The strong colón and the social duality of Costa Rica's free zones

The behavior of the exchange rate in Costa Rica, where the national currency remains strongly appreciated at around 505 Costa Rican colones per dollar, has deepened the gap between two parallel economies: on one side, the multinational service and technology companies operating in free zones, which trade in dollars and pay no local taxes; and on the other, the agricultural and tourism sectors, hit by the loss of competitiveness of their foreign-currency earnings.

This artificial strength of the colón favors the import of luxury consumer goods, but erodes the profitability of export industries that are intensive in local employment outside the Gran Área Metropolitana.

Small farmers of pineapple, coffee and bananas face revenues in colones to cover domestic operating costs that keep rising, which has led to mass layoffs in rural coastal areas.

The Central Bank of Costa Rica must intervene in the foreign exchange market in a balanced way to prevent currency appreciation from ending up destroying thousands of jobs in coastal and rural areas already hit by unemployment.

It is urgent to restructure the development model so that the dynamism of the free zones truly connects with agricultural and industrial production across the entire national territory.