Uncertainty Forces Exchange Rate to Rise

The doubts generated by the fiscal proposal with which the Costa Rican government plans to discuss a loan with the IMF, would be the main cause of the recent upward trend in the dollar's price, which as of September 29 was quoted at ₡604,52.

Tuesday, September 29, 2020

The figures of the Central Bank of Costa Rica (BCCR) report an upward trend in recent days, since between September 11 and 29 the price has risen from ₡595,41 to ₡604,33, which is equivalent to a 2% variation. See full figures.

This rise occurs in the context of the announcement made by the Alvarado administration, when on the afternoon of September 17th and in the context of a severe economic crisis that had already been brewing since before the beginning of the pandemic, it presented the plan with which it intends to mitigate the fiscal impact that the Covid-19 crisis had, a proposal to negotiate an agreement with the International Monetary Fund (IMF) to obtain a credit of $1,750 million.

The proposal to increase tax revenues consists of taxing financial transactions, increasing the tax on profits of businesses and individuals, and increasing the tax on real estate.

In addition to the seasonal nature, uncertainty has boosted the exchange rate, according to specialists. Rosy Duran, corporate finance manager of the Bank of Costa Rica, explained to Nacion.com that "... the uncertainty regarding the macroeconomic evolution of the country and the entry of resources from the IMF, the same effect of 2018 with the fiscal reform'. As additional factors, the constant decrease in the volume traded at Monex since the beginning of the pandemic and the lower supply of foreign currency in that market."

Vidal Villalobos, explained that currently there is "... additional demand for dollars from the private sector due to all this situation that is being generated, especially with the doubts of the International Monetary Fund."

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

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From a communiqué by the Central Bank of Costa Rica: