Tuesday 7 February 2023

Central Bank contradicts Chaves on dollar reserves

BCCR reported that the balance was reduced by US$1.263 billion since February 2020, instead of the US$2.3 billion said by the President this Sunday

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7 February 2023 - At The Banks - BCCR

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QCOSTARICA – The Banco Central de Costa Rica (BCCR) – Central Bank of Costa Rica, came out this Monday to contradict President Rodrigo Chaves, clarifying that the country does have “sufficient reserves” of dollars and correcting him that in the pandemic, from February 2020 to May 2022, the balance of reserves was reduced by US$1.263 billion, and not by US$2.3 billion, as the president declared on Sunday, before traveling to Switzerland.

“The BCCR has sufficient reserves to face shocks on the foreign exchange market and mitigate its impact on the exchange rate,” the Central Bank said in a statement where it warned that the balance of international reserves as of Friday, May 20, reached US$6.839 billion.

The use of reserves is regulated by law: they can only be used for specific cases such as paying for the purchase of fuel, imports of other goods, or when there is stress in the international financial system and it is difficult to obtain funding abroad. They are also used to intervene in foreign exchange markets and influence the behavior of the exchange rate.

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According to Chaves, who has a doctorate in economics, the money situation inherited from the previous administration leaves him “little” room to attenuate the exchange rate and affects the price of gasoline and diesel.

Read more: President blames former gvt for spending US$2.3 billion in international reserves

However, the Central Bank refuted it in the statement by indicating that the current balance of reserves is equivalent to 10.4% of gross domestic product (GDP) and would allow 4.5 months of imports to be met.

According to the information published by the Central Bank on its website about its net reserves, as of May 22, this foreign exchange deposit totaled US$6.839 billion; on February 28, 2020, the last month without a pandemic, they reached US$8.102 billion (US$1.263 billion less), while on May 8, 2018, when the previous government began, they reached US$8.289 billion (US$1.45 billion less than now).

Roger Madrigal, apppointed on May 8 President Rodrigo Chaves, is the president of the Central Bank after being appointed by

The reaction of the Central Bank occurred a day after Chaves criticized the government of Carlos Alvarado for supposedly leaving the country without international reserves. However, the reserves are under the administration of the Cental Bank – which is an autonomous entity with its own Board of Directors – and not the executive branch.

Former Central Bank President: “Costa Rica has enough reserves”

The former president of the Central Bank of Costa Rica, Rodrigo Cubero, also reacted to the Monday’s statements of President Rodrigo Chaves, regarding the use of international reserves to intervene in the dollar exchange rate.

Rodrigo Cubero, former president of the Central Bank of Costa Rica
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Cubero, appointed by Alvarado to run the bank from May 8, 2018 to May 8, 2022, assured that Costa Rica has sufficient international reserves to continue facing external factors and mitigate the impact on the exchange rate and defended that, if the multilateral credits pending in Congress are approved, the country’s reserves will be stabilized and therefore the exchange rate.

Róger Madrigal López, the current president of the BCCR, appointed by Chaves on May 8, previously served as director of the Bank’s Economic Division (holding that position since 2008) and, as such, was one of the main technical advisers to the previous head of the institution, Rodrigo Cubero, and the Central Bank’s Board of Directors.

For Tuesday, the Central Bank set buy and sell reference exchange rate at ¢672.11 and ¢680.57, respectively.

At the commercial banks the sell rate this morning is being quoted between ¢684 and ¢685.

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