Historical Sketch

During the Spanish colonial period, entire Central America united in the Captaincy General (Kingdom) of Guatemala and part of the Viceroyalty of New Spain (Mexico). In the 1820s, it was briefly annexed to independent Mexico but became the Central American Republic in 1823. The confederacy consisted of five free states which enjoyed large autonomy. This led to its quick disintegration already in the late 1830s. The Free State of Cost Rica proclaimed independence from the Central American Republic in 1838 and proclaimed the republic ten years later.

Monetary History Overview

The Central American Republic passed a coinage law in 1824 and began issuing coins in the name of the Federation for all member states. The Spanish colonial bimetallic standard was preserved without change. The Costa Rican mint opened in 1828 but its output remained modest. The scarcity of specie remained a dominant factor in the Costa Rican monetary history, also after the secession from the Federation in 1838. A currency law was passed in 1839 which also included the issuance of state paper money, giving rise to the Costa Rican Peso as national currency. The circulation of Central American, as well as other Latin American, remained the standard, with the occasional addition of local issues. Due to the influx of low-quality and counterfeited coins, the government resolved repeatedly that the coinage needed to be examined and counter-stamped to state its validity. The 1863 currency law brought the decimalization of the sub-unit and the abolition of the Onza and Escudo denominations for gold coins. A few years later, in 1871, Costa Rica adopted the gold standard in the French model. Local coin production remained low so that transactions were done in foreign coinage and in paper money that was issued by private commercial banks. In 1884, the Costa Rican government contracted one commercial bank to take over issuance of the state notes, all other notes lost legal tender status but their use was not prohibited. The country returned to free banking in 1901, the private paper money issuance, however, was now regulated. In 1896, the currency was reformed, and the Costa Rican Colón became the new national currency. New gold coins were issued for circulation that had half the size of the earlier ones, nominally the switch-over occurred on par. The nominal gold standard remained in place until 1922 when the Colón got pegged to the US Dollar. At this time, a state-owned commercial bank took over the central bank functions, and free paper money issuance by commercial banks was abolished. In the 1930s, the Colón got devalued by some 30%, creating stability for more than two decades. In 1961, another 15% devaluation was carried out, and in the late 1960s, the Colón gradually became inconvertible so that parallel rates emerged and dominated the majority of transactions. In 1980, the (mostly inoperative) official rate was finally abolished, and the Colón got floated. It rapidly lost value throughout the 1980s and settled down to a slower decline in the following decade. Since the mid-2000s the value of the Colón has remained more or less stable.

Costa Rica joined the International Monetary Fund (IMF) on 08.01.1946.

Currency Units Timeline

Currency Institutes Timeline

Monetary History Sources