The price at which participants in the Foreign Currency market (Monex) quote the dollar has gradually approached the ¢500 barrier.Yesterday, at the close of the trading period for this currency, the simple average of the price reached ¢503.92, while the weighted average (which takes into account the size of each transaction) remained slightly higher, at ¢504.09.
This is the lowest level for both averages since mid-January 2014, while the ¢500 limit has not been touched since December 2013.The Monex platform only allows transactions over $1,000, which is why it often functions as a wholesale market.Although the average total price is higher, in said market foreign currency purchase and sale transactions have already been closed at ¢500.
The trading platform will open again on a date when the Central Bank of Costa Rica makes a downward adjustment to the Monetary Policy Rate (MPR), which could influence both the level of interest rates, as in the exchange market.In banks, the purchase of the dollar begins at ¢490 and the sale at ¢507.
Request from the tourism sector
The second Monetary Policy Meeting of the Year has been carried on. In these meetings, the Central Bank authorities review the country’s economic performance and based on their analysis, they issue guidelines on variables such as interest rates.
On the occasion of this meeting, the National Chamber of Tourism (Canatur) explained, through a letter addressed to the Bank’s board, indicatesthe urgent need for companies in this sector to recover a more balanced exchange rate, especially with the arrival of the low tourist season in April.
“As is public knowledge, tourism companies, mostly micro, small and medium-sized businesses, as well as the numerous collaborators who work in them, which directly exceed 200,000 people, are facing an economic crisis as a result of the severe depreciation of the dollar against the colon and the situation is going to worsen with the low season,” said Martí Jiménez, president of the group.
“The call from the thousands of voices within the sector is not to ask to prioritize the needs of tourism over other sectors, but rather to find a point of balance that avoids the collapse of one of the most dynamic activities of our economy and one of the most equitable in our country,” he added.
In the opinion of the Canatur spokesperson, the reduction of the Monetary Policy Rate could be, at least, one of the actions that would not only benefit tourism companies and their employees, but would also contribute to preserving the economic stability of local communities, as well as, to strengthen the sector as a whole.
“We urge the authorities to consider this call with the greatest urgency possible, recognizing the strategic importance that tourism has for the economy and well-being of our country,” Jiménez commented.The low tourism season begins at the end of Holy Week.
Forms in danger
If companies’ income decreases, they are forced to lower their operating costs to maintain positive profit margins. The payroll is one of the largest costs in companies, so in extreme situations it is usually cut, that is, personnel are fired. In other cases the decision is not to grow, that is, not to generate more jobs.
The Costa Rican productive sector has warned since the end of 2022 about the effects that the exchange rate is having on its income and how this could translate into less investment and less employment.
The analyst from the College of Economic Sciences of Costa Rica, Luis Vargas Montoya, explained in recent days that this behavior of the exchange rate is reducing the margins of companies, which will have to take measures to sustain their margins.
“One of the main costs that companies assume is without a doubt the payroll. That is where hiring can be put at risk because if companies reach a point where there is no other way to cut, the only thing that will allowing it to continue operating is cutting payroll,” Vargas commented.
Currency abundance
Throughout 2023 and so far in 2024, the Central Bank has alleged that a foreign currency surplus is driving the appreciation of the colón.The abundance of dollars would respond, among other things, to the recovery of the tourism industry, as well as a good performance of exports and direct investment.However, the fall in the price of the dollar mainly hits companies and citizens who receive their income in that currency.
Given this scenario, the ministers of Foreign Trade, Tourism and Agriculture have conveyed their concerns to the Central Bank authorities about the consequences of maintaining such a low exchange rate.To date, the Central Bank has maintained the position that the current level of the currency price corresponds to market forces and therefore does not intervene.