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What do you consider a "big, sharp devaluation"? Does Mkink's prediction meet your definition, or do you mean an all-of-a-sudden drop that just happens?

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bypassin' kinky, and usin' the whole chicken!!!

A 20 to 30 percent devaluation vs. US dollar....in general, yes, Mkink's prediction would fit my definition. The timing and suddenness of it would have a lot to do with its effect on the local economy.

I just don't see it in the historical data. Since the correction of March 2014, the currency has been settling down, not up. The past 30 days has been erratic, but foreign exchanges don't seem to be tracking far from the central bank, and though I do not follow it regularly, today's long options seem to be flat.

I could believe in another correction cerca 2014, but outside of that, it seems to be slowly coming down against the dollar. And if anyone has a good gut feeling about the timeframe of another correction, I'd appreciate a head's up.

Also, I've been looking at some other data. CR is following the US into deflation territory right now, and is projected by year-end to see a .45% deflation. Food inflation has steadily fallen since the currency correction of 2014, and is at the lowest point now since 2009.

Current inflation is at the lowest since 1977. Not sure what that means, but there it is.

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bypassin' kinky, and usin' the whole chicken!!!

Somebody is propping it up! This country is a big credit bubble. Look at all the newer cars and how many of them are on the road! Did everybody pay cash or are they financed? Go check out Panama even the cows are fatter! I am surprised that the colon has not been attacked by currency speculators as it is at least 30% over valued. Go talk to the people out in the countryside and around San Jose away from the Gulch. Their budgets are stretched to the limit! What are CR's big exports banana's and coffee? The game being played is to prop up the currency and to flood the market with imports and credit. Whoever is making the money off the selling and financing of the imports is who is manipulating the currency! It looks like the US pre crash only at a smaller scale.

Right Mugsy…

I've been trying to make this point for a while. It is the overall managing of the colon valuation. The BCCR is but just a political tool used to manipulate the economy. It is a bubble and will eventually end up ugly for the local economy. Don't know how long it will take, another year, a few more months, but it will happen, JMHO. Just look at the social pressures being build in CR, worse that ever in its history.

Hope for the best, but it does not look promising

Tourism is their biggest export. It brings foreign currency directly into the country without the floating credit delays.

So, someone is propping up the value of the colón so to increase the number of financial loans to ticos, so that it'll all crash down, and the ticos lose their cars and the banks lose the money on the loans?????

I keep searching the internet for news articles about how close to collapse the currency is. All I find are the same articles here about the floating peg thing, so when I find anything of interest I'll letcha know.

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bypassin' kinky, and usin' the whole chicken!!!

flush with strong US dollars, CR pays for exports in those dollars... thus no need to devalue...
no need to prop up the Colones... if anything devaluing in this case would be devastating for a petro importer such as CR.... this is called balanced trade

more credit could be created with those dollars if the colones was weak...

there is no benefit to propping up the colones, it wouldnt even be advantageous in the current world economy to do so...

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its easier to fool people than to convince them they have been fooled- mark twain

this timeline makes sense because the FEDs rate hikes that the EURODOLLAR futures are placing for fed funds are at .5% in march and .75 to 1% by 2015....

CR and the US's currency sync is just a correlation due to the trade balances... similar tot he Canadian dollar dropping with Crude prices...

so "manipulation" would be also be defined as responsible monetary policy... a "devaluation" would happen naturally as the the USD takes a well needed pause


http://www.cmegroup.com/trading/interes ... ollar.html

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its easier to fool people than to convince them they have been fooled- mark twain

The head of the Central Bank predicted today that the exchange rate will be stable through 2016.
I was a little surprised by this, but he holds the cards.

If he's saying that, it means they will artificially keep propping up the Colon. But one day that bubble will burst.

So here's an observation that I just realized... when I was in Colombia in August, I paid my hotel (NOT the Mansion btw) bill by credit card. When I booked the hotel on hotels.com, it was about $70/night. A week before the trip, I canceled it and re-booked it for $53/night due to exchange rate going down. And by the time I got there, the exchange rate had gone up some more so that when they charged my card for the same amount as I was quoted on day 1 (448,000 COP), it turned out to be $144 for 3 nights, so about $48/night. They didn't jack up the price of the hotel just because the rate had changed.

In Costa Rica, most businesses that I have dealt with handle this differently. First, they usually still charge your credit card in local currently (colones). But instead of charging you the same rate in colones, they actually adjust the rate in colones based on the dollar exchange rate. If for example, the bill is $100 and the exchange rate was 500:1, they always convert it to colones first using the sell rate which is always higher, so they would charge your card about 52,000 colones. If the exchange rate goes up to 550 lets say, you should be getting a 10% discount. Not in CR. In CR, they will charge your card 570:1 for the $100, or 57,000 colones. So not only do they charge our cards in local currency incurring us a currency exchange fee, they jack up the price just because the exchange rate moved.

This is exactly what we were killing the Medellin Mansion for doing when they sent that ridiculous email a few months ago. I just realized that the businesses in CR do the same thing. The last time I rented a car in CR, it happened to me. The exchange rate moved from 500 to 520 and I ended up paying more just because they thought their the ones who should benefit from the exchange rate movement.

I've not had that, from the few hotels I have stayed in. When I book online, they usually quote in dollars, and that is what is charged. The time's it's been in colónes, it didn't change after the booking, regardless of what the colón did.

Which hotels have you caught doing this to you? We really should report this in a permanent thread.

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bypassin' kinky, and usin' the whole chicken!!!

But I think those businesses that quote prices in dollars are able to get away with it without too much hassle. And unlike the Mansion, they adjust the rates up or down based on the exchange rates. Not just up, in their favor.

You are absolutely right Orange. Rental car agencies and most hotels have always done this in CR, the double conversion trick, in order to benefit from the buy/sell spread, not once but twice per transaction. The way it works is this:

They quote the price in US$, say $100
Then they charge your credit card in colones at the higher $buy rate, say $540
Then your credit card gets billed at the banks exchange rate. Plus any foreign transaction fees, if applicable.

The only way to avoid getting fleeced this way is to pay cash, in US$...and by the way, with the exact amount because of course they don't have change

Lately, the last couple of years, most hotels and some shops, most notably those at the airport or other tourist locations have started charging your international cc in US$, IF requested. Make sure you request to be charged in $....otherwise, the above applies.

As strange as it sounds, when I am quoted in USD, I always bring exact change USD with me.

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bypassin' kinky, and usin' the whole chicken!!!

riddle me this guys
What benefit would "propping up" the colones be?

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its easier to fool people than to convince them they have been fooled- mark twain