In an unstable exchange market, lack of transparency in the rules on intervention by the Central Bank of Costa Rica increases uncertainty and drives investors towards the safest currency.

The rise in the price of the dollar in Costa Rica is a negative factor for some sectors and positive for others, but generally negative for the economy, because it distorts companies’ plans, diminishing their competitiveness, and because it increases market players’ willingness to speculate.

The Central Bank of Costa Rica (BCCR) intends to address the problem by giving assurances of the availability of reserves and its willingness to use them, in order to maintain the exchange rate within the margins that its executives understand to be appropriate. Beyond the discussion about what the value of the dollar in Costa Rica should be, according to the fundamentals of its economy, the problem is not only that market players differ on that value and consequently take their decisions regarding it, but also that it makes it more attractive to speculate on what the rules are, under which the BCCR will use its reserves.  

An article in Crhoy.com outlines the very meritorious opinion of the economist Leiner Vargas, who in this respect points out that these rules are ” dirty “, “… in the sense that only a group of people know the level at which they will intervene. Some believe that there should be a more transparent rule. “

However well-intentioned-and even necessary for the health of an economy- are interventions by the monetary authorities in the markets, they always produce wealth transfer between economic sectors. The transparency of the rules that trigger these interventions is essential for the financial planning of companies, and to limit the benefits gained by those fishing in troubled waters.

See full article at Crhoy.com (In spanish)