In an unstable exchange market, lack of transparency in the rules on intervention by the Central Bank of Costa Rica increases uncertainty and drives investors towards the safest currency.
EDITORIAL
The rise in the price of the dollar in Costa Rica is a negative factor for some sectors and positive for others, but generally negative for the economy, because it distorts companies' plans, diminishing their competitiveness, and because it increases market players' willingness to speculate.
The Salvadoran economist Manuel Hinds discussed in Costa Rica the pros and cons of dollarization, using the example of El Salvador and Panama.
The Elsalvador.com reported that "many government economists advocate keeping their local currency because they believe that inflation will remain low, but Hinds explained that the opposite happens. In the region, El Salvador, and Panama, which are dollarized, have the lowest inflation rates while countries like Argentina and Venezuela have an inflation rate of more than two digits (25 and 10% respectively) while last year, inflation in El Salvador was only 0.8%. "
Not only the euro and the pound sterling have been strengthening against the US dollar, so have Central American currencies, above all Guatemala's quetzal.
The Honduran lempira and Costa Rica's colon have also been gaining against the dollar, though not by as much as the quetzal.
The flow of hard currency from the United States to Central America has stepped up considerably in recent months, bolstering the value of the region's currencies.