by Hal O’Boyle
The Crawling Peg sounds like a rock group that isn’t too proud to beg for a gig or that gets so lubed up during one that dancing is impossible except on all fours. It’s nothing so cheerful, however.
Here in Costa Rica “the crawling peg” refers to the narrow spread of buy and sell prices for the local currency, the Colone, (rhymes with baloney when spoken by gringos). The central bankers here refer to it as a system of “controlled devaluation.” That’s because the value of the Colone only moves one way ─ down ─ against anything of fixed value. Particularly good measures of its value are those things that are hard to create more of, like land and gold.
The Crawling Peg is much in the news recently because the central bank has decided to allow the Colone to move within a wider range of prices against the dollar. This has created a lot of uncertainty about the future value (in dollars) of the local money. People living here are used to their currency deteriorating at an alarming but relatively predictable rate. The new rules make the immediate future value of the Colone more uncertain, but its ultimate value of zero, like that of the dollar, has never been in doubt.
Recent Comments