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you and I are for a RUDE awakening.
550 colones for 1 dollar is not far away.
you (USA) citizens might think that you are riding in the GRAVY train but wait until that inflation teeth chomps into your wallet.
care to read your opinion??
[quote=”aguirrewar”]you and I are for a RUDE awakening.
550 colones for 1 dollar is not far away.
you (USA) citizens might think that you are riding in the GRAVY train but wait until that inflation teeth chomps into your wallet.
care to read your opinion??[/quote]
We’ve been there before.
During 2009 the dollar was as high as 596 colones.I don’t know where you think you can live that isn’t getting hit with inflation
The Costa Rican exchange rate has absolutely nothing to do with the rate of inflation.
The Banco Central de Costa Rica sets a floor and a ceiling on the rates of exchange. As noted in the article below, last October the Central Bank raised the ceiling to 800.5 colons to the dollar but the floor remains at 500.
[url=http://insidecostarica.com/2013/10/08/central-bank-raises-exchange-rate-ceiling-dollars-%C2%A2800/]New exchange rate ceiling[/url]I am amazed that the exchange rate has risen as rapidly as it has but the chances that it will get above 600 is just about zero. This morning we got 549.3 to the dollar..
[quote=”waggoner41″]The Costa Rican exchange rate has absolutely nothing to do with the rate of inflation.
The Banco Central de Costa Rica sets a floor and a ceiling on the rates of exchange. As noted in the article below, last October the Central Bank raised the ceiling to 800.5 colons to the dollar but the floor remains at 500.
[url=http://insidecostarica.com/2013/10/08/central-bank-raises-exchange-rate-ceiling-dollars-%C2%A2800/]New exchange rate ceiling[/url]I am amazed that the exchange rate has risen as rapidly as it has but the chances that it will get above 600 is just about zero. This morning we got 549.3 to the dollar..
[/quote]Les…. I think you’re mistaken if you don’t believe that prices in CR (priced in local currency) will not be adjusted upwards (inflated) to make up for the rise in the dollar (exchange rate).
It’s one of those questions… which came first… the chicken or the egg.
The exchange rate (dollar rise) will result in inflation in local prices (colonies).
The ability to use either currency (without first converting) in CR is a big advantage to those that have their income or assets in dollars.
It is really difficult to predict just what will happen with the exchange rate. Here is a brief example of what can happen in CR with the exchange rate. During the Oduber administration in the 1970s the exchange rate was at 8.60 and had been for some time. At this time the Sandinista movement was gaining strength, the economy was in the pits and there were some bombings and serious social unrest in Costa Rica. Along came Rodrigo Carazo, an ex PLN member, handsome, macho and a great orator (sound familiar) He came to power in 1978 with the exchange rate still at 8.60 and then he decided to let the colon float. Also, very strict controls were placed on who could change dollars. Black market time, big time. Next came the money police. I knew bar owners who were arrested and tried for accepting $s for a bar bill. Entrapment for sure. Even with the controls the colon kept on going up. In 1982 Luis Alberto Monge Araya (Johnny Araya’s uncle) became president and the colon went to 60. Surprise suprise, one Monday the exchange rate opened at 40. The strange thing was that not many people said much. Go figure. Just goes to show that these things can’t be predicted. I lived it.
Most people agree that the colon was over valued but the way it has been devalued has spread panic. Also, could there have been pressure on the CB by certain sectors? Stranger things have happened. Seems like the Presidenta can’t get anything right. It might be good for tourists and those who recieve their income in $s but most of the Ticos will suffer. Also, Japanese, Chineese and Argentine products are paid for in $s. Local produce and manufactured products will increase in price. Oil and petroleum products and most others will go up in price and so will the hardwood table made in Sarchi ad infinitum……….. Gotta call it inflation.500/1$ Are you kidding. At this moment it is 552/1$ and thats about 10%. Merchants have to be careful with their prices in colones or they will be selling below re stock cost.
[quote=”sweikert925″][quote=”Imxploring”]I think you’re mistaken if you don’t believe that prices in CR (priced in local currency) will not be adjusted upwards (inflated) to make up for the rise in the dollar (exchange rate).[/quote]
Only those goods and services which have part of their prices based on foreign sourced components. American automobile prices will go up if the colon gets cheaper, prices of wood furniture made by Costa Ricans from Costa Rican wood will not. Locally grown food won’t, imported food from the US will.[quote=”Imxploring”]The exchange rate (dollar rise) will result in inflation in local prices (colonies).[/quote]
As a categorical statement, that isn’t true. If a nation had absolutely [b]NO[/b] goods and services that were imported from country X then an exchange rate decrease against X’s currency would cause [b]NO[/b] inflationary pressure.
If [b]100%[/b] of their goods and services were imported from X it would increase the price of [b]EVERYTHING[/b].
If [b]SOME[/b] of their goods and services were imported from X then it would have [b]SOME[/b] effect.[url=http://www.xe.com/currencycharts/?from=ARS&to=CRC&view=5Y]Here[/url] is a chart showing the value of the Argentine peso against the colon. The peso has lost more than half its value over the past 5 years against the CRC so why didn’t that cause downward inflationary pressure in CR? Well maybe it did, a tiny bit, but only to the extent that Costa Rica imports goods from Argentina.
As of 2012, Costa Rica’s imports came primarily from these countries:
US 46.2%, Mexico 6.4%, Japan 6.1%, China 5.8%
So of the $16.75 billion imported in 2012, 46.2% came from the US and therefore only about that percentage of imported goods would be affected by a change in the CRC-USD exchange rate.http://www.indexmundi.com/costa_rica/economy_profile.html
CR’s GDP for 2012 is about $45 billion, and $16.75 (37%) billion in imported goods. So with about 46% of that coming from the US, a 10% rise in the value of the dollar might have a small inflationary impact, but not that great. 10% of 46.2% of 37% is about 1.7%.[/quote]
Nice info Steve…. but the reality is that if a store merchant sells a widget today (whether it’s imported or locally produced) and the replacement or restocking cost goes up as it will with the increased exchange rate…. the new item will cost you more.
The fact that the dollar and colonie are basically interchangeable in daily commerce in CR is both a blessing and a curse. For those with dollar based incomes it’s not painful right now. For those with incomes based on local currency…. not so much.
I remember a few years back… I custom ordered some furniture from a local craftsmen… with a delivery date for my next visit to CR three months later. This was during a period when the dollar was constantly rising against the colonie. When it came time for delivery he wanted 10% more because of the currency exchange difference. Fortunately we had set the price in colonies and it was in my favor. I did give him a little “bonus” for the quality of his work… but refused to renegotiate the price on the exchange rate!
Keep in mind this was a sole proprietor working out of his garage with local materials. All businesses in CR are aware of the difference the exchange rate has on local prices… and they will adjust (inflate) accordingly! So no matter what you might think economic theory tells you… prices in CR based currency will reflect the exchange rate difference!
[quote=”sweikert925″][quote=”Imxploring”]Nice info Steve…. but the reality is that if a store merchant sells a widget today (whether it’s imported or locally produced) and the replacement or restocking cost goes up [b]as it will with the increased exchange rate[/b]…. the new item will cost you more.[/quote]
Why would it be more if the item is not imported? Your comment assumes that exchange rate changes automatically increase costs for everything and while they may for some things, they also may not for others. Apparently you didn’t find my explanation of the connection between inflation and exchange rate changes persuasive. How so?That furniture salesman MAY have had a good reason to tack on an additional cost if some of his costs went up, or he may have guessed that YOU automatically assumed that an exchange rate increase justified a price rise. If the latter then he was apparently correct. Aren’t you the guy who is constantly going on about how Ticos are all guilty of Gringo pricing?[/quote]
Once again Steve… personal experience on my part compared to theoretical logic on yours. No insult intended my friend. And as for my furniture maker… he specifically cited the exchange rate as the difference in the price.
We had fixed the price when I commissioned the order… so there was no gringo pricing in play. If there was he added that when we agreed on the price!! 🙂
As I said previously…. the interchangeable nature of the dollar and colone in CR may explain the divergence from normal economic theory you have pointed to… but the reality as I’ve cited does exist and will no doubt result from the recent exchange rate change.
Another point or issue that may be relevant to this issue is that many Ticos I know like to hold their money in dollars.
BTW…. I’m not sure where that world exchange rate is coming from… but on the ground in CR, in the banks, and most importantly in the stores… the current dollar/colone exchange rate is a MUCH different story!
[quote=”sweikert925″]So let me see if I have this right.
You believe that all Ticos try to squeeze more money out of Gringos by practicing “Gringo pricing” but when you came time to pick up your furniture and got hit with the additional 10% you believed unconditionally the stated reason the furniture maker gave you. Because at the point that the agreement was reached the furniture maker apparently stopped all attempts at squeezing more money out of you. LOL
Did you actually check the exchange rates to see if they had gone up in that 3 month period between your price agreement and your taking delivery? If not, how do you know the exchange rate changed to the furniture maker’s disadvantage? It may have gone the other way.
Any Ticos that keep their money in $ would be wise to do so, in my opinion, since the exchange rate has historically favored the dollar. According to comments by you made previously though, they are in for a rude shock since you believe that the US economy is on the verge of a meltdown and that the dollar’s value will sooner or later plunge in value.[/quote]
Come now Steve…. once again PERSONAL experience in CR compared to internet research and theoretical beliefs on how things SHOULD work! I guess we could have one heck of a debate on the difference between a supply and demand pricing system as compared to the whole futures pricing scheme the world seems based on. 🙂
Once again my furniture maker SPECIFICALLY cited the exchange rate… the gringo pricing was no doubt already built into the price we had agreed on. BTW…. I still felt the price was fair and I don’t have a problem paying more for quality. As you witnessed yourself furniture in CR is a fantastic bargain even with some gringo pricing adjustment. The exchange rate had in fact changed during the three months as it had continually until the BCCR implemented their “banding” policy of exchange rates.
As for holding dollars… the world seems to be of the same mindset… but as has been the case with EVERY fiat currency in history… eventually they all return to their true value… ZERO.
We can continue the debate… but let’s be very clear…. it’s reality vs theory…. only one of us is not relying on an internet search to make our point. 😉
imxploring
excellent post!!!
as your 100% correct..
the ticos here are very much tied into the day to day fluctuations of teh dollar and colones and I have found when it suits them they quote dollars.. when not they quote in colones
just last week my alarm guy quotes me in dollars for a small job
I found that odd because he has always quoted me in colones.. until I went and checked the exchanges and realize the recent gains
I dont bother in this micro.. I always just use 500 as the base.
your also 100% with EVERY fiat currency eventually return to ZERO
but thank goodness for Obamacare..
and it looks like the government will be coming to again to save us with their new retirement plan lol :D:D:D:D:D:D
[quote=”Imxploring”][quote=”sweikert925″]So let me see if I have this right.
You believe that all Ticos try to squeeze more money out of Gringos by practicing “Gringo pricing” but when you came time to pick up your furniture and got hit with the additional 10% you believed unconditionally the stated reason the furniture maker gave you. Because at the point that the agreement was reached the furniture maker apparently stopped all attempts at squeezing more money out of you. LOL
Did you actually check the exchange rates to see if they had gone up in that 3 month period between your price agreement and your taking delivery? If not, how do you know the exchange rate changed to the furniture maker’s disadvantage? It may have gone the other way.
Any Ticos that keep their money in $ would be wise to do so, in my opinion, since the exchange rate has historically favored the dollar. According to comments by you made previously though, they are in for a rude shock since you believe that the US economy is on the verge of a meltdown and that the dollar’s value will sooner or later plunge in value.[/quote]
Come now Steve…. once again PERSONAL experience in CR compared to internet research and theoretical beliefs on how things SHOULD work! I guess we could have one heck of a debate on the difference between a supply and demand pricing system as compared to the whole futures pricing scheme the world seems based on. 🙂
Once again my furniture maker SPECIFICALLY sited the exchange rate… the gringo pricing was no doubt already built into the price we had agreed on. BTW…. I still felt the price was fair and I don’t have a problem paying more for quality. As you witnessed yourself furniture in CR is a fantastic bargain even with some gringo pricing adjustment. The exchange rate had in fact changed during the three months as it had continually until the BCCR implemented their “banding” policy of exchange rates.
As for holding dollars… the world seems to be of the same mindset… but as has been the case with EVERY fiat currency in history… eventually they all return to their true value… ZERO.
We can continue the debate… but let’s be very clear…. it’s reality vs theory…. only one of us is not relying on an internet search to make our point. ;-)[/quote]
[quote=”sweikert925″][quote=”Imxploring”]only one of us is not relying on an internet search to make our point.[/quote]
On this particular subject neither one of us is using an internet search to make our points. One of us is using simple logic and common sense and the other isn’t.[/quote]Welcome to Costa Rica Steve… where logic and common sense will no doubt shorten your stay and make it a much more uncomfortable one.
As you’ve apparently joined this board to obtain information for your possible relocation to CR you might be best served to listen and LEARN something from those of us that have ACTUAL experience in CR… or you can (as I suspect you will) continue to attempt to educate the rest of us on your internet based knowledge of the logical utopian society you believe exist in the US and Costa Rica. Like it or not… that’s not reality Steve.
You seem to want to dispute, debate, and discredit the personal experiences that folks share here that you should be learning from. That’s a shame… but I figure that trait is too deeply ingrained in you at this point to change.
Do yourself a favor (truly) and a bigger one for all those you might encounter in CR and look elsewhere to relocate…. CR is really not for you.
Enough said my friend… feel free to reply… but I think most (if not everyone) reading your reply will see it for what it is…. that deeply engrained need on your part to get in the last word and educate the rest of us on a topic (CR) which you have very little personal knowledge of.
Pura Vida Steve…. I hear Chile is very nice! 🙂
imxploring
MATE !!!! PLEASE dont mention anything about CHILE.. for the love of god man.
This may be my next move.. and we dont want to give sweikert any ideas..
let him believe what he wants to believe..
living here will cure him of that soon enough
[quote=”sweikert925″][quote=”Imxploring”]CR is really not for you.[/quote]
So because you are an expert – not only on everything having to do with Costa Rica but also what is in my best interests – I apparently have to reconsider my decision to relocate to CR.Sorry. Isn’t gonna happen.
However if you prefer I no longer respond to any of your posts I can easily do that and maybe you should do the same for mine.[/quote]
[quote=”sweikert925″][quote=”Imxploring”]CR is really not for you.[/quote]
So because you are an expert – not only on everything having to do with Costa Rica but also what is in my best interests – I apparently have to reconsider my decision to relocate to CR.Sorry. Isn’t gonna happen.
However if you prefer I no longer respond to any of your posts I can easily do that and maybe you should do the same for mine.[/quote]
Thanks Steve…. your reply just won me $10!!!
Pura Vida…. 4 more Imperials!
[quote=”davidd”]imxploring
MATE !!!! PLEASE dont mention anything about CHILE.. for the love of god man.
This may be my next move.. and we dont want to give sweikert any ideas..
let him believe what he wants to believe..
living here will cure him of that soon enough
[quote=”sweikert925″][quote=”Imxploring”]CR is really not for you.[/quote]
So because you are an expert – not only on everything having to do with Costa Rica but also what is in my best interests – I apparently have to reconsider my decision to relocate to CR.Sorry. Isn’t gonna happen.
However if you prefer I no longer respond to any of your posts I can easily do that and maybe you should do the same for mine.[/quote][/quote]
Sorry…. Perhaps Argentina…. they need a man of common sense and logic! I was going to recommend Venezuela but the utopian socialist plan down there isn’t working out as our friend might think it would… might be too big a shock to his system!
[quote=”Imxploring”]Les…. I think you’re mistaken if you don’t believe that prices in CR (priced in local currency) will not be adjusted upwards (inflated) to make up for the rise in the dollar (exchange rate).[/quote]
While the exchange rate dropped from 596 to 493 we experienced inflation of 5% to 7%. Tico workers income rose at about 1% to 2% at the same time yet they experienced the same rate of inflation as expats did.
Why do you assume that prices rise simply to gouge expats when the Ticos get hit just as hard or harder. The Tico family that lives with us pays the same prices that I do.
Inflation is worldwide and has been a fact of life for generations. When you can tell me that Costa Rica is the only country that is experiencing inflation we can argue the point.
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