Declining US Dollar Could Trigger Far-Reaching Disruption

As the US dollar weakens, Nearshore service providers are feeling the squeeze. With regional currencies rising against the greenback, many of them face the prospect of lower income or significant losses on contracts they signed with their American clients.

“Yes, we have also been getting more pushback on pricing lately,” acknowledged Jeremy Stryer, co-founder of Holadev, a Queretaro, Mexico-based software development firm, most of whose clients are startups in the United States.

“The constant exchange rate swings make it tough to predict pricing and revenue,” Stryer added.

Mexico stands on shaky financial ground, more than any other country in the region. With exports accounting for 40% of its GDP—80% bound for the U.S. — a weakening dollar threatens to derail its dream of becoming the “China next door” for global manufacturing.

After rising to new highs immediately after the election of President Donald Trump, the U.S. Dollar Index began to slide earlier this month. Already, the greenback has dropped nearly 5% from its 2025 highs. Analysts expect it to decline further in the coming months.

Surprisingly, Latin American currencies had begun to strengthen even before the Dollar Index started sputtering.

Argentina’s peso has surged by 40% in recent months, transforming the South American country from the cheapest destination in dollar terms to the most expensive in the region. Today, for many Argentines, living abroad now costs less than staying at home.

The Mexican peso has appreciated nearly 5% against the greenback this year. Remarkably, the peso is rising even as the US imposes 25% tariffs on imports.

The Brazilian real, meanwhile, has inched up by just 1.5% against the US dollar, largely influenced by high interest rates.

One of the world’s top-performing currencies this year is the Colombian peso, which has surged 7.36%.

The Peruvian sol has also made gains, appreciating 2.12% against the dollar, securing its place as the sixth-best-performing currency in the region.

“It has been pretty crazy with respect to local currency fluctuations versus the U.S. dollar,” says Casey Halloran, CEO & Co-Founder of Costa Rican Vacations.

“We are all grappling with this new reality and attempting to plan for continued shockwaves,” Halloran added.

The declining US dollar “has indeed sparked concern among businesses relying on nearshoring models,” said Christian Corcino, founder and chairman at Intellisys D Corp, a nearshore IT services provider based in the Dominican Republic.

But Corcino’s firm has yet to feel its ill effects. That’s largely because, as Corcino explains, the Dominican Republic’s peso has historically been closely tied to the dollar.

“As the dollar’s value decreases, the Dominican peso tends to mirror that movement, so the impact on operational costs and competitiveness remains relatively neutral. Consequently, our own business, which employs personnel exclusively in the Dominican Republic, has seen minimal effect from the dollar’s recent decline.”

Weak Dollar and Wage Growth

Corcino noted that rising minimum wages, coupled with the decline in the USD, might prompt companies to adjust pricing or optimize resources to maintain profitability.

He added that an increase in overall operational expenses for IT and BPO providers is a natural consequence of these economic shifts.

In January, Costa Rica raised wages by 2.37%. Mexico implemented a 12% increase in its general minimum wage this year, while Brazil hiked it by 3.23%.

Colombia’s minimum wage has nearly doubled in less than a decade. In February, Argentina enacted a 20% wage hike to help workers cope with soaring inflation. The Dominican Republic followed suit, making history with its own 20% wage increase.

However, the increase in minimum wages is less likely to have a significant impact on IT workers.

“For our organization, however, this shift has been less significant. Our employees — primarily software developers — already earn salaries well above the minimum wage, meaning the direct impact on payroll expenses is limited,” Corcino added.

“Going forward, service providers across the region can navigate higher labor costs by focusing on specialized skill sets, improving efficiency, and delivering higher-value services, ensuring that any wage increases are balanced by productivity gains and a stronger competitive edge.”

Impact on Tourism

The impact of the weakened dollar could become evident in the quarterly fiscal reports of nearshore vendors later in April. However, its effects are already apparent in the tourism sector.

Costa Rica’s tourism industry has suffered five consecutive months of declining foreign visitors, as the local currency, the colon, surged to historic highs.

Before the pandemic, a three-day package cost around US$180 per person. Now, the same package exceeds $400—more than double the previous price.

“The Colon vs. USD exchange rate has been detrimental to tourism since late 2022, when the USD to Colon rate fell from a peak of 670 to 500 (-25%),” Halloran added.

By March 15, the colon had reached an all-time high of 485 per USD, as the international airports across the country showed a deep dip in foreign arrivals.

“It has remained at that 500 level today, and multiple industries — agriculture, nearshoring, tourism, real estate, medical tourism, shipping — are highly concerned that a further decline in the USD’s value could lead to a loss of competitiveness,” Halloran said.

Argentina Becomes Ever More Expensive

President Javier Milei devalued Argentina’s currency by 54% shortly after taking office. A year later, it rebounded as the so-called “superpeso.”

Meanwhile, the minimum wage jumped from 156,000 pesos at the start of 2024 to 272,000 pesos today — a 76% increase in nominal terms. In dollar value, it rose from $157 to $228.

According to a report from online job platform Bumeran, the average salary sought in Argentina now stands at $1,234, surpassing the regional average. Just a year ago, it ranked among the lowest in Latin America.

The stronger peso has reshaped tourism patterns. Fewer foreign tourists are visiting Argentina, while more Argentines are opting for trips abroad. In 2024, foreign tourist arrivals dropped by 8.4% to 6.2 million visitors, while the number of Argentine travelers heading overseas surged by 11.8%, reaching 8.3 million, according to the National Institute of Statistics and Census (INDEC).