Q COSTARICA — A chain reaction starting by rising fuel prices is about to hit Costa Rica hard, thanks to the ongoing conflict involving the United States, Israel, and Iran.
Federico Quesada Chaves, head of the School of Administrative Sciences at UNED, warns that international oil prices are climbing and that Costa Rica’s economy will feel the squeeze.
“This isn’t just a quick bump,” he says. “Fuel prices will keep going up, making everything cost more—from your daily groceries to transportation. Plus, with the exchange rate strong and tensions in the Strait of Hormuz, it’ll be tough for our exports to stay competitive.” And don’t be fooled by the recent ceasefire; the real impact is just starting.
Here’s what to expect:
- Fuel costs will rise as crude oil hits over US$100 a barrel, pushing up prices for gasoline, diesel, public transport, and even plane tickets. The Recope, Costa Rica’s refinery that refines nothing, has already announced a hike in fuel prices from ¢67 to ¢136 per liter, waiting for regulatory approval.
- Inflation will climb, especially for food, since farming supplies and imported goods are getting more expensive. This past weekend, the price of a kilo of tomatoes at the local Santa Ana feria hit ¢1,900, a jump of ¢700 a week earlier.
- Exporters will struggle as shipping costs grow and demand falls in key markets dealing with their own inflation problems.
- The Central Bank faces a tricky balancing act—tackling rising import costs while trying to keep the economy moving. A strong colón limits options to fight unemployment and slow growth.
- Tourism could take a hit too, with pricier flights and a costly stay making Costa Rica less appealing to visitors, especially as other countries face economic slowdowns. Stagflation in tourist-generating markets could reduce international demand.
In short, this isn’t just a blip—Costa Rica is bracing for some tough economic times ahead. The government may need to consider policy measures to cushion the blow, including subsidies to offset fuel costs or incentives to stimulate tourism and exports.
For a country that cherishes peace and stability, the reverberations of war thousands of kilometers away serve as a stark reminder of just how fragile economic equilibrium can be.