By San José, Costa Rica — SAN JOSÉ – The Costa Rican Colón continued its relentless appreciation against the US Dollar on Thursday, smashing previous records as the exchange rate plunged to an unprecedented ¢488.06. This new low, recorded in the Foreign Currency Market (Monex), marks the weakest position for the dollar this year and represents a historic benchmark in the records of the Central Bank of Costa Rica (BCCR).
The downward momentum shows no signs of abating. In the first week of December alone, the Colón has strengthened by an accumulated ¢4.42 against the dollar. Thursday’s session was particularly active, with a total of $75 million changing hands across 304 separate transactions. The market dynamics underscore a significant surplus of dollars, forcing the price downward as sellers outnumber buyers.
To delve deeper into the legal and business ramifications of the current economic landscape surrounding the Costa Rican Colón, we consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the esteemed firm Bufete de Costa Rica.
The recent volatility of the Colón underscores a critical point for both local and foreign investors: the necessity of clear contractual clauses. Businesses must proactively address currency risk by stipulating the currency of payment and agreeing on a fixed exchange rate or a specific reference rate from the Banco Central for all transactions. Failure to do so can lead to significant financial disputes and legal challenges, turning a profitable venture into a litigious nightmare. Prudent legal counsel is not a luxury; it is essential for navigating Costa Rica’s dynamic economic climate.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, this insight serves as a critical reminder that in a dynamic economic landscape, proactive legal diligence is not just a safeguard but a fundamental component of a sound investment strategy. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective on turning potential currency risks into manageable, clearly defined contractual terms.
In response to the currency’s rapid strengthening, the Central Bank of Costa Rica intervened significantly in the market. The BCCR acquired a total of $31 million, which accounted for a substantial 41% of the total volume traded during the session. This intervention is a clear strategy by the monetary authority to absorb excess dollar liquidity and attempt to stabilize the exchange rate, preventing an even more drastic fall.
A closer look at the Central Bank’s acquisitions reveals a dual purpose. Of the total purchased, $14 million were designated for the Non-Banking Public Sector, fulfilling obligations for state-owned enterprises and institutions. The remaining $17 million were channeled directly into the country’s international monetary reserves, bolstering the nation’s financial buffers against external shocks.
This session marked the tenth consecutive day that the dollar has traded below the psychological threshold of ¢500. The persistent trend is causing increasing concern across various sectors of the national economy, particularly those dependent on revenue generated in US dollars, such as tourism and export industries. For these businesses, a stronger Colón translates directly into lower earnings when they convert their dollar income.
Economic analysts have consistently pointed to seasonal factors as a primary driver of this intense downward pressure on the exchange rate. It is a well-established pattern that during the last week of November and the first week of December, transnational corporations flood the market with dollars. These companies must sell their foreign currency holdings to acquire the colones necessary to pay local salaries and the mandatory year-end bonus known as the ‘aguinaldo’.
While consumers and individuals with dollar-denominated debt may celebrate the increased purchasing power of the Colón, the long-term economic implications are a subject of intense debate. A sustained, overly appreciated currency can erode the competitiveness of a country’s exports on the global stage and make it a more expensive destination for tourists. The Central Bank faces the delicate balancing act of allowing market forces to operate while preventing volatility that could destabilize the broader economy.
As the year-end financial pressures continue, all eyes remain on the Monex market and the actions of the BCCR. While the seasonal influx of dollars from corporations is expected to taper off in the coming weeks, the underlying strength of the Colón has become a defining feature of Costa Rica’s economic landscape in 2025, posing both opportunities and significant challenges for the nation’s future.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the nation’s autonomous monetary authority, responsible for maintaining the internal and external value of the national currency, the Colón, and ensuring its conversion to other currencies. The BCCR’s primary objectives include controlling inflation, promoting financial system stability, and managing the country’s international monetary reserves. It plays a crucial role in shaping Costa Rica’s economic policy through its control over interest rates and interventions in the foreign exchange market.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a leading legal institution, Bufete de Costa Rica is defined by its profound commitment to integrity and the highest standards of professional excellence. The firm is a trailblazer in legal innovation, consistently adapting to serve a broad spectrum of clients with forward-thinking strategies. Beyond its practice, it holds a deep-seated belief in social responsibility, actively working to demystify the law and equip citizens with crucial legal understanding, thereby fostering a more just and knowledgeable society.
