The Costa Rican government is facing a complex scenario, since by not achieving consensus to access international loans, it will be forced to seek domestic funding sources, which would put pressure on the exchange rate and interest rates to rise.
The economic crisis that the country is going through due to the outbreak of covid-19 ended up sharpening the country's fiscal situation.
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.
During 2019, the price of the dollar in Costa Rica registered multiple fluctuations; however, for this 2020, such abrupt variations are not anticipated, since the Central Bank starts the year with reserves close to $9 billion.
Data from the Central Bank of Costa Rica (BCCR) show that between February 4 and November 28, 2019, the average dollar price in the Costa Rican market fluctuated considerably, ranging from ₡614.31 to ₡562.63.
With the aim of cushioning the fall in the price of the dollar, which between November 5 and 25 was reduced in ₡18,35, in just two days the Central Bank intervened buying more than $30 million.
Of the $41.5 million negotiated at Monex during the November 22 session, the Central Bank of Costa Rica (BCCR) purchased $36 million, and of the $30.7 million negotiated on November 25, the monetary authority acquired $27 million.
In Costa Rica, the exchange rate closed on Tuesday, August 20th at 565.88 colones per dollar in the wholesale market MONEX, its lowest level since late May last year.
The exchange rate for this Tuesday closed at ₡565.88 in MONEX, its lowest level since late May last year. The current level implies an appreciation of the national currency against the dollar of 7.2% so far this year and -0.6% in the comparison of 12 months.
In Costa Rica, it is expected that the downward trend that has been showing the exchange rate since February will intensify in the coming months, when the $3.580 million begins to enter as a result of the issuance of Eurobonds and loans granted by external entities.
According to data from the Central Bank of Costa Rica (BCCR), between the beginning of February and July 30 of this year, there has been a fall of up to 44 colones per dollar, reporting a drop in the average rate in the wholesale market Monex from ¢613.87 to ¢570.13.
In a competitive scenario for lower costs and higher productivity, devaluation against the Lempira Dollar in Honduras and the Cordoba Dollar in Nicaragua is a factor that could help these economies stay competitive.
In the last five years, the exchange rate in Honduras increased by 17%, from 21.06 Lempiras per U.S. dollar in June 2014 to 24.67 in the same month in 2019.
The economic environment in 2018 was defined by a context of fiscal uncertainty, economic slowdown and greater financial volatility, together with a difficult external environment.
Regarding the fiscal uncertainty occupying a large part of last year's economic agenda, explains the Central Bank of Costa Rica (BCCR) which was originated, firstly, in the electoral process that lasted until April, and later in the difficulties faced to achieve an agreement that would help restore the sustainability of public finances in the medium term.
Following the Constitutional Chamber's judgment on the tax reform, the exchange rate in Costa Rica temporarily stopped rising, but it is expected to restart upward trend in the coming months.
According to figures from the Central Bank of Costa Rica (BCCR), from mid-August to the first week of November, the Colon depreciated rapidly. However, after Fourth Chamber prepared the tax reform in Congress a few days ago, the dollar's price against the local currency stopped rising.
After Costa Rica's Constitutional Chamber prepared the path for tax reform in the Congress, the dollar's price against the local currency stopped rising, and positive reactions were reported in the risk outlook.
Last November 23rd, Court IV issued its judgment, so the law project has a free way to move forward more quickly during the coming weeks in the Congress.
After the fast depreciation that the Costa Rican currency suffered weeks ago against the Dollar, in the last seven days the exchange rate has fallen from ¢629 to ¢615 per dollar.
Between August 16th and November 6th, the exchange rate in the wholesale market Monex registered an increase of 11%, rising from ¢567.97 to ¢628.81. However, since November 7th the price of the U.S.
With the purpose of "reducing pressures in the exchange market," the Central Bank of Costa Rica increased the interest rates of its term deposits as of November 7th.
With this increase in the interest rates of the Central Bank's deposit instruments, which is added to the one made last week, the entity seeks to foster savings in colones, particularly in instruments with longer terms.
The exchange rate began in November by recording ¢621 in the windows of some banks and ¢617 in the Monex wholesale market.
In accordance with reports since mid-August, the upward trend of the exchange rate in Costa Rica is not slowing down. According to data from the Central Bank, between August 16th and November 1st in the wholesale market Monex, the Colon has registered a depreciation in relation to the U.S.
In Costa Rica, the currency depreciation persists, with the exchange rate reaching ¢616 in the windows of some banks and ¢610 in the Monex wholesale market.
The increasing trend of the exchange rate in Costa Rica is not stopping. According to data from the Central Bank, between September 27 and October 30 in the wholesale market Monex the Colon has registered a considerable devaluation against the U.S.
The upward trend in recent weeks in the dollar's price against the Colon has slowed.
According to figures from the Central Bank (BCCR), the exchange rate on the Monex wholesale market increased between August 17th and October 11th, from ¢568.35 to ¢597.43 per dollar, equivalent to a depreciation of 5.12%.
However, the constant depreciation registered by the Colon started to be contained at the end of last week, since on October 12th the weighted average in the Monex wholesale market was ¢595.41. The BCCR reported yesterday that the exchange rate dropped to ¢594.56 and today to ¢594.24.