WILLEMSTAD – Curaçao businesses appear willing to shift away from European suppliers when a stronger euro makes European products more expensive, according to a new economic study on the impact of currency fluctuations on Curaçao and Sint Maarten.
The research found that a 1 percent appreciation of the euro against the Caribbean guilder produces an immediate estimated decline of approximately 1.07 percent in Curaçao’s merchandise imports from the euro area.
The effect reflects the higher local cost of European products when the euro strengthens. Importers and consumers can respond by reducing purchases or looking for less expensive suppliers elsewhere.
The study’s overall conclusion is that euro appreciation produces a statistically significant and relatively persistent reduction in merchandise imports from the euro area, particularly in Curaçao.
This does not mean Curaçao suddenly stops importing when the euro becomes expensive. Europe represents only part of the island’s import market.
Between 2010 and 2024, the euro area accounted for 16.9 percent of Curaçao’s merchandise imports, while the United States accounted for 36.1 percent. For Sint Maarten, the difference was even larger: 7.7 percent came from the euro area and 51.7 percent from the United States.
The researchers suggest that when European goods become more expensive, Curaçao consumers and businesses can shift toward the U.S. and other markets.
Products affected can include food, pharmaceuticals, machinery and consumer goods. Demand is likely to fall particularly for non-essential and price-sensitive European products when the euro strengthens.
The study also highlights Curaçao’s broader vulnerability as an import-dependent island economy. Higher international oil prices, for example, increase the value of imports because the island has few alternatives to imported oil and petroleum products.
CBCS researchers see supplier diversification as one way of strengthening the economy against these external shocks.
They recommend reducing logistical, regulatory and informational barriers that make it more difficult for businesses to source products from alternative markets. A broader supplier base could improve supply-chain resilience, limit inflationary pressures and reduce Curaçao’s exposure to currency movements.
The issue also has implications for the stability of the Caribbean guilder. Because the currency is fixed to the U.S. dollar, external shocks are largely absorbed through Curaçao and Sint Maarten’s balance of payments and official reserves rather than through adjustments in the exchange rate.
The researchers therefore stress the importance of maintaining adequate foreign exchange reserves. They point to the CBCS operational target of reserves sufficient to cover at least three months of merchandise imports as an important safeguard for confidence in the currency peg.