Savers in Costa Rica maintain a preference for saving their money in dollars, above doing so in colones, the national currency.
Saving in colones has not only become less attractive but also stopped growing. According to Banco Central, the inclination towards foreign currency (dollars) is reproduced in savings accounts, term deposits and even in investment funds.
The economic slowdown in production in Costa Rica and the distrust of how the economy will evolve as well as the fiscal situation, among other reasons, lead many to think that it is better to invest in a stronger currency, such as the dollar.
The trend, says the Central Bank is that while the balance of savings in foreign currency grows, it stagnates and even contracts in colones.
Last September, dollar accounts grew 5.2% year-on-year, but in colones, they remained stagnant.
This behavior is replicated in the stock market. The assets of the investment funds in dollars, grew 10.3%, and the counterpart in national currency contracted, after showing better results in 2018.
What is behind this behavior of the saver?
The higher interest rates offered by the Government in dollars, in the issues it makes, are part of the explanation, according to the Central Bank.
There is a preference for savings in dollars, especially in the broader aggregate of total financial wealth, due, among other factors, to the higher interest rates offered by the Government in the local stock market, cites the Central Bank’s Monthly Economic Summary Report for September 2019.
Therefore, there are also interesting advantages of saving in dollars, explained José Luis Arce, director of FCS Capital.
Monetary aggregates (liquidity in its different forms, that is, cash in circulation, more liquid liabilities in financial institutions, and wealth) show a slowdown as a whole, but by detailing the behavior by currency, dollars accelerate the step and colones decrease.
Financial wealth in dollars went from representing 30.5% in September 2016 to 35.3% in the same month of 2019.
On the other hand, there is the distrust that consumers still feel in the local economy, to the extent that the country’s fiscal profile and economic outlook has deteriorated, people favor saving in dollars, said economist Adriana Rodríguez.
