In the Monex wholesale market currencies were traded at 513 colones per dollar and bank windows quoted 520 colones per dollar.
From a Blog by Aldesa Stock Brokerage:
"Bank windows in Costa Rica have adjusted their exchange rates for buying and selling the U.S. dollar, and this week many already paying more than ₡500 per dollar, a rate which has not been seen for many months.
With the increase in exchange rate participation going from 0.65% to 0.70% the central bank will have more flexibility to intervene in the market.
The amendment means that the range within which the Central Bank of Guatemala may intervene by buying or selling dollars in the foreign exchange market will be larger, allowing for greater exchange rate volatility.
The Central Bank of Costa Rica has purchased $57 million in the wholesale market to keep the exchange rate from falling below ¢500 per dollar.
The operation is the second largest so far in 2013, after January 9, when the institution was forced to buy $78 million, and the first since August 19.
"During the past three weeks the exchange rate has shown its greatest volatility of the year ranging between ¢505 and ¢500" reports elfinancierocr.com.
The Chamber of Banking and Financial Institutions of Costa Rica proposes that the law should specify which types of capital inflows will be discouraged.
A statement by the Chamber of Banking and Financial Institutions:
Hot Capital
Banks Chamber warns of gaps in Bill and proposes adjustments
• Project "Act to discourage inflow of foreign capital" Record # 18685 is pending in the Legislature.
Costa Rica: the problem is international rates, the exchange rate, the fault of the hot capital, state banks ...
EDITORIAL: As in the illegal street scam known as the ‘shell game’ (three shells/cups/thimbles placed upside down move around while a person guesses under which one the ball is hidden – in the end it is not under any of them), government officials, economists and analysts of all types, are pontificating on whether the ball of the solution to the serious monetary and currency problem in Costa Rica is under one or other of the various vessels that move quickly inciting the innocent to bet on which one it is hidden under.
The National Chamber of Tourism said that the appreciation of the colon against the dollar is hitting the sector hard in terms of competitiveness as a tourist destination.
A statement from the National Chamber of Tourism (CANATUR) reads:
The country's monetary policy is asphyxiating tourism.
• layoffs and business closures are part of the direct impact on the tourism sector.
Representatives of business associations have proposed ten measures to prevent the entry of speculative capital into the country and to provide flexibility to the exchange rate without local currency appreciating.
Elfinancierocr.com reports that "Business representatives this afternoon delivered a plan with 10 steps to curb the heavy influx of foreign capital", among which was "a tax on speculative capital inflows, in addition to promoting a specific tax on remittances sent abroad, of 5% for national banks and 5% for ‘suitcase’ banks".
A bill is being prepared to impose taxes on money which enters the country seeking to exploit the gap between interest rates in local currency and in dollars.
Furthermore President Chinchilla has issued a directive to state banks to stop competing with each other to attract investments from large institutions, such as the Instituto Costarricense de Electricidad, the Social Security Department, or the National Insurance Institute.
When the monetary cauldron reaches boiling point, it is time to recognize that the best solution is to take the fuel away from the fire.
The solutions being employed as a remedy for the distortions caused by the flood of speculative capital in the Costa Rican economy, each have a common factor: they fix one end of the problem and exacerbate another.
Aldesa discusses the possible directions that the monetary policy of the Central Bank of Costa Rica could take, while the influx of speculative capital accelerates.
From Pulso Bursátil, the Blog by Aldesa:
The Central Bank's dilemma ... floating exchange?
In recent weeks there has been speculation about possible changes in the Central Bank of Costa Rica’s (BCCR) monetary policy, in the light of the behaviour of the foreign exchange market at the end of 2012 and so far in 2013. The comments are gaining more weight as the limits established in the BCCR’s reserve accumulation plan get closer to being reached. The plan states that the entity can purchase, for the purpose of defending the lower limit of the bands, a maximum of U.S. $1.5 billion in 2012 and 2013. As of today the figure is U.S. $1.49 billion.
The latest announcements in Costa Rica about greater exchange rate flexibility to appreciate the colon are worrying exporters.
An article on Crhoy.com reported that "Late last year, the president of Costa Rica’s Central Bank (BCCR) Rodrigo Bolaños announced that the monetary authority will continue the transition announced in 2006 seeking to lead the country towards greater exchange rate flexibility consistent with the full adoption of inflation targeting."
International Monetary Fund officials have recommend greater flexibility in setting the exchange rate.
The IMF suggestion is that the exchange rate be adjusted to economic circumstances, free to move up or down, according to Lisandro Abrego, head of a mission from the International Monetary Fund (IMF) which visited Honduras.
Latribunahn reports that "During the press conference at the Central Bank of Honduras (BCH), the head of the IMF mission, Lisandro Abrego, said that "regarding the currency issue it is important to note that in the past we have stated that it would be desirable to have a little more flexibility in the exchange rate, the exchange rate being able to move depending on specific macroeconomic circumstances. "
The Foundation for the Development of Guatemala has analyzed the main economic indicators of the country, and the main variables affecting the exchange rate, inflation and the CPI.
ECONOMIC BULLETIN NOVEMBER 2012
Monthly report of the main indicators of the national economy
Inflation up slightly in October
During the first ten months of the year (January-October), the country registered inflation of 2.90%, while the inter annual variation* of the Consumer Price Index (CPI) was 3.35%, down by 3.3 percentage points compared to October last year (6.65%), marking the second month of increases after eight consecutive months of declines (see chart 1). Meanwhile, the monthly variation was 0.03%, 0.07 percentage points higher than in the same month of 2011 when it reached 0.07%. The annual variation figure is below the range of the inflation target set by the Monetary Board for 2012, of between 3.5% and 5.5%.
The price of the dollar against the Colon has again started to fluctuate, after having spent several weeks at a relatively stagnant level.
In the last two weeks there has been a slight rise, of about six colones, at the banks exchange desks.
However, this rise has not appeared the way it normally does, ie first in the Monex wholesale market, where trading banks and financial institutions do business, and then in the exchange rate offered to the end consumer at exchange desks.