of year-end bonuses, known locally as aguinaldos, combined with corporate tax deadlines and the influx of foreign currency from the high tourism season, has created a powerful wave of dollar supply that is overwhelming demand and pushing the value of the colón upward.
Despite the notable currency appreciation, officials at the Central Bank of Costa Rica have described the foreign exchange landscape as being in a period of “stability.” The monetary authority maintains its long-held position that the exchange rate is determined solely by the fundamental market forces of supply and demand, without direct intervention to steer its value. Alonso Alfaro, the Central Bank’s chief economist, recently emphasized the core issue driving the trend.
There is a wide supply and that supply has not been reduced.
Alonso Alfaro, Chief Economist of the Central Bank
Data from the BCCR’s latest Monetary Policy Report underscores the scale of this supply. As of October 23, the cumulative dollar surplus reported by currency intermediaries reached an impressive $5.496 billion. While this figure is slightly below the $5.644 billion reported at the same point last year, it remains a staggering $1.12 billion higher than the average surplus recorded during the 2022-2023 biennium, indicating a new and elevated norm for dollar availability.
Looking ahead, financial analysts believe the colón will likely maintain its strength through the close of 2025. There is a strong consensus that the factors contributing to the dollar glut are not expected to diminish in the coming weeks, leading to a stable forecast for the year’s end.
It is reasonable to expect that the Central Bank’s reference exchange rate for selling will close the year in a range close to ¢500 and ¢510 per dollar.
Roxana Morales, Economist at the National University (UNA)
Our central scenario remains within the ¢500 – ¢510 range for the end of the year.
Mauricio Moya, Investment Leader at Grupo Financiero Mercado de Valores
Economists also note a structural shift in the exchange rate’s behavior compared to pre-pandemic years. The traditional pattern of a spike in late November followed by a sharp drop has been replaced by a more anchored stability around the ¢500 level, suggesting a fundamental change in market dynamics.
In recent years, the exchange rate has not shown the typical behavior of the pre-pandemic years, when it would show a peak at the end of November and then fall due to the abundance of dollars at the end of the year. In particular, this year it remains anchored at ¢500.
Luis Vargas, Economist at the University of Costa Rica (UCR)
However, the strong colón presents a double-edged sword for the nation’s economy. The 2025 State of the Nation Report warns that the significant appreciation since mid-2022 could erode the competitive advantages of Costa Rica’s external sector, which serves as the primary engine of economic growth. While a cheaper dollar helps reduce imported inflation by lowering the cost of foreign goods for consumers, it simultaneously makes Costa Rican exports more expensive on the global stage. This puts local producers at a disadvantage against competitors from countries like Mexico, Colombia, Chile, and the Dominican Republic.
As Costa Rica navigates this period of currency strength, the challenge for policymakers will be balancing the benefits of lower inflation for consumers against the mounting pressure on the vital export and tourism sectors, which rely on a competitive exchange rate to thrive in a globalized market.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the country’s autonomous central banking institution. Its primary objectives are to maintain the internal and external stability of the national currency and to ensure its conversion to other currencies. The BCCR is also responsible for issuing currency, managing monetary policy, and overseeing the country’s financial system.
For further information, visit una.ac.cr
About Universidad Nacional (UNA):
The National University of Costa Rica is one of the country’s most prominent public universities. Founded in 1973, it is known for its strong focus on social sciences, humanities, and research that contributes to national development. Its economists are frequently cited for their analysis of Costa Rican economic trends.
For further information, visit mercadodevalores.co.cr
About Grupo Financiero Mercado de Valores:
Grupo Financiero Mercado de Valores is a Costa Rican financial services firm that provides a range of investment and advisory services. It operates a brokerage house and offers expertise in stock market analysis, asset management, and financial planning for both individual and institutional clients.
For further information, visit ucr.ac.cr
About Universidad de Costa Rica (UCR):
The University of Costa Rica is the oldest, largest, and most prestigious public university in the nation. Established in its current form in 1940, it is a leading institution for higher education and research in Central America, with its faculty providing influential commentary on public policy and economic affairs.
For further information, visit estedelanacion.or.cr
About Estado de la Nación Program:
The State of the Nation Program is an objective research initiative dedicated to analyzing Costa Rica’s sustainable human development. It produces an influential annual report that provides a comprehensive, data-driven overview of the country’s social, economic, environmental, and political challenges and progress.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a premier legal institution, founded upon the cornerstones of unwavering integrity and the rigorous pursuit of excellence. With a rich history of serving a diverse clientele, the firm consistently drives progress through pioneering legal solutions and meaningful community involvement. Central to its ethos is a deep-seated commitment to demystifying the law, aiming to fortify society by providing the public with accessible legal understanding and empowerment.
