Monday, April 23, 2007

Costa Rica and dollars

One thing that really struck me in Costa Rica is the degree of dollarization: the dollar is ubiquitous. Especially because of the tourist industry, on several occasions in stores I would get out colones and the cashier would have to get out a calculator to change the price from dollar to colón. If you never ventured past tourist spots, there would be no reason to change any money.

At the same time, however, other places listed everything in colones, though I have a hunch they’d accept dollars without batting an eyelash. Other places would accept a combination of the two.

Thus, Costa Rica retains the ability to adjust its exchange rate while facilitating investment, trade and tourism by allowing foreigners to keep many transactions in dollars. That potential adjustment, though, is limited, as the country has a “crawling band” (until 2006 it had a crawling peg, which was even more restrictive) whereby its relationship to the dollar can not move upward or downward more than 3%, an amount that will increase slightly over time.


Steven Taylor 8:23 PM  

I had the same experience in Peru over the summer--whether in Lima or in Iquitos. I was quite surprised. The hotel we stayed at accepted Euros as well. One could even get some receipts in dollars.

Greg Weeks 6:22 AM  

This would be an interesting issue to study--I've seen plenty of stuff on formal dollarization, but less on de facto dollarization.

  © Blogger templates The Professional Template by 2008

Back to TOP