This Week in Costa Rica

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This Week in Costa Rica is a weekly, online radio program and podcast by US expat, Dan Stevens

Costa Rica Central Bank Steps Up Dollar Purchases Most Since May

By Adam Williams

Costa Rica’s central bank is buying dollars at the fastest pace in three months after foreign companies brought in cash to pay workers, not because of a return of speculative capital to the country, according to brokerage Aldesa Puesto de Bolsa.

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Costa Rica’s central bank bought $41.5 million this week through yesterday, the most since May 17. Dollar purchases have exceeded $750 million this year as policy makers try to rein in the colon, which has led Latin American and Caribbean currencies with a 2 percent gain against the dollar this year.

President Laura Chinchilla, who called speculative capital a “weapon of mass destruction,” backed legislation Congress has yet to take up that would raise reserve requirements on foreign investors and boost taxes on interest paid to them to dissuade some inflows. This week’s rise in dollar purchases is probably not related to speculative capital but wage payments, said Adriana Rodriguez, head of investment strategy at Aldesa.

“The national interest rates remain very low, so it doesn’t make much sense that this is a return of speculative capital when there are larger returns available in other emerging market countries,” Rodriguez said in an interview.

Costa Rica’s basic interest rate fell to 6.55 percent this month from 9.2 percent at the start of the year.

Article publish in Bloomberg Businessweek

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at awilliams111@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net; Andre Soliani at asoliani@bloomberg.net

 

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