QCOSTARICA – The president of the Central Bank (Banco Central de Costa Rica – BCCR) assures the transition from a floating band exchange rate to a managed float was possible to the strength of the country’s economy.
Over the weekend the Central Bank ‘formalized’ the change in the exchange rate policy that took effect yesterday morning. However, “the economy must be “de-dollarized” (Esta economía hay que desdolarizarla, in Spanish), said Olivier Castro on Monday.
Speaking on the radio program, Nuestra Voz the Central Bank president said people will hardly feel any sharp change in the dollar exchange since the managed float has in place for past year with the Central Bank’s intervention policies of when there are too many or too few dollars in the market to prevent rise and falls.
Castro said that with the change (formalizing the managed float) the Central Bank wants to send a message that the country has to “de-dollarize the national economy”.
A measure that the Central Bank can apply is a special charge to commercial banks on their dollar loans, and greater controls on those transactions.
Castro said that the biggest economic concern for the Cental Bank is the country’s economic growth, projecting 3.4% growth for this year and 4.1% for next year and that the fiscal decifit.
seems to me he’s got it backwards. IMO, CR needs to go the Panama route and dollarize it’s economy, not the other way around.
He knows that the country can’t possibly pay off all the dollar denominated loans that Costa Rica is on the hook for. By attempting to move away from a dollar economy, he is hoping that the colon will somehow become a international currency. Hope is a poor economic plan but it’s about all he can do. With multinationals retreating from Costa Rica almost daily and exports wobbling, he will be lucky if we don’t see a 590 colon/dollar rate by year’s end.