500 Colones (First Costa Rican Republic) – Costa Rica

In 2023, Costa Rica's currency situation was characterized by a period of relative stability and moderate depreciation of the colón (CRC) against the US dollar, following a period of significant volatility. The Central Bank of Costa Rica (BCCR) maintained a managed float exchange rate regime, allowing the colón to fluctuate within a band but intervening in the foreign exchange market to curb excessive volatility. Throughout the year, the exchange rate gradually moved from around ₡580 to the dollar at the start of the year to approximately ₡535 by year's end, representing an appreciation of nearly 8%. This trend was a reversal from the sharp depreciation seen in 2022 and was influenced by several key factors.

The primary drivers of this appreciation included a significant inflow of US dollars from strong tourism recovery, record levels of foreign direct investment (FDI), and disbursements from a $1.78 billion loan with the International Monetary Fund (IMF). Furthermore, the BCCR's contractionary monetary policy, implemented to combat persistent though easing inflation, involved raising interest rates. This made colón-denominated assets more attractive, supporting the currency's value. The government's improved fiscal position, aided by the IMF program, also bolstered investor confidence and reduced pressure on the colón.

Despite the overall stability, challenges remained. Inflation, though declining from its 2022 peak, remained above the BCCR's target range for much of the year, eroding purchasing power. The stronger colón also presented a headwind for exporters and the tourism sector by making Costa Rican goods and services more expensive for foreign buyers. Looking ahead, the BCCR's focus in late 2023 was on carefully managing the pace of appreciation to balance controlling inflation with maintaining the competitiveness of key economic sectors, while continuing to build international reserves as a buffer against future external shocks.