When it comes to expat living in beautiful Costa Rica, the impulses of math relating to the exchange rate can actually be beneficial. For many expats in this South American country, the money earned or collected is foreign, oftentimes the U.S. dollar.
As a prime example, you might run a successful online business whereby your customers pay for products and/or services in U.S. dollars. Another possibility would involve renting out a vacation home on the VRBO.com website, again with customers paying in U.S. currency. You might even be retired and, while living as an expat, receive your pension in, what else, U.S. dollars.
Key Currency Relationships
Both historically and in looking at the future, it is important to consider the relationship between the U.S. dollar and the Costa Rica colon. At one time, $1 U.S. equated to roughly 350 colones. Today, that has increased to around 500 colones, which means that Costa Rica’s currency has depreciated.
However, before you get too excited about investment opportunities for properties in Costa Rica, you should first understand some things about the history of the exchange rate. Especially when it comes to U.S. currency, the colon has had a unique relationship. In 2001, there was a very slow connection. Instead of there being a consistent value to the dollar, there was an aggressive growth of the colon regardless of the fixed rate.
Fast-forward five years to see a modification of the relationship. At that time, the U.S. dollar had weakened, which gave the impression that the Costa Rica colon was undervalued. Since that time, the exchange rate has floated freely within a band of currency that references the U.S. dollar. The floor of that band has been at a fixed value for some time, although the ceiling has changed at a fixed rate. That means the exchange rate has stayed fixed at the lower spectrum of the currency band.
Throughout the past 10-year period, there have been fluctuations in the rate, going between 500 and 550. The only exception was seen in 2008 during the worst economic crisis in the world. During that time, the Costa Rica colon climbed to about 580. Although as an expat you will probably not experience dramatic gyrations of the currency rate, this risk factor does play in your favor.
While the rotations could prove beneficial to the U.S. dollar, there is also the risk of instability. Over the past several years, the economy of Costa Rica has become more “dollarized.” Small and large merchants gladly accept U.S. currency; yet at one time, it caused a great deal of confusion and frustration.
Even getting ripped off when making purchases is a thing of the past since the majority of merchants in Costa Rica use modern-day cash registers that automatically display the correct change in local currency.
Overall, living as an expat in Costa Rica is relatively stable and convenient. In addition to paying for things with U.S. currency, you can get U.S. dollars from ATMs and maintain U.S. dollars in your bank account for taking care of daily expenses. Dealing with U.S. currency while living as an expat in Costa Rica has never been easier.