For the IMF, recent steps towards a more flexible exchange rate, especially by reducing currency surrender requirements, are positive.
The international organization encouraged the country to a gradual transition to exchange rate flexibility and to continue efforts to strengthen the operational autonomy and governance of the central bank with a perspective of a gradual transition to an inflation targeting regime.
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.
A greater supply of dollars, high local interest rates and a decrease in imports of durable goods explain the decreasing trend of the exchange rate in Costa Rica, which on June 18 reached the lowest level of the year.
In 2018, the dollar price against the Colon was on an upward trend, however, between February 6 and mid-June of this year, there has been a fall of up to 28 colones per dollar. [GRAFICA caption="Click to interact with graph"]
In Costa Rica, exporters ask the Central Bank to "avoid distortions in the fixing of the exchange rate because of the oversupply of dollars from the sources of financing for the fiscal deficit."
At the end of 2018 and the beginning of 2019, the dollar price against the Colon reported an upward trend, but from February 6 to mid-June 11, there has been a fall of up to 26 colones per dollar.
In the first four months of the year, trading volume totaled $3.873 million, 19% less than the same period in 2018.
From the Central Bank of Nicaragua report:
According to official statistics, the volume of exchange market operations in April totaled 924.7 million dollars (US$38.5 million daily average), showing a 0.97% decrease with respect to the level registered in the previous month.
In Costa Rica, the exchange rate of the Colon against the Dollar began 2019 upwards, but from February 6 to mid-May, a fall of up to 26 colones per dollar has been reported.
After the average exchange rate against the Dollar in the Monex wholesale market increased from ¢609.05 to ¢613.87 between January 1 and February 6 of this year, there have been continuous declines in recent months, with one of the lowest levels of the year being recorded on May 16, ¢587.97.
The volume of operations totaled $2,948 million during the first quarter of the year, registering a 19% decrease with respect to the same period in 2018.
From the Central Bank of Nicaragua report:
The volume traded (purchases + sales) of foreign currency in the exchange market during the first quarter of 2019 was 2,948.3 million dollars (daily average of US$38.8 million), showing a decrease of 18.9 percent over the first quarter of the previous year, mainly because of the decrease in financial sector operations with the public.
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In Costa Rica, the exchange rate of the U.S. dollar against the Colon began to rise in April, but from the 3rd to date, a fall of up to 12 colones per dollar has been reported.
After the average exchange rate against the dollar in the Monex wholesale market increased from ¢599.2 to ¢607.9 between March 29 and April 3, there have been continuous declines in the last few days, since as of this month's 17th it decreased to ¢595.8, one of the lowest levels of the year.
The volume of operations totaled $3.413 million during the fourth quarter of 2018 in Nicaragua, recording an increase of just 1% over the same period in 2017.
From the Central Bank of Nicaragua report:
The volume traded (purchases + sales) of foreign currency in the exchange market totaled 3,413.0 million dollars during the fourth quarter of 2018 (daily average of US$44.3 million), showing a 1.1 percent increase with respect to the fourth quarter of the previous year, mainly because of the increase in the operations of the BCN's foreign exchange desk with banks and financiers.
In Costa Rica, in the first half of the month, the exchange rate of the dollar with respect to the colon recorded a downward trend, however, from January 16 to 24 it increased almost 9 colones per dollar.
After the average exchange rate against the dollar in the wholesale market fell from ¢610.7 to ¢600.3 between January 8 and January 16, Monex has registered continuous increases in the last few days, rising to ¢609 on January 24.
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.
Because of the uncertainty in the local economy, so far this year in Guatemala the Quetzal has depreciated just over 5% against the U.S. dollar.
According to Banco de Guatemala figures, between January 1st and December 19th, 2018, the reference exchange rate increased from Q7.34 to Q7.75. This upward trend contrasts with the reported last year, since during 2017 the exchange rate dropped from Q7.53 to Q7.35.
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.
In Costa Rica, businessmen in the sector expect that the depreciation of the local currency against the dollar will raise the price of finished construction materials, which are mostly imported.
According to data from the Central Bank of Costa Rica (BCCR) between August and October of this year, the exchange rate of the Colon against the Dollar had a fast rise, and although in recent days some signs have shown that the depreciation of the local currency has declined, businessmen in the construction sector expect increases in costs.