www.CostaRicaTicas.com

Just move to Canada and save your mongering careers

Bilko....

You live in CR, where is the bulk of your cash? CR or the USA? Why?

Most prosperous nations let their currencies float rather than have their central banks try to outsmart the buyers and sellers in the currency markets. Take the British Pound for instance. CNBC all day long shows the up to date market price for the dollar vs. the pound. The price changes every second. This is a free, floating market. Buyers and sellers determine at any given second how many dollars it takes to buy a pound, and conversely, how many pounds it takes to buy a dollar. The last time I looked was yesterday afternoon and I think it cost 2.04 (and some decimal) dollars to buy a pound. Whatever that exact price was, a few seconds later it was different, probably .0001 or.0002 more or less. Likewise, the Euro and the yen and the Canadian dollar and the Australian dollar and many other prosperous countries' currencies float against the dollar and against each other in a completely free market.

Then there is Costa Rica, whose citizens love their big government. You will note that it is not as prosperous as the countries mentioned above who let their currencies float. Big governments screw up everything they touch, and Costa Rica's government is a whiz at screwing things up. Costa Rica has a central bank whose members decide among themselves what the correct exchange rate should be between the colon and the dollar. They think they are smarter than the millions of individuals around the world who buy and sell dollars and colons. They aren't. They are bureaucrats that are probably appointed to their positions as a reward for supporting politicians in the past. How can these people know how many colons it should cost to buy a dollar? They can't.

For many years Costa Rica had a much higher inflation rate than the United States did and thus it was obvious that the colon needed to be steadily devalued against the dollar, so the central bank of Costa Rica estimated (guessed?) each week what the correct exchange rate should be, and each week they devalued the colon a little bit. I think the exchange rate was about 280 colons for one U.S. dollar the first time I visited Costa Rica six or seven years ago. There was no free market for the colon vs. dollar exchange rate anywhere in the world at that time. It was completely decided by the government bureaucrats.

Then about a year ago along came Oscar Arias who became the new President of Costa Rica. He has a degree in economics from a prestigious university in England and it was probably because of this that shortly after he took office there was a policy change at the central bank. The central bank set a ceiling and a floor, between which the dollar and the colon exchange rate could move freely. To the surprise of about everyone, ever since then the colon stopped its devaluation with the dollar and stayed pretty steady at about 517 colons per dollar. Why? Who knows. The central bank claims that at 517 the dollar was overvalued and was pressing against the floor that they had set, so a week or two ago they suddenly lowered the floor to about 495 colons per dollar and the "free" market (within its slightly less narrowed limits) promptly devalued the dollar to the 495 colones floor. Now the latest rumor is that the central bank is about to lower the floor again another 4% or so. additionally there is the rumor that someone at the central bank thinks that the correct exchange rate should be about 400 colons for one dollar.

Now what the hell is the correct exchange rate? It used to be 280 and it has been 517 and then suddenly it was 495 and rumor has it that it will soon suddenly be 475 and rumor also has it that a central banker thinks maybe it will suddenly be 400. It should be obvious to anyone reading this that no one knows what the correct exchange rate should be. Not now and not in the future and not in the past and not ever! Not the central bank and not the President of Costa Rica and not the professors at the University of Costa Rica and not the housewife buying rice. There is only one way that the correct exchange rate can be known, and that is to float the colon. Allow the colon to be freely traded, without any floor or ceiling, and in an instant the correct value will be determind by thousands or millions of buyers and sellers around the world. No guessing or estimating would be needed. And more importantly, Costa Rica would be taking a small step away from government interference and meddling in its economy, and would be taking a small step toward becoming a more prosperous nation.

I'm seriously considering converting as much of my cash as possible to Euro's, then exchange Euro's for Colons as needed. However, I think you get bit twice this way. I've read that in many places they convert first to dollars (paying the conversion fee) then you pay another conversion fee to whatever the other currency is.

I have to find out the bank policies on this.

When you convert any currency for another currency at a bank in Costa Rica, the bank will make some money on the deal and it will be you who pays them. A bank typically will have two prices for a given currency. If you want to buy colones with dollars or if you want to buy dollars with colones, the bank will be happy to provide either service. However they have two prices, such as 495 colones per dollar and 500 colones per dollar. If you want to sell dollars and buy colones, you will receive 495 colones per dollar. If you want to buy dollars and sell colones, you will have to pay 500 colones per dollar. This spread is how the banks make their money. Let's call it a commission. If instead you use your dollars to buy Euros, there will be a commission. If you then use these euros to buy yen, there will be a commision. If you then use these yen to buy Canadian dollars, there will be a commission. Every time you convert from one currency to another there will be a commision. Banks normally charge a fairly low commission and airport money exchange shops normally charge a high commission. If you have a buddy who has too many colones and wants to buy dollars, and if you have too many dollars and want to buy colones, you can make a commission free exchange if you both agree to it. You can speculate in Costa Rica by buying the colon because you think you know which way it is likely to move, and you can speculate in many other currencies by buying or selling them on the futures market because you think you know which way they are likely to move. In all cases you are a currency speculator and you may make or lose money. Currencies often move in the opposite direction you and many experts expect. At least with the futures market, there is no commission except for a small broker's charge. Good luck!

The dollar is on a long slide. On the plus side free enterprise will help some. As the dollar slides more products will be sent overseas reducing the trade deficit. We can already see lots of Europeans coming here so tourism is helping.

My gut tells me until we have a change in Gov't the dollar will continue to slide. Not an economic reason but reality.

We have a lot to pay for with hundreds of billions going to a war.

There is a lot of pressure on China to let its currency float. If they do this would help a lot.

On a personal level if the dollar lowers too much against colones then demand will lower and prices will stabilize. CR is protecting the exchange rate because tourism is so important to the economy in CR.


Hang on to your shorts if Iran gets its wish. They are pushing OPEC to switch the basis of oil to the Euro. If that happens the dollar will completely tank. If you wondered why we wanted to attack Iran now you have the REAL reason.

Many businesses in CR get paid in dollars but pay in colones (wages etc). Expect price increases soon from virtually all tourist related businesses. If you rent a place here try to have the contract in dollars. I would manage to move here the first time the dollar has devalued against the colon ever.

BKTUNA
I am neve going home

I basically posted:
I’ve been paying the same price for the last 10 years, no complaints. I should have said that I’ve actually been paying a lot less. Due to inflation 2007 dollars are worth about 22% less than in 1998.

ID responded in part:


“spin” “voodoo economics” - I don’t think so. For the record I’ve always aced my micro and macro economic courses and even tutored public sector microeconomics in graduate school. And the girl I dated in DC, dated David Stockman in the Reagan Era (OK less relevant but he was the architect of Reagan’s Trickle down theories ). I understand where you are coming from and appreciate Sunshine’s thorough analysis, however I’m coming at this from a different angle. Leave the spin for the spinners.

Sunshine wrote:


Well I don’t think that anyone knows what the correct price for a session with a girl from the Del Rey should be. I also believe that the “dreaded” Cien is a psychological price or barrier in both the provider’s and hobbyist's mind. El Ciego mentioned this about a year and a half ago in an ID thread that does not give ID much credibility in this arena (http://costaricaticas.com/phpBB2/viewtopic.php?t=10819&postdays=0&postorder=asc). The Del Rey is unique, it is the venue where the girls get the top dollar in the country (not counting clip joint strip bars for the uninformed). I imagine strippers in the US have had a similar problem with the $1 tip.

Due to fluctuating supply and demand, the difference in wages between a sex provider and other forms of unskilled labor, and the Cien “barrier”, I don’t think we’ll see such a big price increase with girls from the Del Rey even with a devaluating dollar. However MP’s have basically kept up with inflation and are likely to increase gradually as they have over the last 10 years.

Hey but who really knows, as Bktuna points out, we are in uncharted waters.

Not many of us here are trained economists. The basics dont take much intelligence to understand. When the dollar is low or tanking, our goods and services become cheaper to foreigners while foreigners goods and services become more expensive to us. Many countries work on a trade RANGE like Costa Rica does. Not pure, free exchange in ratings.

Reality is our national debt, tied to problem credit markets are not going to correct themselves quickly or over night. Believe me, many of our countries foes are salivating at our economic and currency demise. FOr some Americans, this will help bring more jobs and wages back to the domestic USA...but it will take a while for the dollar to come back against many of the major currencies. I read recently that for the FIRST time ever Warren Buffet...one of the most conservative of AMerican investors...was hedging his holdings is foreign currencies because of the dollar and US economy woes. Hang on for the ride folks.

Another good thing here in Panama is that many banks offer a wide array of currencies to hold your cash in. We are seeing a lot of american companies...and individuals...opening accounts here for that particular reason.

Lets just hope the girls dont get smart enough to adjust their rates quickly with the floating currencies...

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

The bulk of my money is in non-dollar investments. I am forced to keep some here as part of my residency requirement. I just transferred all my dollars into Colones. My money is technically in the USA as part of a brokerage account, but the assets held there are not dependent on the value of the US dollar. I actually make money as the dollar tanks.

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

In CR you can have either a dollar or colones bank account. Most always chose dollars because you gained as the colon dropped against the dollar. I am now opening a colon account also.


BKTUNA
I am never going home

Still I would not put all my eggs in one basket or completely write off the dollar. Part of the reason for the dollar's current demise (other than Irak) is the sub-prime mess but just read an article where the exact same rapid runup in property values is occuring in China with loose financing (actaully very loose compared to even our former loose standards).

And when the perverbial kimshee hits the fan there over there then in which direction will the money begin flowing again?

Excellent idea BK, if you can keep a couple of dimes in each account just use which ever is strongest at the time.

Cujo

_________________
"Pain is the fuel that fans the flames of my pyre. A battle plan is only as good as the general carrying it out on the field. This is my war son, and I have the biggest bombs and the smallest conscience"...

Sunshine:

That's nice, but it has little to do with what I said.

If I convert all my excess cash to Euro's, yes... there will be a fee. And of course there will be a fee when you convert them to anything else. I'm not stupid.

My point was that from what I've read, converting from non-USD to some other non-USD (especially when either of those non-USD might be tied to the dollar) involves a conversion to USD first, then to the other non-USD, so you get bit twice (thrice really, if you consider the first fee of changing from USD to euros). Thus USD->EUR->USD->CRC instead of USD->EUR->CRC. Get my drift?

I don't know if that's the way the banks work here, though. I haven't been able to get them to convert Canadian Dollars or GBP, but then I don't have an account with them yet either.

Now, this scheme only makes sense if you intend it to be long term. ie, you convert to EUR early, then save that money expecting EUR's to gain while the dollar loses. Then, you convert EUR->CRC and (hopefully) end up ahead of holding that money in either USD or CRC.

The question is, do you come out ahead after all the fees? That will depend on how much the EUR gains, how much the dollar loses, and how much the CRC gains or loses.