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BIG announcement: Costa Rica’s Central Bank will allow a controlled flotation of the US$:Colon
[img]https://www.welovecostarica.com/public/images/Banco-Central.jpg[/img]
I’m still wading my through the news at the moment but Spanish speakers can read more at:
[url=http://www.nacion.com/economia/banco-central/Banco-Central-decreta-flotacion-administrada_0_1466853367.html]Banco Central permitirá flotación controlada del dólar[/url]
[url=http://www.nacion.com/economia/politica-economica/Sector-empresarial-acertada-flotacion-administrada_0_1466853384.html]Sector empresarial estima acertado el paso a la flotación administrada[/url]
Would be happy to hear your opinion as to how you think this will affect Costa Rica – intentionally and unintentionally.
How will it affect people earning or receiving US dollars and people earning colones?
Scott
It appears that the government in CR can no longer afford the needed monetary commitment required to keep the dollar down. As such dollar earners will most likely see a benefit in buying power while those earning in local currency will see a decline.
How it impacts local businesses, products, and ultimately prices will be a function of how interconnected they are with either currency.
The other variable in CR is that either currency is almost interchangeable in day to day transactions, right down to having breakfast in a little local soda in the sticks. As such the impact of a “float” will not be a mathematical exercise in economics but to some degree an emotional one as to how it is perceived by the public and the financial sector.
The tourism/tourist sector should see a gain as they price most goods and services in dollars yet pay their expenses in colones.
That gain may be a wash however if locally priced items rise quickly and swallow up the dollar gain in the exchange rate.
The impact on real estate may be muted for a while as things settle out.
Like the Swiss Franc situation, at some point the required effort to MANIPULATE a market becomes even too great for governments to undertake.
Its quickly becoming every man for themselves with the central banks. It might be a very wild ride for a while.
I saw a post about this on FB and was confused. I have to admit that I still have some confusion (although you have helped). My biggest concern is being fair to my gardener and housekeeper. Should I, at this point, pay them in dollars or colones. It sounds as if paying in colones is to my benefit but will hurt them. I want to do what is best for my employees, so it sounds like paying them in dollars is best. Right?
[quote=”VictoriaLST”]I saw a post about this on FB and was confused. I have to admit that I still have some confusion (although you have helped).
My biggest concern is being fair to my gardener and housekeeper. Should I, at this point, pay them in dollars or colones. It sounds as if paying in colones is to my benefit but will hurt them. I want to do what is best for my employees, so it sounds like paying them in dollars is best. Right?[/quote]
I too have the same issue. If YOUR income (which I’m guessing it is) is in dollars, and the dollar rises, then paying them in dollars would be fairer. I’m sure they won’t have an issue with it. Any exchange rate variations may very well be gobbled up by rising prices for goods priced in colones anyway. At least with them being paid in dollars the impact on them will be minimal.
I had an experience years ago when I custom ordered some furniture from a fellow in Tilaran. We agreed on a price in dollars… but when delivery time came the dollar had dropped against the colon and he wanted more money. Not a lot but enough to get my attention. When I asked if he would have “dropped” his price on delivery had the exchange rate gone the other way there was that momentary pause and a slight smile on his part that told me the issue had become moot. He didn’t have a very good poker face! We settled on the price we agreed to when the items we ordered.
Paying in dollars… if that is what your income is based on allows you to budget and avoids the problem with folks you care about and the impact varying exchange rates have on them.
I wonder if the price of the Broken Ceiling Pizza at Moyas will be going up?? LOL
Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
Few business people do…
You start paying them in dollars and their wives and husbands will be telling them that you are probably ripping them off…
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
Don’t complicate your life! Pay them what they expect to be paid in the money that they expect to be paid in …
Just my dos colones …
Scott
Scott
One does not need to be a rocket scientist to assume whatever changes will occur will benefit the awake smart ones and hurt the poorer middle class ignorant ones..
this should be interesting..
the right thing to do at this point is just get rid of the colones and use dollars as currency.. instead of creating these artificial methods that allow some to benefit with these fluctuations
make the dollar the base as panama.. instead of making believe colones are worth anything other tanks in costa rica
[quote=”Scott”]Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
Few business people do…
You start paying them in dollars and their wives and husbands will be telling them that you are probably ripping them off…
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
Don’t complicate your life! Pay them what they expect to be paid in the money that they expect to be paid in …
Just my dos colones …
Scott
[/quote]Hell Scott (can I say that here?) that’s not rude mainly because I don’t understand it either. But you have a point – better to not confuse things. I am confused enough for everyone.
As to the price of pizza at Moya’s, I usually just make my own 🙂 Want a slice?
[quote=”Scott”]Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
Few business people do…
You start paying them in dollars and their wives and husbands will be telling them that you are probably ripping them off…
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
Don’t complicate your life! Pay them what they expect to be paid in the money that they expect to be paid in …
Just my dos colones …
Scott
[/quote]Perhaps I’m employing over – qualified gardeners and housekeepers…. they seem pretty sharp and have a good understanding of the colon/dollar exchange rate and how it impacts them….they also have bank accounts… perhaps I’m paying them too well! I’m thinking perhaps I should cut off the free wifi and dumb them down a bit! I knew introducing them to the Internet was the beginning of the end!!! LOL
[quote=”VictoriaLST”]Hell Scott (can I say that here?) that’s not rude mainly because I don’t understand it either. But you have a point – better to not confuse things. I am confused enough for everyone.
As to the price of pizza at Moya’s, I usually just make my own 🙂 Want a slice?[/quote]
Interesting offer…. I might just take you up on that… although Moya does have some great toppings! 😉
[quote=”Imxploring”][quote=”Scott”]Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
Few business people do…
You start paying them in dollars and their wives and husbands will be telling them that you are probably ripping them off…
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
Don’t complicate your life! Pay them what they expect to be paid in the money that they expect to be paid in …
Just my dos colones …
Scott
[/quote]Perhaps I’m employing over – qualified gardeners and housekeepers…. they seem pretty sharp and have a good understanding of the colon/dollar exchange rate and how it impacts them….they also have bank accounts… perhaps I’m paying them too well! I’m thinking perhaps I should cut off the free wifi and dumb them down a bit! I knew introducing them to the Internet was the beginning of the end!!! LOL[/quote]
Just don’t show them the article in today’s [url=http://www.nacion.com/economia/finanzas/Pension-exdiputados-millones-anos_0_1467253271.html]La Nacion[/url] about the pensions that some of the diputados are earning in Costa Rica…
208 ex-legislators who are – on average – earning a pension of 5,000,000 colones per month (US$9,206.74) and which automatically increases by 30% (Yes! THIRTY per cent) per year!
According to the article, nobody could join this ‘plan’ after 1995 but even so 208 people earning $9,206.74 per month is a total of US$1,915,001.92 per month just for this small group…
Mind-boggling!
[quote=”Scott”][quote=”Imxploring”][quote=”Scott”]Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
Few business people do…
You start paying them in dollars and their wives and husbands will be telling them that you are probably ripping them off…
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
Don’t complicate your life! Pay them what they expect to be paid in the money that they expect to be paid in …
Just my dos colones …
Scott
[/quote]Perhaps I’m employing over – qualified gardeners and housekeepers…. they seem pretty sharp and have a good understanding of the colon/dollar exchange rate and how it impacts them….they also have bank accounts… perhaps I’m paying them too well! I’m thinking perhaps I should cut off the free wifi and dumb them down a bit! I knew introducing them to the Internet was the beginning of the end!!! LOL[/quote]
Just don’t show them the article in today’s [url=http://www.nacion.com/economia/finanzas/Pension-exdiputados-millones-anos_0_1467253271.html]La Nacion[/url] about the pensions that some of the diputados are earning in Costa Rica…
208 ex-legislators who are – on average – earning a pension of 5,000,000 colones per month (US$9,206.74) and which automatically increases by 30% (Yes! THIRTY per cent) per year!
According to the article, nobody could join this ‘plan’ after 1995 but even so 208 people earning $9,206.74 per month is a total of US$1,915,001.92 per month just for this small group…
Mind-boggling!
[/quote]
Trust me…. they know their government is full of thieves… but that’s not any different from the US or most countries in the world today. It’s the kind of environment that leads to revolutions.
This is why I dont pay any taxes.. U.S. or Costa Rica.. AT ALL aside from properties owned
and whatever I spend
I let the sheeple of society pay.
This is the only way I can sleep at night
[quote=”Scott”][quote=”Imxploring”][quote=”Scott”]Sorry to be rude but do you really think that gardeners and housekeeper in Costa Rica understand currency fluctuations?
(snip)
It’s been my experience that most gardeners and housekeeper in Costa Rica don’t have a bank account so where do they change those dollars into colones?
Answer: In a place where they’ll probably get ripped off with the exchange rate which is not what you want.
(snip)
Mind-boggling!
[/quote]Here’s an anecdote on dollar/colon exchange.
The first time I came to C.R., as a visiting professor at UNA, I had some cash left over when I returned to the states. So I bought a CD at BN , in colones, for $250. The exchange rate at the time (1979) was 8.5 to the dollar, so the CD was for 2125 colones. Now, 36 years later, at today’s exchange rate of 530 colones/dollar, my $250 investment is worth $4.01. (Of course there has been interest applied meanwhile, but somehow [being Costa Rica] the entire account has “disappeared”). 😆 My personal desaparicedo.
It appears I will not be using that CD to pad my retirement.According to the [url=http://www.dollartimes.com/inflation/inflation.php?amount=100&year=1979]Dollar Times[/url] $250 in 1979 would be worth $860.59 today and I don’t suppose that’s going to “pad your retirement” too much either, maybe for a month!
Scott
However if you put that $250 into a s&p 500 index fund in 1979 it would be worth approx. $13,000 excluding inflation/fees. Now if you had $25K to invest in the s&p in 1979 and held it there, it would have grown to approx. $1.2MM excluding inflation/fees. That would pad the old retirement account a bit! Hard to beat the s&p over the long haul. Though I adhere to a market timing model myself, can’t stomach the down “cycles”.
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