QCOSTARICA – Do you have debts in US dollars? Don’t worry, the value of the dollar has decreased again after fluctuating, an up and down situation that has been the norm in the last several months.
The upwards trend during the last week is primarily due to the uncertainty generated by the announcements of the Central Bank and the United States Federal Reserve.
However, last Friday(August 4) the dollar exchange had a decrease and is expected to stay in a range of ¢540 to ¢550 colones to one US dollar the rest of the year, according to economists and financial analysts consulted by the financial newspaper La Republica.
This situation is good news for people who have debts in dollars since they will continue to pay a lower price. However, it is not equally positive for the productive sectors that obtain income in dollars but have operating expenses in colones.
On the other hand, those who have savings in dollars or investments are also seeing benefits.
The stability of the exchange rate will depend on two factors: the second placement of Eurobons for US$1.5 billion and money from the International Monetary Fund (IMF), which will amount to US$521 million.
“The income of US$521 million from the International Monetary Fund in “tractos” (two payments) and the placement of the Eurobons causes Costa Rica to be swimming in dollars in the coming months and this will make the Central Bank have to lower the monetary policy rate more so that we have an (dollar) exchange rate more in accordance with reality, for the good of exports, tourism, and direct foreign investment, but above all jobs,” said Daniel Suchar, an independent analyst.
The most benefited from the decline of the dollar exchange are the more than 700,000 families that have debts in US dollars, but receive income in colones, remembering when at this time last the exchange rate was close to ¢700.
In the medium or long term, another variable that could influence is the reduction of the monetary policy rate approved by the Central Bank. SeeCentral Bank of Costa Rica lowered the monetary policy rate to 6.50%
“This low rate combined with inflation will cause an increase in the demand for dollars in the medium and long term. In addition, a series of dollars product of the second part of the Eurobons for US$1.5 billion and other international loans will allow containing the exchange rate and holding it stable,” said Karla Arguedas, Prival Advisory & Strategy manager.
Luis Alvarado, Economic and stock market analyst at ACOBO Bolsa added that “The decrease in interest rates in the local market reduces the investment in colones, which encourages the placement of resources in local currency above the foreign currency, this leads to an excess of dollars in the economy”.
Roxana Morales, an economist at the Universidad Nacional (UNA), said that “If the Central Bank significantly reduces the monetary policy rate, but the entry of dollars to the economy for international loans and Eurobons is very high then would place more pressure on the exchange rate (appreciation of the colon) in the coming months”.