WILLEMSTAD – A weaker euro can have an immediate negative impact on Curaçao’s tourism earnings from Europe, according to a new economic study examining how currency movements affect the economies of Curaçao and Sint Maarten.
The working paper, titled “The Mighty Euro: The Impact of Euro Exchange Rate Fluctuations on the Current Account of the Balance of Payments of the Monetary Union of Curaçao and Sint Maarten,” was prepared by Robert Hieroms and Raïna Hieroms of the Economic Analysis & Research Department of the Central Bank of Curaçao and Sint Maarten (CBCS).
The researchers analyzed quarterly data from 2010 through 2024 to determine how movements in the euro affect tourism exports and merchandise imports.
The study estimates that a 1 percent depreciation of the euro against the Caribbean guilder is associated with an immediate 0.84 percent decline in Curaçao’s tourism earnings from the euro area. The negative effect becomes smaller over time, declining to about 0.52 percent by the second quarter after the initial shock.
The reason is relatively straightforward. The Caribbean guilder is pegged to the U.S. dollar, meaning that when the euro loses value against the dollar, it also loses value against the Caribbean guilder. Curaçao consequently becomes more expensive for European visitors.
The researchers caution that the estimated tourism effect does not reach conventional levels of statistical significance. Nevertheless, the direction of the relationship is consistent with the economic expectation that European travelers have less purchasing power in Curaçao when their currency weakens.
The findings are particularly relevant for Curaçao because of the island’s strong tourism ties with Europe, and especially the Netherlands.
Between 2010 and 2024, the Netherlands alone accounted for an average 42.1 percent of Curaçao’s tourism foreign exchange earnings. When other euro-area countries are included, the euro area represented 48.6 percent of the island’s tourism earnings.
The study also found that economic developments in Europe matter beyond the exchange rate. Higher economic growth in the euro area has a positive and statistically significant effect on Curaçao’s tourism earnings, as European households have more disposable income available for travel, accommodation, restaurants and leisure activities.
The authors therefore recommend that Curaçao continue diversifying its tourism markets. They specifically point to North America, Latin America and other emerging markets, supported by targeted marketing and increased air connectivity.
Reducing dependence on one currency area, they argue, could make Curaçao less vulnerable when the euro weakens and provide greater stability in tourism-related foreign exchange earnings.