Costa Rica manipulates interest rates to control their currency valuation increase


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Interest Rates

Costa Rica’s finance minister informed reporters that the country plans to reduce the country interest rates in order to control the local currency valuation trend, which was the best performing Latin America currency in 2012. The combination of a strong return rate of 10% in December 2012, and a stable government has made CR’s colon one of the most wanted currencies on the region.

In Costa Rica, teams made their way to Poás Vo...
In Costa Rica, teams made their way to Poás Volcano National Park for a Route Info clue. (Photo credit: Wikipedia)

The current increase of 2.2% in the value of the colon, can strongly affect the local economy by making it less competitive in the international market. The manufacturing industry will see itself affected by the rising prices of their products, while at the same time the tourism industry could be affected by the relative increase in hotel and service rates. On the other hand, a quick devaluation of the country currency could put at risk the country reserves, increase the relative cost of the importation of products (including the important oil prices), and make it harder to pay it’s own international obligations.

  Costa Rica to Reduce Interest Rates to Stem Currency Surge – Bloomberg.

 

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