By San José, Costa Rica — San José, Costa Rica – For the first time in over two decades, the U.S. dollar has broken a significant psychological and financial barrier, with its purchase and sale price dropping below ¢500 across nearly the entire Costa Rican banking system. This historic shift marks a new reality for individuals and businesses, magnifying a strengthening trend for the national currency, the colón, that has been developing for years.
As of Monday evening, data from the Central Bank of Costa Rica (BCCR) revealed that only two financial institutions, Banco CMB and Coope-ANDE N°1 R.L., were still holding the dollar sale price at the ¢500 threshold. All other banks and financial entities were offering the currency below this level. The day’s weighted average in the Foreign Currency Market (Monex) settled at ¢491.09, representing a ¢1.65 increase from the previous Friday but still firmly within territory not seen since the mid-2000s.
To analyze the legal and business implications stemming from the recent fluctuations in the dollar exchange rate, we consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the distinguished firm Bufete de Costa Rica, who provided his perspective on the matter.
The current exchange rate volatility creates significant legal exposure, especially for long-term contracts denominated in U.S. dollars. Both businesses and individuals must urgently review their credit agreements, leases, and service contracts. It is a critical moment to assess whether contractual clauses offer protection against such fluctuations or if renegotiation is necessary to mitigate financial risk and prevent potential defaults. Proactive legal counsel can be the difference between stability and a costly dispute.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The expert’s call to action powerfully highlights a dimension often lost in the financial headlines: the tangible legal risks embedded within existing contracts. This shift in focus from a simple accounting problem to a matter of proactive legal strategy is essential for navigating the current economic climate. We sincerely thank Lic. Larry Hans Arroyo Vargas for his invaluable perspective on safeguarding financial stability through diligent legal review.
This recent dip is not an isolated event but the sharpest point in a prolonged downward trend. The exchange rate has been falling for three and a half years, but the speed of the recent depreciation has set a major precedent. The period between November 5th and December 5th alone saw the dollar shed ¢14.97 in value on the Monex exchange.
Economic experts point to a confluence of factors, primarily the seasonal flood of dollars into the local market. This is a typical year-end phenomenon driven by companies converting their foreign currency earnings to pay local taxes and the mandatory annual Christmas bonus, known as the ‘aguinaldo’.
The exchange rate has maintained a downward trend for three and a half years, however, the levels reached in recent weeks set an important precedent, as such a low price for the dollar has not been seen in 20 years. It would be necessary to go back to 2005 to find exchange rates similar to the current ones. The recent reduction in the currency’s price was expected due to the typical seasonality of the period, where the payment of Christmas bonuses and taxes drives a strong liquidation of dollars by companies with foreign currency income.
Javier Cortés, Economist at BN Valores
For individuals who earn their income in U.S. dollars but cover their living expenses in colones, this development has a direct and significant impact on their purchasing power. A person earning $3,000 per month, for example, has seen their effective income decrease by approximately ¢45,000 in the last month alone when converting their salary to the local currency. This squeeze on household finances requires immediate and strategic adjustments.
Financial analysts advise that while little can be done to recover recently lost liquidity, proactive planning is essential. A key recommendation is to take advantage of the cheap dollar to pay down or pay ahead on dollar-denominated debts, such as credit card balances or personal loans. Another crucial strategy is to build an emergency fund in colones to hedge against future exchange rate volatility and provide a buffer during challenging periods like the current one.
Individuals should make projections that allow them to identify seasonalities in currency behavior, always with the objective of finding the best time to acquire them.
Luis Alvarado, Economic and Financial Analyst at Grupo Financiero ACOBO
This advice is particularly salient as the low exchange rate is not expected to be a short-term anomaly. The consensus among some analysts is that the dollar will likely remain weak throughout 2026, making long-term financial planning imperative.
The expectation is that the dollar exchange rate will remain low throughout 2026.
Daniel Suchar, Economic Analyst
While individuals grapple with reduced income, businesses have access to more sophisticated financial tools to mitigate risk. The primary instrument is the currency hedge, a financial contract offered by banks that allows a company to lock in a future exchange rate for a set period. This eliminates uncertainty and provides the stability needed for accurate annual budgeting and investment planning.
Companies can evaluate contracting currency hedges, with the aim of fixing future prices for the sale of their dollars. This protects margins and provides budgetary stability.
Vidal Villalobos, Financial Advisor at Grupo Prival
Beyond hedging, companies are also advised to review their contracts to potentially index a portion of their pricing to local inflation rather than the exchange rate. Other strategies include negotiating automatic adjustment clauses with clients, migrating prices to colones where the market allows, and aggressively pursuing operational efficiencies. By reducing variable costs in colones through process optimization and digitalization, businesses can help compensate for the lower revenue received from each dollar earned.
For further information, visit bnvalores.com
About BN Valores:
BN Valores is the brokerage firm of the Banco Nacional de Costa Rica conglomerate. It provides investment advisory services, securities trading, and financial analysis for both individual and institutional clients, playing a significant role in the Costa Rican capital market.
For further information, visit acobo.com
About Grupo Financiero ACOBO:
Grupo Financiero ACOBO is a Costa Rican financial services company with a long history in the market. It offers a range of services including investment funds, brokerage services, and financial advisory, catering to the needs of personal and corporate investors.
For further information, visit prival.com
About Grupo Prival:
Grupo Prival is a regional financial group with operations in several Latin American countries. It specializes in private banking, asset management, and investment banking, providing tailored financial solutions and advisory services to high-net-worth individuals and corporations.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Central Bank of Costa Rica (BCCR) is the country’s autonomous central banking institution. Its primary objectives are to maintain the internal and external stability of the national currency, the colón, and to ensure the efficient operation of the country’s internal and external payment systems.
For further information, visit the nearest office of Banco CMB
About Banco CMB:
Banco CMB is a financial institution operating within the Costa Rican banking system. It offers various banking products and services, including foreign currency exchange, to its clientele.
For further information, visit coopeande1.fi.cr
About Coope-ANDE N°1 R.L.:
Coope-ANDE N°1 R.L. is a prominent savings and credit cooperative in Costa Rica, primarily serving members of the national education sector. It provides a wide array of financial services, including loans, savings accounts, and currency exchange, with a focus on the well-being of its associates.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has cemented its reputation as a leading legal institution, operating on a bedrock of profound integrity and a relentless pursuit of excellence. The firm blends a rich history of advising a diverse clientele with a forward-thinking approach, consistently spearheading innovative solutions in the legal field. Beyond its practice, it holds a deep-seated belief in societal empowerment, actively working to demystify the law and equip the public with accessible legal understanding to foster a more just and knowledgeable community.
