Q COSTARICA — With the arrival of year-end holidays and the trade winds, the US dollar exchange rate has plummeted, reaching its lowest values in almost 20 years on the Mercado de Monedas Extranjeras (Monex)—Foreign Exchange Market.
Last weekend, the US dollar closed below ¢500 colones for the sixth time between Friday, November 14, and Friday, November 21.
But what is causing the US currency to trade at such a low level?
“Typically, at the end of the year, we see a greater supply of dollars due to businesses paying invoices for Christmas purchases, as well as the peak tourist season. Additionally, businesses exchange dollars to cover year-end expenses such as bonuses and taxes,” explained Vidal Villalobos, financial advisor at Grupo Financiero Prival, to LaRepublica.
The expert points out that if the dollar falls further, sectors such as exports and tourism will be more severely affected. Therefore, the Banco Central (Central Bank) has already indicated it will be buying dollars to prevent a further drop in the dollar’s value and, incidentally, to further strengthen its international reserves.
“In this way, we don’t expect further reductions in the exchange rate, but rather relative stability for the remainder of this year and the beginning of next year, given that we are in the midst of an election,” Villalobos added.
For her part, Elizabeth Morales, assistant manager of Coopecaja, clarified that the national market is being flooded with dollars because multinational companies are bringing dollars from abroad to pay Aguinaldos (Christmas bonuses). This is compounded by the peak tourist season.
In this regard, economists from the Universidad Nacional (UNA) estimate that the currency will close the year between ¢500 and ¢510 colones.
How to take advantage of this?
The current downward trend of the dollar affects several productive sectors that have their income in dollars but their expenses in colones, such as the export sector, tourism, and companies in free trade zones. Obviously, it also impacts workers who receive their income in dollars.
However, all those who have debts in dollars and their income in colones benefit.
Likewise, imported goods tend to be cheaper, while travel becomes more economical, since flights and services paid for abroad go further for less.
However, financial experts are urging people to be careful with their finances, as this does not mean the dollar will remain cheap forever.
Experts say it’s smart to keep an eye on your money. Just because the dollar is low now doesn’t mean it’ll stay that way. So if you’re planning to buy big things like a car or a house on credit, be sure you can handle the payments even if the dollar’s value climbs back up.
The Dollar’s Last Week
Between Friday, November 14, and the previous Friday, the Banco Central de Costa Rica (BCCR)— Central Bank of Costa Rica’s—reference exchange rate on Monex fell below 500 colones five times:
- Friday, November 14, ¢499.09
- Monday, November 17, ¢ 499.85
- Tuesday, November 18, ¢ 499.62
- Wednesday, November 19, ¢ 500.07
- Thursday, November 20, ¢ 499.56
- Friday, November 21, ¢498.71
Monex is the platform where financial institutions and other authorized participants buy and sell foreign currencies, such as the U.S. dollar, and the price is determined by supply and demand (the figures represent the exchange rate per dollar in colones).