QCOSTARICA — The dollar exchange rose ¢10 in the last month, going from ¢504 to ¢514 earlier this week.
This is a brief break for businesses and persons who earn in dollars, not so much because of the recovery of the dollar, but because the downward trend has finally moderated and although it has receded a little in recent days, it is also true that abrupt declines may be ruled out.
The issue is that despite fluctuations, it has not been enough to offset the depreciation of the dollar, more than 25%, over the past 18 months.
This slight rise in value may not be of much help to struggling businesses facing potential bankruptcy and widespread layoffs. In fact, anyone earning in dollars may still face challenges.
The positive is that according to experts from the Universidad Nacional (UNA), the dollar could potentially end the year at ¢530 colones if no significant events occur in the second half of the year.
The slight increase in the dollar exchange rate can be attributed to the Banco Central (Central Bank’s) decision to lower its monetary policy rate by 50 basis points on April 26, bringing it to 4.75%.
It is anticipated that the Central Bank will make further adjustments in the near future, which may lead to further strengthening of the dollar.
“At a structural level, the differential between local and international interest rates is negative and this makes the premium for investing in colones unattractive and the price of the dollar rises. Also, the fact that the (U.S.) Federal Reserve has toughened its discourse due to the inability to control inflation is helping and is increasingly moving away from its intention to raise the reference rates in that nation,” said Juan Pablo Arias, stock market economic analyst at the Bolsa Nacional de Valores (National Stock Exchange).
At the same time, there are reports of a reduction in the availability of dollars and an uptick in demand. The rise in the exchange rate for the dollar could benefit export, industrial, tourism, and construction firms by boosting their earnings to some extent, but it may also have a negative impact on those who owe money in dollars.
“The increase does not compensate at all for the reductions that the exchange rate had and the impact would be the following: if you owe in dollars and your income is dollars, not to worry, but if, on the contrary, you earn in colones, then yes, you will have problems, although it is good to affirm that financial intermediaries have been careful when placing loans in dollars to avoid precisely these risks,” highlighted Greivin Salazar, an economist at the UNA.
The annoyance with the dollar exchange rate caused thousands of businessmen and workers associated with the construction, tourism, agriculture and export sectors to demonstrate on Wednesday, the major concentration occurring in the downtown streets of San Jose, to ask for more actions from the government of Rodrigo Chaves and not have to continue laying off personnel.
Effects of a stronger dollar. The Costa Rican economy is impacted by the U.S. dollar in various ways, including its influence on inflation and its role in creating opportunities, businesses, and jobs. The effects of a strong dollar would improve export competitiveness, allow the tourism sector to generate more income. With a stronger dollar, Costa Rica becomes a more competitive country in the eyes of foreign investors.
In closing, the downward trend of the dollar may have finally stopped, but the price of the dollar is far from satisfying the productive sectors.
