Back on August 12, 2007, I wrote a post entitled “The Colon Vs The Dollar – Watch your money!” In that post, I cautioned my readers that the weakening dollar could not long stand firm against the Costa Rica colon. I urged readers to move their funds from their dollar accounts (in Costa Rica banks) to colon accounts as I anticipated that the Central Bank had to act soon to bring the dollar down and increase the value of the colon.

Last night, they did just that. The colon has been revalued to about ¢497 and ¢498.39 to the dollar.

So what is the effect of this? Here are some examples:

First, it means that people with money in Costa Rica dollar accounts lost about 4% of the value of their accounts last night. This is true also of CD accounts. Sadly, those who are here seeking residency (pensionados and rentistas) have lost that percentage from any US dollar accounts they opened as deposits for their residency requirements.

Now let’s be clear on the word “lost”. You lost money only if you intend to use those dollars to buy goods and services in Costa Rica. If you were to withdraw those dollars and return to the US for example, you lost nothing. The US did not devalue the dollar. Costa Rica did!

A standard $60,000 rentista deposit is now worth only about $57,800 or so. I say “or so” as each bank in Costa Rica can still set the exchange rate as they see fit, so long as it stays within Central Bank guidelines. Either way, the money is gone.

If, however, you had your money in a colones account, your money now buys about 4% more than yesterday. If exchanging for dollars, you now need shell over only about 498 colones to get one dollar. If you have CD or deposit accounts, they buy 4% more when they are cashed in.

If you are working here in Costa Rica and you receive your salary or wages in colones, your paycheck just got bigger! Example: Your ¢300,000 paycheck now is worth about $602.00. Yesterday, it was worth about $580.00.

However, if you are paid in dollars, something that has been happening more and more frequently in the past couple of years, you just got hosed (unless your employer is really nice), as you just took a about a 4% pay cut.

I also feel that this will not be the end. The true exchange rate should be, in my opinion, now closer to about 460 colones to the dollar. I think the Central Bank simply could not make that large a change in one shot.

However, I think there is a good chance more adjustments are coming. I am expecting that these may be made in increments of 4-5% each until the proper exchange rate is reached.

I do not think that the next change will be in the very short term (2-3 months) BUT, if you read the August Post, I stated. “It is now my opinion that sometime within the time period of from 4 to 8 months from now…” Well clearly I missed that but came close. Almost 4 months! Therefore, when (and if) the next change comes, I think we should be looking at January-March, 2008.

For the almost fifty persons who wrote to me after the August post and told me you were making the switch, felicidades! For some of the others who thought I had lost my marbles (see some of the comments after the August post) , I hope you at least had your money in euros.

What to do now?

I believe we need to wait and watch a bit to see how the banks in Costa Rica value the dollar. I am 99% sure it will stabilize around ¢500 to the dollar (except at Scotia Bank of course!). If it continues to remain solid, then I believe the Central Bank will make at least one and perhaps two more adjustments.

Polite comments welcome as always!

The hands down #1 topic of these emails is people asking me for my advice on moving to Costa Rica. Popular questions are:

* Where are the North American communities?
* Where are the good places to live?
* Constant questions about buying property here…
* Where is the best place to buy? Live?
* Where to visit when coming here to decide about a permanent move
* Where can I get a job?
* Plus a TON of emails from scared baby boomers world-wide who are just now saying to their spouses, “Holy SHIT Martha (or Clyde), there ain’t no way we can live on our social security! We gotta get outta this place!”

So, in this Post I am going to cast some pearls to you folks!

First, let’s take a look at a telling statistic, (and for those of you who do not believe in statistics, please do not consider a career in the insurance industry).

About 40% of ALL those who relocate to Costa Rica, LEAVE within one year.

Now think about that! These people packed up their lives, some quit their jobs, all said adios to family and friends, and many brought property and land in Costa Rica only to return “home” in 6 months with their collective tails twixt their collective legs to explain what idiots they had been for not planning the whole process better! Actually, that last part is a lie. They really return home and blame everyone and everything EXCEPT themselves for the failure of their grand experiment. Human nature… go figure.

In any case, the point here is that Costa Rica, or any other foreign country, is NOT for everyone. When you leave your home country to live here, every single thing you do (now), every single day, will change. You must be prepared for this. The sum of all these changes is perhaps best engendered in the general topics of Culture Shock or Cross Cultural Adjustment. Only a fool does not believe these are real issues that will affect your ability to live in and enjoy a foreign country!

That brings me to “the big lie”, OK… maybe that is too harsh, so I’ll rephrase that to “the enormous misunderstanding”. It is:

You do not need to learn Spanish to live in Costa Rica.

In reality, it should say “You don’t need to learn Spanish to exist in Costa Rica.”

Yes, while you can certainly exist here without knowing Spanish, but time and time again I hear the frustration of those who cannot communicate with others on a daily basis. I see their frustration in stores, restaurants, in government offices.

So now you say, “I heard that almost all Costa Ricans speak English?”.

Why YES, they DO… so long as you are living in a hotel, at the airport, staying in a bed and breakfast and doing nothing all day but visiting the butterfly farms! That is not living. That is being a tourist!

When living here, you will be doing exactly the SAME boring everyday things as you do now! You will be dropping off the dry cleaning, picking up a prescription, visiting a doctor’s office, stopping at the hardware store, renewing a drivers license, visiting the bank, etc, etc. and NEWS FLASH: With the exception MAYBE of the doctor, almost NONE of those people in those places will speak one word of English (or French, or German, or whatever), and then the frustration builds.

Real Estate

Lately, real estate has been a hot market, and more and more I am meeting people who have either purchased land or other property (sight unseen!) or come here for a two week vacation and return home separated from their money. I bunch of them got screwed. Some don;t even KNOW it yet! It is an almost SURE way to pay too much or simply buy in the wrong location!

As a visitor here, you will have NO idea what is a fair price to pay nor will you be able to negotiate this as you have no knowledge of the enormous differences in real estate and the laws here in this country.

Well, you think, I’ll make sure the realtor checks the Multiple Listing Service (MLS). Well, there IS no MLS in Costa Rica.. No comps. Nada. Further, the laws here are so very different! There are 100 ways to get taken even if you know what you are doing. Can you spell “sucker”?

You may well also buy in the wrong location because you just don’t think about how different things are in Costa Rica, how many places there are to live here, the differences, and how those differences may affect you.

Let’s take just one example dealing with location.

You are a retired (or nearly retired) couple who want to live somewhere near the ocean. A reasonable desire, but here comes the conflict:

A 60-something couple has different needs than does a younger couple… right? The first one that comes to my mind is medical care. As we grow older, stuff starts to break. It doesn’t mean we are ready for the old folk’s farm… but it does mean you need to be at least reasonably close to a hospital or a medical complex and have emergency ambulance service close by.

The conflict? There are few if ANY hospitals anywhere near most of the beaches and for sure no trauma centers. They are hours away in the Central Valley. As for ambulances, in most Cruz Roja (Red Cross) ambulances in the beach areas, you are lucky to see a bottle of oxygen, much less the nearly “hospital equipped” vehicles prevalent in the USA.

Another common question is, “Where do all the ex-pats live? (meaning the English speakers). People want to live with others of their nationality. I understand this, but there is a downside. When you live in one of those gated, gringo strongholds, you may well pay at LEAST 50% more for housing (and that is conservative!) and at least twice to three time more for food, clothing, and nearby restaurants, than if you lived elsewhere in Costa Rica. Why? You are viewed as wealthy whether in fact you are or are not, and for sure, the average Costa Rican is going to ask higher prices for everything.

In fact, if you live in those places, you’ll end up paying about the same as if you lived in Miami!

I can go on perhaps with 50 other examples… but nearly all these issues can easily be resolved, lessen your chances of an ugly surprise, and vastly lessen your chances of falling in the 40% who leave.

LIVE here for at least 6 months and preferable a year, before you make the final decision to move.

Don’t sell everything. If needs be, put it all in storage or rent your existing home while you leisurely and intelligently make this incredibly important decision.

Travel the country and see all the beauty there is here. See if you like it! In that year, you will experience life and living in this country… a HUGE difference from just visiting. Then when you make the big decision to buy land or move here, your will be playing from a position of strength! If you decide against it, then you have not lost much and in fact have learned about not only another culture, but about yourself as well. A no-lose situation!

People are always amazed when I tell them that after all these years, I still rent. I do not own property in Costa Rica. Why? The three biggest reason are:

1. As there are no tax advantages to ownership and property taxes are non existent (and also not deductible anyway), why pay the outrageous interest rates to own a home here?
2. I could pay cash, but I can earn more in the US stock market than I can on the appreciation of the vast majority of real estate in this country**. Where does my money do better?
3. At least once every 4-5 weeks, my wife and I find someplace else we would like to live in this incredible country. One week it the mountains, the next week it might be Tileran in the highlands! Because buying property in Costa Rica is FAR easier than selling it, by renting, we have the ability to move anywhere at any time, and when we retire in 2-3 years… we will! Also, our money is not tied up. We are liquid and free to do as we please.

(**Note: The exception may be certain beach front locations that are appreciating greatly, but as we have no desire to live in that heat and humidity, far from the hospitals, infrastructure and cultural activities in the valley, I am not about to buy property on the beach. I also have no interest in speculating on property values. Finally, my businesses require the technical infrastructure currently available only in the San Jose area).

That’s it! Costa Rica is a marvelous place and offers a lot, but it is not for everyone. It is a totally different culture and I assure you, THEY are not going to change! So before you write me, think clearly about what are your wants and needs. Come visit (and NOT for 2-3 weeks), and you’ll be ever so much better off for the effort.

One final note to those who want to work here. In general, you CANNOT. Only citizens and permanent residents can legally work here (just like the USA), so if you are thinking about coming here to find a job… it might be a good idea to rethink that.