Beyond the debate about the growing fiscal deficit within the country and the urgent need for a tax reform, Costa Ricans’ economy can also be affected by events that happen abroad: the US government’s economic policies, the Venezuelan crisis, and the European consolidation.
Each one of these events, to a lesser or greater extent, poses different scenarios for Costa Ricans, who may be affected by changes in interest rates, increases in prices or changes in terms of trade and investments.
The United States, Costa Rica’s main trade partner, could produce the most significant effects for the Costa Rican economy and thus the greatest impact on citizens’ finances.
According to Hernan Varela, a market analyst at Lafise, the Trump government has shown its partiality for pro-growth management of the economy, coupled with a tax reform that is based on cutting taxes to boost spending.
These measures would be accompanied by increases in interest rates, which has an impact on domestic interest rates in dollars through the prime rate, which is used as a reference.
The specialist explained that two increases are on the horizon: one in June and another possibly in September, which will eventually be received by national debtors in foreign currency.
As for the pro-growth policies, Varela said they are positive for Costa Rican exports, as long as the United States does not take protectionist measures, as it has done with Canada, Mexico and China.
Another aspect that can negatively impact the Costa Ricans is an increase of the military rhetoric that leads to increases in the price of oil, as this is transferred to consumers through fuels.
Regarding the exchange rate, Varela believes that the recent increases are due to purchases from domestic companies and individuals and not from external effects. This means that Costa Ricans are dollarizing their savings. At the moment the trend continues to rise, but abrupt increases are not expected.
Thus, a debtor in foreign currency should prepare now for increases in both interest and the price of dollar.
The current Venezuelan crisis could also become a risk to the stability of family finances of Costa Ricans.
An increase in tension between the government of Venezuelan President Nicolás Maduro and the opposition could slow the oil supply from the South American nation, which is currently around 2 million barrels a day.
According to Varela, a crisis that stops or diminishes the export by this country will affect the price of crude, and would take it above $ 50.
Again, these increases are transferred to Costa Ricans through fuels and other products, and finally manifests in inflation.
The behavior of Europe is the one that would be most encouraging for Costa Ricans’ economy.
The electoral victory of Emmanuel Macron in France is seen as a good signal for the stability of the European Union.
Varela thinks that the EU would continue to be very important potential for Costa Rican trade, as it grew at a higher rate than the United States in the first quarter of the year: 1.7% versus 0.7%, respectively.