Costa Rica has spent much of the past decade walking a monetary tightrope, and the results have been extraordinary in some sectors and quietly devastating in others. At the center of the story is the Banco Central de Costa Rica, or BCCR, and its inflation-targeting framework, whose stated goal is to keep consumer price growth within a tolerance band of 2% to 4%, with an explicit 3% target.
The BCCR’s forward-looking, data-dependent approach has been praised by international observers, with the IMF noting that inflation was projected to reach that 3% target by early 2026 following a period near zero since mid-2024. But the reality on the ground has been far more complicated, and the costs of that policy have rippled across the tourism sector, exporters, and even hospital construction.
To understand the present, the numbers over the past decade tell an essential story. The exchange rate stood at roughly ₡526 per dollar in early 2015, climbed to ₡600 by mid-2017, and surged to ₡677 by May 2022, a peak driven by pandemic-era pressures, supply chain shocks, and elevated global commodity prices. Inflation mirrored that turbulence, peaking in 2022 alongside the weakest colón in modern memory.
Then came the reversal. The average exchange rate fell from a decade high of roughly ₡647 in 2022 to ₡515 in 2024 and ₡505 in 2025, a dramatic appreciation of the colón that coincided with an equally dramatic collapse in inflation. Costa Rica closed 2025 with annual inflation at minus 1.23%, marking the fourth consecutive year outside the BCCR’s target range. That trend intensified into early 2026, when January’s CPI recorded a year-over-year decline of minus 2.5%, deflation at levels unseen since 1983.
By early 2026, Costa Rica had entered a macroeconomic condition uncommon within contemporary inflation-targeting regimes: sustained deflation. Despite a series of policy rate reductions during 2024 and 2025, the response of prices remained muted. The BCCR reduced its monetary policy rate from a peak of 9.0% in 2023 to 3.25% by the end of 2025, but critics argue the pace was too cautious relative to deflationary realities on the ground. The bank’s defenders counter that the gradual approach was designed to prevent entrenched low-inflation expectations and to guard against external shocks from global trade tensions, a posture the IMF has broadly endorsed.
The strong colón, however, has had a double-edged quality that official optimism tends to gloss over. The current administration and central bank officials have publicly framed the strong colón as evidence of a well-managed economy, pointing out that it keeps import costs lower, reduces inflation pressure, and makes dollar-denominated debt easier to service. But the sectors that earn in dollars and pay their workers in colones tell a different story.
Exporters receive fewer colones for each dollar earned, squeezing profits in agriculture, manufacturing, and services. Coffee producers say their margins are shrinking, and the national tourism chamber has urged the central bank to cut rates further.
Tourism, which accounts for roughly 8% of GDP, has been particularly hard hit. In 2024, 75% of businesses in the tourism sector reported lower earnings due to currency pressures, and air arrivals fell 2.1% from January to August 2025 compared to the previous year, with a sharper 7% drop recorded in February 2025 alone.
Since mid-2022, when the dollar reached ₡680, the colón has gained dramatically, and what cost a tourist $36 then now costs more than $50 for the same service. Tourism operators face a structural squeeze: most revenues arrive in dollars while wages, utilities, and taxes must be paid in colones that are worth more, compressing profit margins and threatening employment, particularly in rural coastal communities. That decline in demand has already resulted in more than 22,000 job losses across the tourism industry.
Exporters have similarly sounded alarms. The exchange rate has fallen nearly 20% below the decade’s average, and the Chamber of Exporters has called on the central bank to lower its policy rate to ease the burden on businesses. Even the government’s own fiscal position has felt the pinch, since a cheaper dollar means fewer colones collected on dollar-denominated economic activity.
Nowhere has the compounding effect of these pressures been more tangible than in Limón, a Caribbean port city long underserved by public infrastructure. In December 2025, the Costa Rican Social Security Fund, or CCSS, closed the bidding process for the construction of a new hospital in Limón, estimated at ₡208 billion, without a single company submitting an offer. Seven firms had been pre-qualified to bid, but none stepped forward.
The failed tender came amid separate controversy over the chosen site, which environmental authorities said contained a wetland. But construction industry observers noted that the strong colón, which shrinks the colón-denominated value of dollar-based project revenues and raises the real cost of labor and materials for international contractors, has made large public infrastructure projects financially unattractive in the current environment. The Limón hospital, already delayed for years and urgently needed to serve a population of more than 250,000, remains without a builder.
Costa Rica’s macroeconomic story over the past decade is one of genuine achievement shadowed by structural contradictions. The BCCR has won plaudits for taming inflation and strengthening the currency, yet economists warn that prolonged deflation can discourage consumer spending and force businesses to cut prices further, squeezing margins, cutting jobs, and eroding the very stability the policy was meant to protect. The central bank is now navigating territory where its inflation target, the lodestar of its policy for years, sits well above actual prices, and where the communities most exposed to its decisions are running out of patience.
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