CBCS: The Euro moves, St. Maarten feels it, but not as much as Curaçao

St. Maarten uses the Caribbean guilder, earns much of its tourism money in U.S. dollars and buys a large share of what it consumes from abroad. At first glance, that would seem to make the rise and fall of the euro somebody else's concern. A new Central Bank working paper entitled: 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 St. Maarten, shows why that assumption would be wrong.

When the euro weakens against the U.S. dollar, a vacation in St. Maarten effectively becomes more expensive for European visitors. When the euro strengthens, goods imported from Europe become more expensive for businesses and consumers here. In other words, movements in a currency St. Maarten does not use can still affect how much tourists spend, what businesses import and ultimately how money moves through the economy.

The good news for St. Maarten is that the island appears less exposed to the euro than Curaçao. The reason is simple: St. Maarten's economic relationship is far more closely tied to the United States.

Why a Weaker Euro Matters to Tourism

The Caribbean guilder is pegged to the U.S. dollar, which means its value against the euro moves along with the dollar. If the euro falls against the dollar, European travelers need more euros to buy the same amount of Caribbean guilders or dollars while vacationing in St. Maarten.

Nothing on the island has to become more expensive for that to happen. A hotel room can remain at the same price, a restaurant can keep the same menu and a rental company can leave its rates untouched. From the perspective of a traveler earning and saving in euros, however, all of those things suddenly cost more.

That can translate into visitors spending less, shortening trips, choosing cheaper accommodations or, in some cases, reconsidering a destination. The Central Bank study found that depreciation of the euro against the U.S. dollar has a negative effect on tourism earnings from euro-area visitors in both Curaçao and St. Maarten. The researchers caution that the estimated effects were not statistically significant at conventional levels, but said the direction of the results was consistent with what economic theory would suggest and the size of the effect remained economically relevant.

In simpler terms, the study does not prove that every drop in the euro will immediately produce fewer tourists. It does show that a weaker euro tends to work against destinations such as St. Maarten because European visitors lose purchasing power here.

St. Maarten Has an American Cushion

This is where St. Maarten and Curaçao begin to look very different.

Between 2010 and 2024, the Netherlands accounted for approximately 42.1 percent of Curaçao's tourism earnings. For St. Maarten, the Netherlands represented only about 5 percent. The euro area as a whole generated 48.6 percent of Curaçao's tourism earnings, compared with just 11.9 percent for St. Maarten.
The United States tells the opposite story. American visitors accounted for approximately 52.1 percent of St. Maarten's tourism earnings during the period studied, compared with 32.5 percent for Curaçao. That heavy U.S. presence means St. Maarten is less vulnerable when the euro loses value because the majority of its tourism business is not coming from travelers earning euros.

The study also notes that St. Maarten's tourism industry has traditionally benefited from strong U.S. airlift connections and proximity to the American market. European visitors, including those from the Netherlands and France, remain important, but they represent a much smaller share of tourism earnings than they do in Curaçao.

That provides St. Maarten with something of a cushion against euro weakness. It does not make the country immune, but it means a major swing in the euro is likely to hurt Curaçao's tourism economy more than St. Maarten's.

The Other Side Is What We Import

Exchange rates do not only affect who comes here. They also affect what St. Maarten buys.

This is particularly important because St. Maarten is one of the most import-dependent economies in the region. Merchandise imports averaged about 66.9 percent of GDP between 2010 and 2024, compared with a Caribbean average of about 40.3 percent. The study links that high figure directly to St. Maarten's reliance on imported goods to support a tourism-oriented economy.

When the euro strengthens against the dollar, European goods become more expensive in Caribbean-guilder terms. That can affect everything from food and beverages to construction materials, equipment and other products purchased from European suppliers.

The Central Bank found that a stronger euro tends to reduce merchandise imports from the euro area because European products become less competitive. Businesses and consumers may respond by buying less or switching to suppliers in countries where goods have become relatively cheaper.

Once again, St. Maarten has less exposure than Curaçao. About 51.7 percent of St. Maarten's merchandise imports came from the United States during the period studied, while only 7.7 percent came from the euro area. Curaçao sourced a considerably larger 16.9 percent of its merchandise imports from the euro area.

That means the supermarket shelf or business supply chain in St. Maarten is more closely connected to movements in the U.S. economy than to Europe. Even so, companies importing European products can feel the effect when the euro strengthens.

Protected From Europe, Dependent on America

The study consequently presents St. Maarten with an interesting economic trade-off.

Being heavily connected to the United States reduces the country's vulnerability to changes in the euro. But the same numbers reveal just how concentrated St. Maarten's economy has become around one major tourism market and one major source of imported goods.

Tourism earnings represented an average 66.1 percent of St. Maarten's total foreign exchange earnings from exports between 2010 and 2024, roughly in line with the Caribbean average and almost twice Curaçao's 33.4 percent. Merchandise imports were also equivalent to approximately two-thirds of GDP.

St. Maarten is therefore protected from one type of risk partly because it is exposed to another. A weak euro may not hurt as badly here as in Curaçao, but a downturn in the United States, reduced American travel demand, weaker airlift or another major shock affecting the U.S. economy could have much greater consequences.

That helps explain one of the Central Bank's main recommendations: diversify.

Do Not Put Everything in One Market

The researchers recommend that policymakers continue expanding tourism source markets instead of depending too heavily on one region. They also recommend broadening the countries from which goods are imported so that businesses are not overly vulnerable to price changes or disruptions in a particular market.

For St. Maarten, diversification does not mean turning away from the United States. The American market remains one of the country's greatest economic strengths. It means adding more strength around it, including growing business from Canada, Europe, Latin America and other markets so that trouble in one part of the world does not immediately become trouble for St. Maarten.

The same principle applies to imports. Businesses that have multiple supply options can react more easily when currencies move, shipping costs change or international disruptions make one source suddenly expensive.

The Central Bank study ultimately turns something as distant-sounding as the euro-dollar exchange rate into a very local issue. When the euro falls, European tourists have less spending power here. When it rises, European goods can cost more. St. Maarten feels both movements, just not as strongly as Curaçao because its economic compass points much more firmly toward the United States.

That may be comforting when the euro is the problem. It should also be a reminder of just how much St. Maarten has riding on America.

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