UPDATE – May 2017 Colón Drops to 600 per Dollar
After a couple of years of fairly stable rates around ¢540 to ¢550 relative to the U.S. dollar the colón took a big dip at the end of May loosing about 5% to reach approximately ¢600 per dollar.
The central bank intervened and is working to stop the drop so values may fluctuate for the next few weeks.
Residents receiving paychecks in local currency will experience marked increases in costs. However, tourists are not likely to notice much change in prices. Most travel related things like hotels, lodges, tours, activities, beach bars and restaurants are already in U.S. dollars so the value of the colón has little impact on international vacation prices.
2014 Colón Devaluation
The president of Costa Rica’s central bank has stated that the massive drop in the value of the colón relative to the U.S. dollar is expected to continue. The Costa Rican currency lost nearly 10% of its value in February 2014 and extrapolating that rate of decrease would mean that by the Christmas high season it would be worth less than half what it was at the beginning of the year.
In a “normal” economy a big decrease in the value of the local currency would mean big savings for international travelers. However Costa Rica is a special case and savings are very unlikely.
This has created some tiny bargains – for example the cost of a public bus from the airport to downtown (¢650) would drop from $1.30 to $0.85 in U.S. funds – but most travel costs would stay the same or even increase.
Out on the tourist trail nearly all hotel rooms, tours and meals are priced in U.S. dollars and therefore not affected by the value of the colón.
That’s a pretty simple explanation for why prices would stay the same for international travelers but doesn’t explain why costs might actually rise. To understand that you need to know that 10-60% of the income for a travel related business in Costa Rica comes from domestic travel.
The vacation purchasing power of an average Tico’s paycheck fell by 10% in just four weeks at the beginning of 2014 because salaries are in colones but the rainforest lodges and beach resorts charge dollars.
If bank president Rodrigo Bolaños is correct in predicting that the trend will continue for the coming months it will force locals to cancel or severely curtail their travel plans. When visitor numbers dropped during the economic crisis in 2008 a common reaction was to raise prices (in dollars) to make up for lost revenue and there’s no reason to think the response will be any different now.
A decrease in the number of local travelers could mean that by the end of 2014 the dollar, euro and other foreign currencies could be worth twice as much at the exchange counter but still buy less at hotels, restaurants and tour operators.
If you’re planning on spending foreign money on travel in Costa Rica now may be the best time to make your reservations and lock in prices.