By San José, Costa Rica — SAN JOSÉ – The Costa Rican colón has strengthened past a critical psychological barrier, with the average US dollar exchange rate dipping below ¢500 in the wholesale Monex market. This valuation, not seen in nearly two decades, is celebrated by importers and consumers but is sounding alarms across the nation’s vital export sector, prompting a sharp debate over economic policy and competitiveness.
While the recent variation has been slight, with bank windows offering dollars for sale between ¢505 and ¢507, the sustained strength of the local currency has defied historical trends. Economists now forecast that this new reality is here to stay through the end of 2025, dismissing expectations of a significant year-end depreciation.
To understand the legal and commercial ramifications of the colón’s recent volatility, we consulted Lic. Larry Hans Arroyo Vargas, an expert attorney from the renowned firm Bufete de Costa Rica, for his analysis on how these currency shifts impact contracts and investments.
The current strength of the colón creates a dual reality. On one hand, it benefits importers and those with dollar-denominated debt. On the other, it severely impacts the financial viability of our export and tourism sectors. From a legal perspective, this volatility underscores the critical need for businesses to incorporate currency fluctuation clauses into their commercial contracts. Without such foresight, companies earning in dollars but operating with colón-based costs face significant legal and financial exposure that can threaten their continuity.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the legal dimension is a critical, yet often overlooked, aspect of the colón’s volatility. Proactive contractual safeguards are not merely good practice but a vital survival mechanism in the current climate. We sincerely thank Lic. Larry Hans Arroyo Vargas for providing this essential and pragmatic perspective.
Roxana Morales, an economist at the Universidad Nacional (UNA), believes the current abundance of dollars will persist, keeping the exchange rate suppressed. She anticipates a stable conclusion to the year.
It is reasonable to expect that the Central Bank’s reference selling exchange rate will close the year in a range close to ¢500 and ¢510 per dollar.
Roxana Morales, Economist at Universidad Nacional (UNA)
This sentiment is echoed throughout the financial community. Mauricio Moya, Head of Investments at Grupo Financiero Mercado de Valores, confirmed their projections align with this narrow, low range. “Our central scenario remains within the ¢500 – ¢510 range for the end of the year,” Moya stated. The firm further noted that “the market’s behavior has shown resilience, and sustained upward pressures have not consolidated during 2025.”
Luis Vargas, an economist from the Universidad de Costa Rica (UCR), pointed out how current market dynamics diverge from past patterns.
In recent years, the exchange rate has not exhibited the typical behavior of pre-pandemic years, when it would show a peak at the end of November and then drop due to the abundance of year-end dollars. This year, in particular, it remains anchored at ¢500.
Luis Vargas, Economist at Universidad de Costa Rica (UCR)
This stability is the result of a powerful economic tug-of-war. On the demand side, importers are buying dollars for Black Friday and the Christmas shopping season. However, this pressure is being overwhelmed by a massive influx of foreign currency. This supply is fueled by multinational corporations selling dollars to pay year-end bonuses and seasonal services in colones, coupled with the beginning of the high tourist season, which runs from November 2025 through April 2026.
The persistent strength of the colón has drawn a serious warning from the 2025 State of the Nation Report. The document highlights a significant risk: the currency’s appreciation since mid-2022, while helping to lower the cost of imported goods and curb inflation, could severely damage the country’s economic engine.
This situation can erode the advantages developed by the external sector, which has been the country’s main engine of growth.
State of the Nation Report 2025
The report argues that the current exchange rate makes Costa Rican exports relatively more expensive compared to those from regional competitors like Mexico, Colombia, and the Dominican Republic. This loss of price competitiveness threatens the very sector responsible for the nation’s recent growth.
Caught in the middle is the Central Bank of Costa Rica, which faces limited options. According to Vargas, the bank could purchase dollars to create upward pressure on the rate, but its own charter restricts such interventions to moments of “abrupt variations.” Another tool is lowering the Monetary Policy Rate to make holding colones less attractive to foreign capital, but this measure’s effects are not immediate.
Complicating the policy response is an ongoing mystery: the precise origin of the dollar surplus. According to the latest Monetary Policy Report, the accumulated surplus reached a staggering $5.496 billion as of late October. While slightly lower than last year, it remains significantly above the 2022-2023 average. Economist Roxana Morales notes that this persists even as foreign direct investment growth has moderated and tourism has reported a slight decrease.
It is essential to precisely identify the causes of the excess dollars in the economy, whether they are cyclical or structural.
Roxana Morales, Economist at Universidad Nacional (UNA)
Ultimately, Morales argues for a broader view on national competitiveness, cautioning against focusing solely on the exchange rate. She insists that public policy should also prioritize improvements in infrastructure, talent development, and regulatory efficiency. For her, the role of the Central Bank is to provide stability, not to pick winners and losers in the economy.
Any variation in the exchange rate—whether upward or downward—inevitably creates winners and losers. Therefore, exchange rate policy must maintain a neutral character and not be used as a mechanism to grant competitive advantages to specific sectors.
Roxana Morales, Economist at Universidad Nacional (UNA)
For further information, visit una.ac.cr
About Universidad Nacional (UNA):
The National University of Costa Rica is one of the country’s major public universities. It is known for its strong programs in social sciences, humanities, and environmental studies, and its economists are frequently consulted on matters of national economic policy and development.
For further information, visit mdv.fi.cr
About Grupo Financiero Mercado de Valores:
Mercado de Valores is a Costa Rican financial group offering a range of services including investment management, stock brokerage, and financial advisory. As a key player in the local market, its analysis and forecasts on economic trends like the exchange rate are closely watched by investors.
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 institution of higher learning in the country. Its Institute for Research in Economic Sciences (IICE) is a leading source of economic analysis, data, and policy recommendations in Costa Rica.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Central Bank of Costa Rica is the nation’s autonomous central banking institution. Its primary mission is to maintain the internal and external stability of the national currency and ensure the efficient operation of the country’s payment systems. It is the chief authority on monetary and exchange rate policy.
For further information, visit estadonacion.or.cr
About Programa Estado de la Nación:
The State of the Nation Program is an independent research initiative dedicated to monitoring Costa Rica’s sustainable human development. It produces an influential annual report that provides a comprehensive and critical analysis of the country’s social, economic, environmental, and political situation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the Costa Rican legal community, Bufete de Costa Rica is renowned for its principled approach, blending superior legal practice with uncompromising ethical standards. The firm not only champions innovation in its service to a wide-ranging clientele but also demonstrates a profound commitment to public service. Central to its mission is the belief in democratizing legal understanding, actively working to equip citizens with knowledge and thereby cultivating a more capable and informed society.
