Thursday 20 January 2022

Central Bank Defends The Colon

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(QCOSTARICA) In September the Central Bank (Banco Central de Costa Rica – BCCR) made an intervention in the exchange market through the sale of US$81 million in order to avoid upward pressure on the exchange rate.

Photo Shutterstock/La República
Photo Shutterstock/La República

The US$81 million that the Central Bank sold on the wholesale market to try to minimize upward pressure on the exchange rat. The amount is almost half of the US$169 million dollars it has injected so far this year.

The exchange today is: one US dollar to ¢547.18 for the sell and ¢559.79 for the buy.

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Also, the BCCR uses currency negotiations with the public sector to moderate variations in the exchange rate. For example, the bank sells the currency to the public sector and then replaced in the wholesale market (Monex).

This year, the public sector net sales exceed net Central Banks’s purchases in the Monex.

La Nacion reports that “…This year, net sales to the public sector exceed net purchases of the entity in the Monex market. The former president of the Central Bank, Rodrigo Bolaños, estimated that since December 15 last year and to date, the company has sold in total, net, about US$750 million through the different methods that it has to influence the market.”

“… Bolaños said that since June, the institution has let the exchange rate rise through a combination of measures including prices (letting the dollar become more expensive) and quantity (losing part of their reserves). From June 1 to October 6, the price of the currency on the wholesale market has risen about ¢15. However, Bolaños said that this could not be sustained for long, as it will start to have disturbing effects on the level of reserves.”

The injection of dollars allows the Central Bank to prevent further increases in the currency, however, on the other hand it reduces its international monetary reserves.

Between September 4 and October 4 this account fell by US$374 million. Overall this year, from January to October, the reduction is US$163 million.

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The reduction in the decline of international reserves is in line with the BCCR’s 2016-2017 macroeconomic program.

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