QCOSTARICA — “The ‘low’ dollar season is about to end…” was the headline of Costa Rica’s leading financial newspaper, El Financiero, in October 2023.
The publication went on to say that, as a consequence of the abundance of dollars in the market, the exchange rate has remained at low levels, compared to previous years, however, that will soon come to an end, citing a number of reasons for the upward trend of the dollar exchange.
That did not happen.
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Today, March 12, 2024, we can see from the chart above by the Banco Central de Costa Rica (BCCR) – Central Bank – from figures reported by the financial institutions, the dollar exchange dropped below¢500 colones to one U.S. dollar, the lowest point this 2024 and not seen more than a decade ago.
And is expected to drop even more, as the Central Bank expects the “abundance of liquidity” of the dollar will be maintained and it is unlikely to observe marked upward pressure on the exchange rate.
The Central Bank is expected to continue to absorb the excessive supply of dollars and for this reason, the appreciation of the national currency, the colón costarricense, will continue.
Different business chambers expressed their concern and insisted that there are jobs at risk due to the fall in the dollar exchange rate.
According to the sector, the Central Bank has had the main objective of managing inflation; However, the control of this factor generates a high social cost and loss of competitiveness.
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For example, in the free zones, on average, 20,000 jobs were provided annually during the period 2020-2022; while, as of December 2023, it only reached 5,500, which represents a drop of 73%.
The groups indicated they trust that the Board of Directors of the Central Bank will urgently make the appropriate decisions to ensure, not only the country’s macroeconomic indicators, but also to create a balance.
However, the sentiment on “the street” is not as positive.
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