“Good” & “Bad” Exchange Rates

Essentially everything in the Costa Rica Costa Rican tourism sector is either literally or for all practical purposes priced in U.S. Dollars. The Colón to Dollar exchange rate has very little impact on costs for visitors.

Unless travelers get quite a ways off the beaten path the cost of most hotels, lodges, meals, car rentals, drinks, tours and entry fees are posted in U.S. dollars. This is because the value of the Costa Rican currency – the colón – is not stable and continuously decreased for the past few years.

Because of this U.S. travelers can mostly ignore changes in the exchange rate when trying to determine how much Costa Rica travel will cost. Travelers from Canada, the U.K. and Europe should look at the value of their currency vs the Dollar to determine whether travel in Costa Rica is “cheap” or “expensive.”

Lot’s of Colones Mean a “Good” Exchange Rate…Right?

Each time there’s a big drop in value of the Colón people ask “how much am I going to save on my Costa Rica vacation?” They’re disappointed to learn that the answer is “basically nothing”.

Travelers might save a nickle here and there on a bottle of water that’s priced in colones but since most things that tourists buy are priced in dollars the prices don’t change when the exchange rate does. After a few days or weeks even the nickles disappear as the price of the bottle of water is adjusted.

In fact contrary to reducing costs the big change in exchange could be very costly for travelers. The rate of ¢500 to the dollar became normalized in casual transactions because it’s so easy to do that conversion (just double the number… a 10 mil colones note is 20 dollars). Using that casual rate now means that dollars are undervalued by at least 20%.

The biggest impact of the drop in the value of the colón is to decrease the income of Tico’s who receive paychecks in local currency.

Cost vs Exchange Rate

Many people are confused by the concept of an exchange rate and think that just because you can get a lot of colones for one dollar that’s a “good” exchange rate and Costa Rica must be very cheap.

In fact costs in Costa Rica are similar to costs in the U.S. but because colones have 600 times less value than dollars you have to spend more of them for the same product.

It’s similar to thinking of converting dollars into pennies. 100 pennies won’t buy you any more in the store than 20 nickles or 1 dollar. If price tags in the U.S. were in pennies, things wouldn’t be any more or less expensive there would just be a couple more zeros on the price tags.

A motor-scooter might cost $2,500 dollars in the U.S. but in Costa Rica you’d need to be a millionaire to pay the ¢1,500,000 price tag. A $160 a night hotel room will run you a hundred thousand colones which doesn’t sound so “good”.