Comments on: Costa Rica’s Central Bank considering devaluation of exchange rate

By: zzzzz

zzzzz — Sun, 20 Sep 2015 16:00:00 +0000

completely agree

By: SDPUS

SDPUS — Sun, 20 Sep 2015 11:10:00 +0000

When a countries currency is de-valuated it could benefit from the lower cost of its export of goods, which become cheaper to buy by customers in countries whose currencies are stronger.

Governments around the world are often tempted to lower, unnaturally, their currency rates in order to benefit from the lower value of the national currency.

Lower currency value encourages exports and discourages imports, improving the country’s trade deficit and imbalances.

However, the average citizen of a country with a recently devalued currency, could suffer from higher prices of imported goods and overseas holiday costs.

By: zzzzz

zzzzz — Sun, 20 Sep 2015 00:38:00 +0000

No it isn’t. Duty does not generate USD.
Duty is a tax based the value of the goods, period.
It is of no consequence how it is paid and it does not generate USD for the government.
You pay in Colones and if they give you the option to pay it in Dollars, it changes nothing as it is equivalent to you going to the bank and making the exchange there and still paying the same amount.
No one is changing their Colones to USD to go to customs to pay a fixed dollar amount, it is a % of the value and not USD income in any way.
Only in cases where there is a fixed USD charge would the price differential come into play

By: winkdarren

winkdarren — Sat, 19 Sep 2015 23:42:00 +0000

Since the duty / revenue is generated in USD, and almost of government bills are paid in Colonies. This effectively allows the government to have considerable amount more colonies to pay the government employees.

By: zzzzz

zzzzz — Sat, 19 Sep 2015 16:33:00 +0000

What you are saying is that the revenue generated in duties is USD and therefore as the Colon depreciates in comparison it represents more revenue but in fact that is not the case since the duty imposed is a fixed rate based on the value independent of whether paid in Clolones, USD or porc chops. The revenue generated by customs is not foreign revenue and it is simply a tax.
If the relative cost of the imported goods goes up (since it is priced in U$) because of currency depreciation, so does the net amount of tax and in that way maybe you can say revenue goes up but by the same token, there is a direct correlation to a diminution in spending if the price of goods go up.
Exports such as from agriculture- which does not represent the most important part of the economy- sold in U$ does bring in more bucks but all those tax free trade zones would most likely not bring additional net benefit to the country other than make them marginally more competitive.

By: winkdarren

winkdarren — Sat, 19 Sep 2015 01:44:00 +0000

Yes, but my point is that regardless of the value of the Colon, customs is revenue in USD.

By: zzzzz

zzzzz — Fri, 18 Sep 2015 23:44:00 +0000

interesting but whatever denomination customs would base it’s duties it would still be the same since duty is a percentage of the value based on cost + transport + insurance

By: winkdarren

winkdarren — Fri, 18 Sep 2015 21:41:00 +0000

One of the biggest and most important examples is, Customs, its a % based on the value which happens to be a calculated in USD and a huge source of revenue for CR. I believe Inside Costa Rica had a thing on this a few years ago and customs made up something like 40% of total revenues.

By: disgsted

disgsted — Fri, 18 Sep 2015 16:03:00 +0000

Lets say argument sake you get 535 /540 colons to the dollar That puts you right at 600,000 +/-. You’re getting a hell of a deal. Where can I get this exchange?

By: zzzzz

zzzzz — Fri, 18 Sep 2015 02:32:00 +0000

“but a great deal of government revenue is in fact collected pegged to
the USD. Overall this benefits the economy, helps the debt crisis, helps
the deficit”
That doesn’t make any sense
If they devalue the colon and still keep it pegged to the U$ how does “collected pegged to the USD” work? to benefit the economy more?
If they devalue, the cost of imported goods such as fuel goes up.
Cost of servicing USD denominated debt goes up.

Cost of government capital expenditures go up and expect minimum wage to go up.
Unless salaries are indexed consider this a tax