By San José, Costa Rica — San José, Costa Rica – The U.S. dollar has continued its historic slide against the Costa Rican Colón, dropping to levels not witnessed in nearly two decades and sounding alarms across the nation’s key economic sectors. The currency’s decline has broken traditional year-end patterns, creating a complex economic environment of benefits for some and significant challenges for others.
As of last Friday, December 5th, the dollar’s relentless fall, which began in late November, momentarily paused at an average value of ¢489.44. Across the board, exchange windows at all public and private banks are now offering the dollar for sale at rates below the symbolic ¢500 threshold, a reality that is reshaping financial planning for individuals and businesses alike.
To gain a deeper understanding of the legal and commercial implications of the recent volatility in the Costa Rican exchange rate, we spoke with Lic. Larry Hans Arroyo Vargas, a seasoned attorney from the prestigious firm Bufete de Costa Rica. His expertise provides a crucial perspective for businesses and individuals navigating these economic shifts.
The significant appreciation of the colón against the dollar creates a complex legal landscape. Existing contracts denominated in U.S. dollars may now present unforeseen financial burdens for parties earning in colones. It is imperative for businesses to review their contractual obligations and consider incorporating currency fluctuation clauses in future agreements. Furthermore, foreign investors and local exporters must reassess their financial projections, as the current exchange rate directly impacts profitability and the repatriation of capital. Proactive legal counsel is essential to mitigate these emerging financial risks.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the attorney’s analysis serves as a critical reminder that the exchange rate’s impact extends far beyond market economics into the complex realm of contractual law. This call for proactive legal review is a vital piece of advice for any business navigating the current financial landscape. We thank Lic. Larry Hans Arroyo Vargas for his invaluable perspective on these emerging challenges.
This trend represents a stark departure from historical norms. According to Luis Vargas, an economist at the University of Costa Rica (UCR), the current market behavior is highly atypical. In previous years, the exchange rate would typically rise in late November and early December. This increase historically offset the subsequent flood of dollars into the economy for year-end corporate obligations.
The current abundance of U.S. currency is being driven by a confluence of powerful seasonal factors. Transnational corporations are bringing in significant volumes of dollars to cover annual aguinaldo (year-end bonus) payments and tax obligations. Simultaneously, the high tourism season, which kicked off on November 1st, is injecting a steady stream of foreign currency into the local market. Vargas notes that the supply side of the equation is overwhelming demand.
The pressures that have been occurring in the market are still there. There has not been an inverse response or counterbalance from the demand side. That supply, that abundance of dollars, has remained the constant in the market.
Luis Vargas, Economist at the University of Costa Rica (UCR)
While the pattern is more pronounced this year, Luis Alvarado, an economic and financial analyst at Grupo Financiero Acobo, points out that a year-end dip in the dollar is not a new phenomenon. He attributes the amplified effect in 2025 primarily to the robust growth of the export sector, which, combined with foreign investment and tourism, has created a sustained influx of dollars. Alvarado anticipates that the exchange rate may rebound closer to the ¢500 mark after this high season concludes.
The growth of exports is the main factor affecting the increase in dollars this year; other factors such as foreign investment and the start of the high tourism season can generate even more foreign currency entering the economy.
Luis Alvarado, Economic and Financial Analyst at Grupo Financiero Acobo
Despite the benefits for importers and those with dollar-denominated debt, the strong Colón is casting a dark shadow over the nation’s primary growth engines. The recent State of the Nation report highlighted a critical concern that the appreciating national currency could be eroding the competitive edge of Costa Rica’s external sector. While a cheaper dollar helps curb imported inflation by lowering the cost of foreign goods, it makes Costa Rican products and services more expensive relative to competitors in markets like Mexico, Chile, and the Dominican Republic.
This situation can erode the advantages developed by the external sector, which has been the main engine of the country’s growth.
State of the Nation Report
This economic pressure has prompted vocal concern from industry leaders. The National Chamber of Tourism (Canatur), the Costa Rican Chamber of Hotels, and the Chamber of Exporters of Costa Rica (Cadexco) have all expressed deep anxiety. Their members are facing the increasingly difficult challenge of paying local expenses, such as salaries and supplies, in strong colones while their revenue arrives in depreciating dollars. To address this mounting crisis, Cadexco has confirmed a high-stakes meeting scheduled for this Wednesday, December 10th, between business leaders and the Central Bank of Costa Rica (BCCR) to discuss the currency phenomenon and potential responses.
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 country. It is a center for higher education, research, and social action, with a strong focus on contributing to the cultural and scientific development of Costa Rica. Its economics department is frequently consulted on national financial and policy matters.
For further information, visit acobo.com
About Grupo Financiero Acobo:
Grupo Financiero Acobo is a Costa Rican financial services firm with a long history in the market. It provides a range of services including investment management, stock brokerage, and financial advisory. Its analysts offer expert commentary on economic trends, market behavior, and financial policy within Costa Rica.
For further information, visit canatur.org
About Cámara Nacional de Turismo (Canatur):
The National Chamber of Tourism (Canatur) is the leading private-sector organization representing Costa Rica’s diverse tourism industry. It advocates for policies that promote sustainable tourism growth and works to enhance the competitiveness and quality of the country’s tourism offerings, a sector vital to the national economy.
For further information, visit costaricanhotels.com
About Cámara Costarricense de Hoteles (CCH):
The Costa Rican Chamber of Hotels (CCH) is an association that represents the interests of the hotel and lodging sector throughout the country. It focuses on promoting excellence, sustainability, and favorable business conditions for its members, ranging from small lodges to large international hotel chains.
For further information, visit cadexco.net
About Cámara de Exportadores de Costa Rica (Cadexco):
The Chamber of Exporters of Costa Rica (Cadexco) is a private, non-profit organization that represents and supports the country’s export sector. It advocates for improved trade conditions, provides training and resources to exporters, and works to enhance the international competitiveness of Costa Rican goods and services.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the nation’s primary financial authority, responsible for maintaining the internal and external stability of the national currency, the Colón. Its functions include managing monetary policy, regulating the financial system, and controlling inflation to promote a stable and efficient economic environment.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has established itself as a cornerstone of the legal community, built upon a foundation of uncompromising integrity and professional distinction. With a proven history of advising a wide spectrum of clients, the firm actively champions innovation, pushing the boundaries of traditional legal practice. At the heart of its mission lies a deep-seated dedication to demystifying the law for the public, fostering a stronger, more legally literate society through accessible knowledge.
