QCOSTARICA — Costa Rica is becoming known for being a more expensive destination than New York, according to Rubén Acón, president of the National Chamber of Tourism (Canatur).
Acón once again called on the authorities of the Banco Central de Costa Rica (Central Bank) and the government of Rodrigo Chaves to limit the appreciation of the colon, as the dollar exchange rate is affecting the tourism sector and limiting employment capacity.
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The Canatur president emphasized that this situation is causing the tourism sector to lose money, limiting investment and job creation, while prices may be increased to mitigate losses.
“We are seeing that tourists resent and complain about the cost of visiting Costa Rica, that is undeniable. When tourists come they say that everything is very expensive here. Here it is more expensive than in New York, and that, without a doubt, is going to have a negative effect,” Acón told Telenoticias.
Currently, the dollar exchange reference rate set by the Central Bank is ¢539 for the buy and ¢533 for the sell (the lowest since the exchange reached the historic ¢698 in June 2022).
For example, on November 27, 2022, the rate was ¢599 and ¢606, respectively.
The reality is that the exchange rate affects sectors that depend on the currency for their businesses, for example, the free zone regime or exports, but above all tourism, which not only depends on the income of foreign currency, but also competes with other destinations where tourists receive much more for every dollar spent.
“We are managing a violent process of appreciation of the colon that is undoubtedly affecting us, but we do have to recognize that foreign currency income, from tourists by air, is actually recovering, we are returning to 2019 levels; However, the truth is that when it comes to taking those dollars and converting them into colones to pay our operating expenses, there is a difference of 20% or 22% that has us in a very complicated situation, where companies are losing profitability, but additionally, we are losing competitiveness,” said Acón.
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Acón added that Costa Rica already has an image as an expensive destination among the sector, especially compared to destinations such as Colombia or Mexico, where authorities have depreciated their currencies in search of attracting dollars.
The high cost is not only affecting foreigner, but local tourists as well.
“It is undeniable that for a Costa Rican, visiting some hotels here in Costa Rica is extremely expensive compared, for example, to going to Medellín or Bogotá, which in truth is much cheaper. You go to San Andrés, you go to Mexico and everywhere it is cheaper than vacationing in Costa Rica.
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“That is why we are very concerned, because sooner or later that is going to translate into business closures, not just tourism, and it is going to translate into job loss, and when that happens, you know what it’s like, a company that closes it is very difficult for it to reopen. The Central Bank will be responsible for that,” Acón said.
Warning risk
Last week, the former president of the Central Bank, Rodrigo Cubero, assured that the tourism numbers are beginning to materialize the warnings that had been raised months ago due to the appreciation of the colon against the dollar.
“It is an exchange rate that at a historical level is relatively low and that could put pressure on sectors that are important for the generation of employment and well-being in Costa Rica such as tourism, exports and the attraction of foreign direct investment, all of these could become at risk as a consequence of this sustained appreciation of the exchange rate.
“It is difficult to attribute what is happening in a sector to a single cause, but we have certainly seen stagnation in tourism: in annual figures both the number of tourist arrivals and the foreign exchange that the sector is generating for us have stagnated and that suggests “There could be a relationship between the strong appreciation of the exchange rate in the last year, we cannot attribute it exclusively to the exchange rate, but it seems a plausible explanation,” Cubero asserted.
The problem in this scenario, according to Cubero, is that the end of the year never favors the appreciation of the dollar, since the payment of aguinaldos (year end bonuses), tourism and seasonal crops produce a significant income of resources to the market.
Contributing to a strong colon (cheaper dollar) is the Central Banks coffers receiving almost US$1.5 billion from the second issuance of the so-called Eurobonds.
Despite this, the former Central Bank president projects an average exchange rate of ¢568 for 2024, a figure that for Canatur is still far from acceptable.
“We, the business sector, are currently in the process of preparing budgets and we do not know what type of exchange rate to use. If you are making projections, it is very difficult to justify the operation with those numbers, because they are probably negative, and then what is happening is that the companies that are thinking of investing or coming to Costa Rica are considering it, because the truth is It’s just that nobody comes here to lose.
The Central Bank maintains that the exchange rate responds to the reality of the market and the injection of resources and that its monetary policy remains impartial and consistent with its principles.
“We have insisted that the Government should lower the monetary policy rate, pay the FLAR (Latin American Reserve Fund) loan and should stop intervening when the dollar is trying to rise, because it turns out that the Central Bank is selling dollars so that it does not rise, there is an obvious guideline that the dollar remains low and the truth is that it is affecting not only tourism, the export sector or the free zone, but the entire country in general,” concluded Acón.
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