Coffee and tourism: symbols of Costa Rica’s economy suffering from the dollar’s local decline

Holy Week marks the end of the high season in Costa Rica and with it, the beginning of months of uncertainty for an industry that contributes 8% of the national annual wealth with three million tourists. Tourism employs approximately 175,000 people, one out of every 12 active workers in the country, and is the engine of the economy. But now it is in crisis not because of lack of customers.

The exchange rate of the dollar against the colon fell by 2…

Holy Week marks the end of the high season in Costa Rica and with it, the beginning of months of uncertainty for an industry that contributes 8% of the national annual wealth with three million tourists. Tourism employs approximately 175,000 people, one out of every 12 active workers in the country, and is the engine of the economy. But now it is in crisis not because of lack of customers.

The exchange rate of the dollar against the colon fell by 24% between June 2022 and December 2023. In July 2022, it was close to 700 colones per dollar and is now at 500, like a decade ago. This trend has alerted the growing export sector led by dynamic foreign capital companies manufacturing medical devices, although the weakest activities show signs of concern. The same happens with tourism and with coffee growers, who export more than 85% of the crop and whose sales prices saw a decline of about 13% last year.

Costa Rica faces a flood of dollars due to the arrival of investment capital and an increase in exports, but also due to speculative capital, which benefits from high interest rates, explains economist and consultant Gerardo Corrales, referring to possible flows of money. Without denying. illegal activities. “Now the situation has changed, with the lowest inflation among OECD countries (-1.8%) and exchange rate appreciation of 24%, the highest in the world, at the end of 2023, but without measures aimed at balancing the situation. ” he adds.

“This is a continuous, sudden devaluation and there is no end in sight,” local coffee sector officials lamented at a press conference, in which they urged the government of Rodrigo Chaves to pay attention to preserving the producer base. . About 26,000 farms, mostly small. Each coffee farmer now gets 27,000 colones less per bushel than last year, about 20% less, while the cost of imported agricultural inputs has become cheaper by that proportion.

“My dad is very sad because it is not sustainable and producing coffee is the only thing he has done his whole life, it is his identity. “He feels very bad and he doesn’t want us to talk about it,” Manuel C., the youngest in a coffee-growing family south of San Jose, said after hearing Vice President Stephan Bruner’s statement. , also coordinator of the economic team. Brunner said those affected by the exchange rate should look for another activity and producers should build up financial reserves for “lean times”.

Rodrigo Chaves has said that the colon’s appreciation is a sign of a strong economy (national GDP is projected to grow by 5.1% in 2023, among other favorable indicators) and that there are winners and losers in everything. The irritation from export groups is widespread and there are frequent warnings from economists about the impact on employment figures. The Central Bank of Costa Rica (BCCR) is under pressure to adjust the reference rate to move the exchange rate upward, but monetary and government authorities are moving too slowly or not having the will to implement the tool. Giving signals. Shirley Calvo, executive director of the National Chamber of Tourism (Canatur), a trade group of an industry with abundant chains and generators of wealth throughout the region, tells EL PAÍS.

“They don’t want to use the devices; The response has been almost non-existent and it feels like they are letting the local economy be destroyed,” commented Calvo, who considered Brunner’s statements “outrageous.” He assured that the high season will end this Easter. And businesses could not save enough to withstand the low season. He warned that some would close or minimize operations, as Colon praised local tourists for spending dollars on vacations outside the country. Encourages.

Corrales points to particular risks for tourism and coffee growers. In the Costa Rican tourism industry, unlike other nearby countries, it is common for tourists to take dollars out of their Bermuda shorts and pay directly to tour guides or ceviche vendors, restaurants, car rentals or even beach supermarkets. The thing is. They go shopping. Refreshments. The greenback roams the tourist areas as much as the colonies. This directly impacts medium and small businesses.

In coffee, the threats are different: climate change that alters crop cycles and the instability of the international market, in addition to the temptations of the real estate business. The commitment to producing high-quality coffee under environmentally and socially sustainable conditions remains, but this moment is critical for a region that contributes less than 0.1% to national GDP and which ranks 14th in production in the world. location, but which has been basic development in some rural areas. “The best coffee in the world,” Pope Francis repeated this year when he received a Costa Rican diplomatic delegation.

Activities that are an essential part of Costa Rica’s image in the world are in danger, Francisco Mirabelli said in a telephone conversation from Monteverde, a city in northwestern Costa Rica known for its cloud forests. He has been a tourist guide since 1995 and also chairs a trade association that brings together about 3,000 accredited guides. “I can assure you that almost all of us are working with knives in our backs, looking for additional employment and wondering what will happen after this week. Same with hotels and transporters,” he says. In 2022, tourists paid $1.8 for a local beer and now pay about three dollars. He says the problem is that there is no quick solution in sight. “Tourists realize this when we try to support ourselves, other people work under a lot of stress and service can suffer, but many people can’t afford that,” he says.

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