Coffee and Tourism: Costa Rica’s Economic Emblems Hit by Local Dollar Slump

Easter week in Costa Rica marks the end of the high season and the beginning of months of uncertainty for the tourism industry, which contributes 8% of the country’s annual wealth. The tourism sector employs nearly 175,000 people and is the economy’s driving force. However, it is now floundering, not because of a lack of customers but because of the exchange rate of the dollar against the Costa Rican colón falling 24% between June 2022 and December 2023. This trend has put on alert the growing export sector driven by dynamic foreign-owned companies that manufacture medical devices.

Costa Rica is seeing a flood of dollars from the arrival of investment capital and increased exports, but also from speculative capital that has reaped profits from high interest rates. The tables have turned with the lowest inflation in OECD countries (-1.8%) and the exchange rate appreciation of 24%, the highest in the world at the end of 2023, but there are no measures in place to offset the situation.

The local coffee sector is experiencing a continuous, abrupt devaluation that seems to have no end point, regretting authorities of the local coffee sector in a press conference. Each coffee grower now receives 27,000 colones less per bushel compared to the previous year, a drop of almost 20%, without the costs of imported agricultural supplies falling by the same amount.

Rodrigo Chaves has pointed to the appreciation of the colón as a sign of a strong economy, but there are winners and losers in all things. There is widespread unease among export groups and frequent warnings from economists about the impact on employment figures. The Central Bank of Costa Rica (BCCR) is under pressure to adjust the reference rate to push up the exchange rate. However, the monetary and government authorities are acting too sluggishly or showing signs of reluctance to apply the tools at hand. Shirley Calvo, executive director of the National Chamber of Tourism of Costa Rica (Canatur), a business group of an industry with abundant connections that generates wealth throughout the country, told EL PAÍS that they have been reluctant to use the instruments at hand.

Corrales highlights particular risks for tourism and coffee growers. In the Costa Rican tourism industry, it is common for tourists to pull dollars out of their Bermuda shorts to directly pay the tour guide, ceviche seller, restaurant bill, car rental, or even the beachside supermarket where they buy refreshments. Greenbacks circulate in tourist areas as much as colones, having a direct impact on small and medium-sized businesses.

In the coffee sector, there are other threats: climate change that alters harvest cycles, the instability of the international market, and the temptations of the real estate business. The commitment to produce high quality coffee in environmentally and socially sustainable conditions remains, but this is a critical moment for the sector that contributes less than 0.1% of the national GDP and occupies 14th place in production in the world.

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