Costa Rica Faces Economic Uncertainty as Tourism and Coffee Sectors Struggle
As Holy Week marks the end of the high season in Costa Rica, the country is bracing for months of uncertainty in key industries that drive the economy. Tourism, which contributes 8% of the national annual wealth and employs almost 175,000 people, is facing challenges despite a steady flow of customers.
The exchange rate of the dollar against the colon has fallen by 24% between June 2022 and December 2023, causing concerns for the export sector and industries heavily reliant on foreign exchange. This trend has affected not only tourism but also coffee producers, who have seen a significant drop in the value of their sales.
Economist Gerardo Corrales explains that Costa Rica is experiencing a flood of dollars due to investment capital and increased exports, but the speculative nature of some capital inflows is causing imbalance in the economy. The appreciation of the colon, coupled with low inflation rates, has put pressure on sectors like coffee production, where farmers are struggling with reduced earnings.
Authorities in the coffee sector have expressed their distress over the situation, with some farmers facing significant financial losses. Despite calls for government intervention to stabilize the exchange rate, Vice President Stephan Brunner suggested that affected producers should consider alternative activities.
Meanwhile, Rodrigo Chaves has defended the country’s strong economy and highlighted the positive growth indicators, attributing the appreciation of the colon to market dynamics. However, export groups and economists have voiced concerns about the long-term implications of the currency imbalance on employment and economic stability.
The Central Bank of Costa Rica is under pressure to address the exchange rate issue, but the lack of decisive action has raised fears of a prolonged economic downturn. Tourism businesses are particularly vulnerable, with the high season ending this Easter and many facing financial challenges ahead of the low season.
The uncertainty in the economy has prompted calls for urgent measures to support key industries like tourism and coffee production. With risks posed by external factors like climate change and market volatility, Costa Rica is facing a critical period that will test its resilience and economic stability.