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Is the Strong Colón Hurting Costa Rica’s Economy?

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The exchange rate in Costa Rica has been a topic of interest for several sectors of the country, as it is seriously affecting an important part of the economy.

This time, Manuel Tovar, Minister of Foreign Trade and president of the Foreign Trade Promoter (PROCOMER) sent a letter to the Board of Directors of the Central Bank of Costa Rica (BCCR) requesting measures to stabilize the exchange rate due to the effects that the constant decline is having on the country’s export sector.

Manuel Tovar requested an urgent review of the measures taken in the exchange and monetary policies, which have been rejected by the productive sector of Costa Rica and some factions of the Legislative Assembly.

“Different sectors that generate employment are seriously affected by the same (measures), both in their income and in their capacity to maintain and generate new sources of employment, negatively affecting the development and competitiveness of the country,” he indicated in the document sent.

Minister Tovar pointed out that the appreciation of the colón against the US currency is 25%, compared to data from 2022. This makes Costa Rica the second country with the second-highest appreciation of the exchange rate compared to the main competitors of Foreign Direct Investment (FDI).

The Minister stated that they have also identified a 26% decrease between 2022 and 2023 in the number of people employed in professional and administrative support activities, where shared services companies and contact centers are located.

PROCOMER indicated that some Free Trade Zone companies are partially or totally suspending new projects and reinvestments; decreasing, or eliminating salary increases; suspending new hires; partially reducing working hours; and even considering relocating their operations to other countries.

“It is with great concern that we have noted the difficult position in which many of the companies in the various productive sectors find themselves,” he added.

The main collateral damage is the increase in the unemployed population and the stability of these sectors of the economy.

“It is clear that operating costs are growing at a much faster rate than the country’s economy, forcing companies to make adjustments to their operations that result in job losses and diminished growth opportunities,” he noted. (https://ticotimes.net/2024/01/30/is-the-strong-colon-hurting-costa-ricas-economy)

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