The next U.S. president is not yet known, but in the region it is expected that in an eventual new Trump administration, the focus will be on the recovery of the U.S. economy, while an eventual Biden administration would focus on countering corruption and illegal migration.
Two days after Election Day took place, the United States is experiencing an atmosphere of tension and uncertainty, since because the results are closed, neither candidate can yet be declared the winner.
The effects of the pandemic and fiscal uncertainty are the factors that explain the rise in the price of the US currency in Costa Rica against the Colon, which on November 4 was quoted at 614.55 colons to the dollar.
According to the figures of the Central Bank of Costa Rica (BCCR), between October 19 and November 4 the selling price of the dollar has shot up, rising from ₡605.24 to ₡614.55, which is equivalent to a 2% variation.
According to the Central Bank, this year the Costa Rican economy will contract by 4.5%, an estimate that would be optimistic in the current context of fiscal and economic crisis, uncertainty, distrust and lack of decisions in the transcendental issues facing the country.
The recent results of local production and the new estimates of global economic activity have allowed the Central Bank of Costa Rica (BCCR) to revise its economic growth projections for the country: the economic contraction for 2020 is expected to moderate to 4.5%, from the 5.0% predicted in the 2020-2021 Macroeconomic Program Review of last July. For 2021, an annual increase in production of 2.6% is projected, a figure 0.3 percentage points (p.p.) higher than that also announced in July.
In Costa Rica, the number of people visiting commercial establishments, restaurants and entertainment venues has been rising in recent months, but consumption levels are still low, due to unemployment and limited income.
Because of the quarantine caused by the covid-19 outbreak, April was when people stayed longer in residential areas; however, according to Google mobility reports, as of June mobility patterns began to change.
As of June, Central American economies began to show signs of incipient recovery and as of August, Guatemala, Nicaragua and Costa Rica registered the smallest drops in their levels of economic activity.
Since March of this year, the region has faced a severe economic crisis generated by the outbreak of covid-19. The strict quarantines decreed, the closure of borders and commercial establishments, ended up damaging the dynamism of productive activities.
According to IMF forecasts, Panama and El Salvador are the economies that in 2020 will report the worst falls in their production, while Guatemala would be the country in the region that would emerge best from this economic and health crisis.
Due to the severe economic crisis generated by the covid-19 outbreak, the economic growth projections calculated by international organizations are not at all encouraging for Central America.
After the UCCAEP in Costa Rica began to negotiate the lifting of the blockades with the self-proclaimed group Rescate Nacional, promoter of the protests, several business chambers distanced themselves from that decision and others have expressed their support.
Given the wave of protests and blockades that have been reported in the country, which arose after it was reported that to access a loan from the International Monetary Fund for $1.75 billion, the government planned to tax financial transactions, raise the tax on the profits of companies and persons, and increase the tax on real estate. The Costa Rican Union of Chambers and Associations of the Private Business Sector (UCCAEP) decided to negotiate the lifting of the blockades.
Faced with increasing chaos in Costa Rica due to demonstrations and blockades, a part of the business sector decided, unilaterally, to negotiate with representatives of the movement that incites to protest, and to reject the official call by the President of the Republic.
In the context of the health and economic crisis that the country is suffering, between 2019 and 2020 the average income per household decreased by 12%, and the incidence of poverty increased from 21% to 26%.
The average income per household according to the 2020 National Household Survey (Enaho) is ₡891,934 per month ($1,487), which represents a variation of -12.2% from the previous year, when it was at ₡1,016,358 ($1,694).
In the context of the crisis generated by the outbreak of covid-19 and after reporting a -9% year-on-year variation in July, in August the IMAE registered a smaller reduction by contracting 8% compared to the same month in 2019.
The fall in the volume of production is greater in the activities of hotels and restaurants (59.3%), transport and storage (27.4%) and trade (15.5%), all of which is closely related to the greater incidence in these sectors of national and international restrictions on the movement of people and goods, reported the Central Bank of Costa Rica (BCCR).
Although the Alvarado administration reversed the initial proposal to ask the IMF for $1.75 billion in financing and called for an inter-sectoral dialogue, Costa Rica is semi-paralyzed by the blockades that are taking place on various roads in the country.
In this scenario of economic crisis, falling tax revenues and the need to finance recovery programs, in Guatemala and Costa Rica it is already proposed to increase current taxes and create new ones.
Guatemalan authorities are already beginning to discuss the fiscal policy they will apply in 2021, when the economy will have to face the effects of the economic crisis generated by the covid-19 outbreak.
After the unemployment rate in the United States fell from 15% to 8% between April and August, it became evident that at the beginning of the crisis the capacity of recovery that the North American country could develop was underestimated and it is expected that this behavior could boost the economic activity in Central America.
During the first half of 2020, when the first cases of covid-19 began to be reported in the region, forecasts noted that the recovery of economic activity would be excessively slow, due to a significant drop in consumption globally.
After reporting in June a 7% year-on-year variation, in July the monthly index of economic activity continued to fall, registering an 8% drop with respect to the same month in 2019, a decrease that is explained by the economic crisis affecting the country.
The lower activity, which is due to the impact that the pandemic has had in Costa Rica and around the world, is seen in the five major economic activities (agriculture, manufacturing, construction, trade and services) that make up the monthly index of economic activity (IMAE).
Between February and August of this year, the proportion of consumers in Costa Rica who expressed pessimism regarding the country's economic future increased from 33% to 47%, a rise that can be explained by the crisis resulting from the outbreak of covid-19.
According to the Consumer Confidence Survey conducted during August 2020 by the School of Statistics of the University of Costa Rica, people in the country expect increases in the cost of their loans in the next 12 months.