www.CostaRicaTicas.com

I have to agree with Ladiesloveme in general.

And I agree with the guys above who say get out into the real countryside to do the research and avoid the promoters and puffers.

A lot of other sites for gringos are started and funded by real estate promoters who speak glowingly of the retired life owning a house in CR without mentioning all the porblems that some others have written about.

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PacoLoco: "You pay for it one way or another."
Ace: "Rent everything, do not buy in Costa Rica"

Zippy,
I can only speak from personal experience, but I am one of those people. But I did A LOT of homework and research beforehand, including numerous trips to CR, for this purpose. Granted, I always found a little time to monger during my trips, but the lion's share of the time, it was all about business.

Below is taken from the original article that I posted:

The province of Guanacaste, in the northwest corner of Costa Rica’s pacific coast, already boasts a flagship Four Seasons Resort Hotel and has plans for a J.W. Marriot as well.

“The presence of major players like the Four Seasons and J.W. Marriot indicates that clearly the area is exploding, and anyone in position to get in the game at the development level, should take a serious look at this area” said Brad Markin, land owner and co-founder of EstateRealty.com.

As I've mentioned in some prior posts, this is exactly where I have invested. Over the past few years, I've built a couple condo's by the beach, with a third unit currently under construction. Each of the finished units sleep 8 people, and are managed by a Property Management Company. They have consistently kept them rented since day one. The 3rd unit should be completed within the next 4 - 5 months. After they take out all the monthly expenses (including their commission), they wire the balance of the rental funds to my account in CR, and I can check my account on-line, with just a few keystrokes.

In addition, I've seen the re-sale prices (of identical condo's) more than double over the past couple years. I still feel very confident that I've made a solid investment here. It allows me to bank a residual monthly income (every month) from the rentals, and the value of the units is certainly not depreciating.

I've seen my share of scam-artist realtors in CR, who try to be your best friend, and they're going to try to sell you anything they can. Don't get taken in by their bullsh*t. If it sounds too good to be true......(you know the rest). Many people get excited with the prospect of owning a piece of land, or home, in Costa Rica. And they let their emotions make their decision. Don't let it happen.

I may be one of the lucky ones, but I still stand by what I said before. If you are willing to do the necessary research, and don't mind getting a little dirty in the trenches, then go for it. You may be rewarded in spades. If not, you can always purchase Series EE Bonds! And, one more thing. It helps to have a good, trustworthy abogado (attorney)!

Buena Suerte a todos los inversionistas,
MG

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You ALWAYS have an option ....... "NEXT" !!!

Paco,
Don't know if you've seen this yet, but the below article talks about this situation. It's in today's (Friday - 10/13) Tico Times:

Exchange Rate Uncertainty Looms
By Blake Schmidt, Tico Times Staff
bschmidt@ticotimes.net

Any day now, the government will implement a new exchange rate regime intended to liberalize Costa Rica's devaluating currency.

The change will have widespread, large-scale effects throughout the economy, and is intended to give the Central Bank the muscle of monetary reform needed to rein in Costa Rica's runaway inflation.

Between now and the end of the year, Costa Rica will open its 22-year-old system of mini-devaluations to a world of uncertainty. As the colón is allowed to fluctuate more freely against the dollar, consumers and financial markets will have to adapt to a regime in which the Central Bank will no longer adjust the exchange rate with predictable daily increments of approximately 13 céntimos (hundredths of a colón).

But the Central Bank won't send Costa Rica's colón pedaling off into the volatile world of supply and demand without training wheels. The colón will be allowed to fluctuate within a currency band, or a price ceiling and floor, set and maintained by the Central Bank.

Citing fears of possible last-minute speculations, Central Bank president Francisco de Paula Gutiérrez has been tight-lipped about exactly when the change will be made. He has refused to announce a date for the change, though he has said it will occur before year's end. Consumers will be informed of the change the very day it takes place, he said.

Gutiérrez told The Tico Times that just about everything is in place for the currency band system to be put into affect.

Under the new system, the Central Bank will use the $2.6 billion it has in reserves to buy and sell dollars to banks in order to keep the exchange rate floating inside the currency band.

The change is the first step in the Central Bank's long-term goal to liberalize the colón completely and free it from the U.S. dollar – to which it has been nearly fixed with a “crawling peg” system since 1984.

Liberalization of the colón is part of a larger plan to control Costa Rica's high inflation rate, which crept above an accumulated 14% the end of last year and is expected to reach 11% this year, according to Gutiérrez.

Former Central Bank president Eduardo Lizano explained “the essential change is that risks that the Central Bank took on will be passed on to economic agents.”

Known as a “crawling band” in economic argon, the new system will mean changes for institutions, consumers and the economy as a whole.

For the financial sector, banks will have to advertise and compete among each other to offer consumers the best exchange rate, and develop insurance to cover the risks of the new exchange rate system.

For consumers and investors, it will mean having to seek out the best exchange rate the market will offer them and having to adjust to a new system that allows for more uncertainty than the current mini-devaluation system.

For the Central Bank, it will mean having more tools with which to control the country's high inflation, which Gutiérrez called “one of Costa Rica's biggest problems.”

Speculation already exists as to whether the new system could halt the current trend of dollarization in the economy, but one thing is for sure: it will open the economy to the risks of speculation and the volatility of supply and demand.

Also, the Central Bank's ability to control inflation will largely depend on whether Costa Rica's Legislative Assembly can pass the fiscal reforms necessary to help pay down the Central Bank's debt, thus making sure it has the resources with which to implement its monetary policy.

It is unknown as of yet what the width of the currency band will be, although Central Bank economist Eduardo Méndez said it will be “narrow” – between 3-4% of the colón's value.

The currency band's floor and ceiling levels will be maintained by the Central Bank in accordance with a “crawling band” model. That means the floor and ceiling will slowly grow apart, making the band wider and wider, thus giving the colón more and more room to float.

Too Much Certainty?

Under the near-perfect certainty of the current system, the Central Bank makes daily adjustments to keep the exchange rate within a very small band, Gutiérrez explained. The Central Bank is constantly devaluating the colón by small fractions, so people know their dollars will continue to appreciate against the colón, Gutiérrez explained.

More people put dollars into banks, and invest in dollars, because over time those dollars will have increased in value in Costa Rican terms, Gutiérrez said.

“There's too much certainty,” he said. The new system will bring uncertainty to the equation. People are already speculating as to what that uncertainty could bring. Costa Rican Chamber of Exporters (CADEXCO) president Mónica Araya said exporters are worried about taking on the increased risks.

“There are no insurance services yet to cover risks. So there are no instruments to minimize risks. But there will be. Then we'll have to pay insurance,” she said.

Araya said the booming $7 billion export industry – which Costa Rican President Oscar Arias hopes to make an $18 billion industry by the end of his term – fears that the colón will appreciate under the new system. If that happens, the demand for imports would rise and the demand for exports would drop.

“It all depends on how the Central Bank handles the bands,” she said.
Costa-Rican American Chamber of Commerce (AmCham) president Hernán Pacheco said he has heard a lot of speculation in anticipation of the new system, but that the general feeling in Costa Rican business circles is that the new sysem is “favorable.”

Some, including Gutiérrez, say the uncertainty will make it less likely that people will keep putting dollars into Costa Rica's highly dollarized economy. More than half of the liquid economy is in dollars, Gutiérrez said.

Under the new system, people will not know what the colón will be worth against the dollar in the future. Gutiérrez said that might mean people will be less likely to pour dollars into the economy.

However, José Luis Arce, an economist for the private San José economic consulting firm Consejeros Económicos y Financieros, S.A., said he doubts a currency band will deter people from using dollars.

“The process of dollarization is generally irreversible. Once people have lost faith in the local currency, it's difficult to recuperate it,” he said.

However, Lizano says the fate of the dollar in the economy will depend less on people's faith in the local currency, and more on people's faith in the new currency band system.

“It depends on the economic agents' confidence in the system. They'll keep their dollars if there is no confidence in the colón. Without any confidence, in fact, the economy could become even more dollarized,” he said. For people to trust in the system, he said, the Central Bank will have to implement a cautious, transparent system.

Lizano, who was Central Bank president from 1984-1990 and again from 1998-2002, was against liberalizing the colón during his two terms.
But Lizano and Gutiérrez agree things have changed – a steady flow of direct foreign investment, a growing economy, and the Central Bank's finances make for different economic circumstances than when Lizano was in office.

The Central Bank's deficit is the smallest it has been in years. The bank has $4.6 billion in liabilities, but is sitting on $2.6 billion in reserves it will be able to use to control exchange rate fluctuations.

Gutiérrez says the time is now.
The change will include renovation of the Central Bank's online exchange rate price negotiation platform. Under the new system, called MONEX, all banks will post their prices on the Web at the Central Bank's site, where consumers will be able to open a Web page with a list of the exchange rates each bank is offering. The Central Bank has already begun posting the exchange rate on its site www.bccr.fi.cr/flat/bccr_flat.htm

Under the current system, each bank advertises the rate on its own Web site. Under the new system, the Central Bank will announce each day the exchange rate price floor and ceiling. Gutiérrez said the currency band will be narrow at first, between 3-4% of the currency's value (about ¢20) but grow wider in time.

“We have to permit that all prices – including the price of the exchange rate – reflect market circumstances, not the dirigismo of a few bureaucrats,” Juan Ricardo Fernández, president Association of Free Consumers, told The Tico Times.

The last time the exchange rate regime was changed was in the wake of Costa Rica's economic crisis in the 1980s. At the end of 1980, the Central Bank abandoned the official exchange rate and floated the colón. It was the first change in the official rate of the colón to the dollar since 1968, when the colón was pegged at ¢8.60.

Then in 1981, as Central America slipped into economic crisis, the colón collapsed. The national currency was officially devalued by the Legislative Assembly amid hyperinflation (TT, Dec. 4, 1981).

Once the colón stabilized, in 1984, on the coattails of the crises, the current mini-devaluation system was established. Gutiérrez said that regime hasn't allowed the Central Bank to control inflation.

He said the country is trying to achieve the “impossible trinity,” referring to a theory in international economics that suggests the following three things cannot be maintained: free capital movement, a fixed exchange rate, and control over monetary policy.

He said making the exchange rate more flexible is the best way to break the trinity, as Chile, Colombia, Israel and Mexico have done in the past with “excellent results.” However, for the Central Bank to control inflation in the long run, it depends upon the government's ability to pass fiscal reform, which would reduce the Central Bank's $2 billion deficit, Gutiérrez said.

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You ALWAYS have an option ....... "NEXT" !!!

This ought to be interesting. But it shouldn't get extremely messy since the colon was never totally pegged to the dollar. It was not a fixed exchange rate. Luckily for the CR economy, they made a smart decision to establish a ceiling and floor, so the fluctuations won't be disasterous. I still don't see why they are doing this. I don't know much (anything ) about their imports/exports, but I assume they trade a lot with the US. I'm not sure why they're trying to move away from the USD. It's not like the Colon will be in such high demand to stop the devaluation. They want to bring "uncertainty" into the equation. In economics, that's a hated word. If this doesn't work out, it will get much worse. (BUT BETTER FOR US HOLDING USD)

I lived in Mexico when this happened in 1994. In 2 days in December, the peso was worth half its value against the dollar. Locals with dollar mortgages but peso incomes overnight saw their payments double...and didnt have the income to support that. There was a lot of havoc short term for the country...and some devastated debtors. Bill Clinton then helped bail out Mexico with a 20Billion dollar loan to help stabilize things. I wouldnt count on that happening for Costa Rica...

This correction/medicine is inevitable at some point in time. Better sooner than later in my opinion...then everyone can adjust and get on with biz. I dont think it would effect too much people who are invested in dollars...and renting to foreigners. Where it will impact is locals/Ticos and their assessibility to the market and real estate. Colones will not buy much that day.

In the long run, real estate in CR will depend on foreigners continued investment and tourism to the country. ONe of the big dangers to this is crime and violence. Crime had a tremendous increas in mexico after this devaluation.

If they dont pass the free trade agreement, I also think the economy will tank even more. Just my opinion...

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All that a man achieves and all that he fails to achieve is the direct result of his own thoughts...

Before the US bails them out, Bush will make them outlaw prositution and close down Del Rey, etc.

Thanks for posting that MG, Seems a lot of people aren't even aware of this situation and those investing in CR or about to certainly should be. From what I heard many have already put things on hold until this deal happens and the currency stabilizes, knowing how things work down there the possibility of things turning into a major clusterphuck for some time seems quite possible.

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Living well is the best revenge
http://www.youtube.com/watch?v=MwUtj_YnNoY

For those interested, here's some more info on the exchange issue:
(in todays's A.M. Costa Rica)

New exchange rate idea goes into effect Tuesday
By the A.M. Costa Rica staff

The Banco Central waited for a three-day weekend to begin its plan to allow the colon to float inside a specified range against the dollar.

The bank board of directors met Friday and formally agreed to change the system in mini-devaluations that had existed for more than 20 years. The plan had been announced earlier.

The new system will begin Tuesday. Agencies and banks that exchange money will be allowed to set their own rate provided the numbers are within the range established by the central bankers.

For Tuesday that range of rates will have a floor of 514.78 colons to the dollar. The ceiling or the point where the Central Bank would intervene to sell dollars will be 530.22 colons to the dollar.

The buy and sell rates for Friday and through the weekend were 521.22 colons and 523.39 colons. They were the last rates established by mini-devaluation.

The bank said that it would raise the buy rate each business day by 6 centimos or hundreds of a colon. The rate at which dollars would be sold will be raised by 14 centimos every business day, the bank said.

For business purposes, the Central Bank will compile each day the rates at which authorized institutions are buying and selling dollars. This will be the reference rate at which most business outside the banks will be conducted.

The bank's stated goal in instituting this new method is to reduce inflation in the country. The Central Bank has been printing colon notes to offset its losses in protecting the colon against the dollar. The bank has a $2.8 billion deficit from years of money exchanging.

The bank said that to exchange dollars or colons now, an individual should shop around or at least check the list of rates of various institutions. And banks and similar must display their rates in an obvious location, the central bank said.

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You ALWAYS have an option ....... "NEXT" !!!

Let's hope the new system will work for CR and achieves the set out objective in near future.

Criswell and Carnak both agree, the chances of this move ending inflation in CR are slim and none. Bilko agrees. If we are wrong, feel free to rub my nose in it. The other 2 are in the great beyond, you'll have to hold a seance (like I did).

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"The only normal people are those you don't know very well." Joe Ancis

Saludos,

Here is a current story in real time and dollars US:

Background –

In the 1970’s my step dad bought a couple lots about 4 blocks from the beach near Playa Flamingo in a development, for $500 and change each. There was a third beach lot, but it is a sad tale of thievery and beyond the scope of this story. Suffice to say be careful out there.

In 2000 Pa passed away and named me as personal representative. It was a complicated estate with many heirs, and it was 2003 until I got to the lots. They were an obscure entity in a foreign country and not at the top of the list. Anyway they were not part of any specific requests, no provisions made whatever. I went in cold to Costa Rica to check it out. In the following bear in mind the way it worked out, I got no money out of this other than my expenses (and well great times but don’t tell the other heirs that).

Cut to the Chase –

Early 2003 with a little support from the ‘old board’ and a couple of maps I went to CR solo to figure it out. First stop DR of course, all good but another story. I traveled out to the coast and find the lots are going for about $5,000 US each. Shit, not enough to get exited about, but too much to throw away. Over the next years I visit two embassy’s; talked to three abogados plus my American attorney; and give up putting this into the probate proceedings in any legal kind of way for both countries. Long story short I paid a CR lawyer a grand to ‘just’ put them into my name. Sure nuff he did. (This has bugged me every since – what is to stop anybody from getting title this way). I happened to pull it off. Again be damn careful.

Conclusion –

In April this year 2006 I sold the two lots to a Tico couple for $40,000 US apiece, money wire transferred to my American attorney and distributed to the heirs - done deal. I took about $6K for ‘per diem’ (hahaha no sir, no hookers included), and gave the Canadian Lady realtor about six.

Epilogue -

Four years ago $10,000 US ask price LESS closing costs to $68,000 NET IN the USA Bank this year - quite a jump. No prognostication here - it is what went down.

Not saying I believe it will continue, to the very contrary. Nonetheless, I sorta have my both eyes open…

Guanacaste Province is the area to invest. The $350 million invested in the Four Seasons put this area on the map.

The following investments are occurring at this time: Michael Dell has purchased land to build a Westin, Steve Case has purchased a large parcel to build his Exclusive Resorts and an Aman Resort, a Hyatt, St. Regis, Regent Hotel, JW Marriott and Hilton are all coming. The Spanish company Rui just purchased a large parcel to build a hotel. Mandarian, Fairmont and Ritz Carlton are looking for sites.

The airport in Liberia has had over 300,000 international arrivals YTD. The key to a successful resort destination site is airlift. There are nonstops from Miami, Atlanta, Houston, Dallas, Newark, Charlotte, Philadelphia, Minneapolis.

Real estate in the Guanacaste Province is being sold based on a "lifestyle" decision ... investment returns are secondary to individuals who want resort residences in this location.

Factor in the following attributes and you understand why; great weather, world class fishing and scuba, several great surfing locations, ecotourism, gaming, new signature golf courses, lack of hurricanes, fee-simple ownership and title insurance, and last but not least "the ladies". High end retail will soon follow.

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Make sure you have a wife that trust you ... therefore she will believe your lies.

They are all coming, but when will they get there? By the time anything big happens so that my investment returns a nice profit, I'll be near dead (I'm 44).

I consider "investment" to mean that you buy now, hold it and then later sell it for a considerable profit. I don't consider my primary residence an investment (not really my definition of an investment). I consider my primary residence the minimum of what someone should do so not to have to pay rent in old age. Investment to me is what you do with your extra cash (YMMV).

I still think there is less hassle investing in the USA - buy something close to home especially if you are investing in something that isn't very liquid. There are a lot of drawbacks when investing abroad; If you own land or home abroad, you can't leverage your investment as in home equity to my knowledge. I could go on and on, but I just don't see any reason to invest in land or house abroad. There is just too many opportunities closer to home that you can better control.

I agree with those that move to CR and prefer to own rather than rent, but since there is no real way to value property (land and homes) in CR, I'd rather, if I wanted a house, spend 175,000 to build the house that I'll later say is worth 450,000. I mean why pay someone 450,000 when if you are in CR you can build it for 175,000. I'm using hypothetical numbers just for example purposes.

I recently read in the newspaper of a 68 year old man asking what his next investment move should be - he was so well off that he didn't need his SS checks. I kept thinking, give it a break man, just live, go play bingo, go to CR or Brazil and bang some Chicas.... LIVE!

*