In Colombia, the appreciation suffered by the Colombian Peso against the dollar in recent years hit the export sector, especially flower exporters and garment factories, sectors which have reduced significantly as a result of not being able to compete under the new conditions.
The Colombian situation could be replicated in Costa Rica, at a time when the export sector calls for government solutions to cope with the loss of competitiveness that has led to the appreciation of the colon against the U.S. currency
In order to survive the new conditions imposed by the exchange situation, the President of the Exporters Association of Colombia, Javier Diaz, is suggesting that exporters change their mentality, innovate, and add value to their products.
Some measures taken in Colombia are examples of such an innovation process, as highlighted in the article by Leticia Vindas in Elfinancierocr.com: Colombian exporters managed to negotiate some special conditions with the Government to help remedy the effects. For example, the government agreed to eliminate the extra tax that the sector paid on electricity bills. They have also reduced setting up processes for new businesses so that creating a new business is cheaper, along with a series of incentives to new companies, such as not having to pay the costs of commercial registration in the first two years and paying only 25% on social security in the early years before it then increases. "
Source: elfinancierocr.com
More on this topic
November 2010
Two thirds of the country's tourism businesses have been negatively affected by the 15% increase in the value of the Colon.
The tourism industry in Costa Rica, which represents 7% of the GDP, receives most of its revenue in Dollars and pays most expenses in Colones. This puts them as one of the sectors most affected by the sharp appreciation of the Colon.
June 2010
Investors might be seeing the Costa Rican Colon as a risky asset with good yields for “carry trade” transactions.
ALDESA reported that the ups and downs of the Costa Rican currency are being monitored by international investors, in addition to the recent comments by the new president of the Central Bank, who suggested more future intervention to ease the currency’s volatility.
November 2010
The loss of competitiveness in exports and tourism generates unemployment, but intervening in the exchange rate will generate inflation.
There seems no good solution to the problem Costa Rica has with the appreciation of its currency, which has meant a loss of competitiveness of its exports, especially agricultural, by about 5% annually over the past 4 years.
May 2010
CINDE stated that the increase in the value of the Costa Rican colon versus the U.S. dollar is negatively affecting the country’s exporters and diverting foreign direct investment.
Alberto Trejos, president of the Costa Rican Investment Promotion Agency (CINDE), stated that the recent strong increase in the price of the Costa Rican currency is making exporters less competitive.
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