The U.S. dollar is surging as investors unsettled by the global financial crisis flock to the relative safety of American currency. But the trend is likely to put a damper on Maine`s tourism and export industries, which have enjoyed strong growth in recent years as the dollar sagged, experts say.
A strong U.S. dollar makes goods manufactured in Maine more expensive for overseas buyers and adds to the cost of vacationing here.
The change particularly will be felt by those doing business with Canada, the state`s largest trading partner. On Thursday, the Canadian dollar was worth 80 cents U.S. For most of the year, it has been roughly on par with the dollar.
``This is disappointing for a lot of Maine businesses,`` said economist David VanderLinden, an associate professor of finance at the University of Southern Maine. ``For a while, we were enjoying really wonderful times in Maine. A number of companies I talked to said it`s a lot easier to ship to Canada, and they thought it would continue.``
The relative value of the dollar to the Canadian dollar is particularly important in Maine. Tourism is the state`s largest industry, and Canadians account for the majority of foreign visitors.
As a result, one of the first places to feel the pinch of a strengthening U.S. dollar is Old Orchard Beach, a popular destination for Canadian tourists.
``In the last two years, we had a huge influx of Canadians. You can see the drop in the same way,`` said Bud Harmon, executive director of the local chamber of commerce. ``I think we are just sitting back and crossing our fingers that it won`t affect us next summer.``
Harmon said he`s seen huge swings -- usually tied to the exchange rate -- in the number of Canadian tourists during the 30 years he`s been working in Old Orchard Beach.
``Every 10 years, there is something like this,`` he said. ``What`s a little different this time is that it`s not just about the exchange rate. It`s about the economy in general.``
Harmon said he and his fellow chamber leaders along the York County coast had already been discussing new marketing efforts in Canada because of the volatile economy. The exchange rate shift will make those efforts all the more important.
Economist VanderLinden said that it might take some time to see the impact on the tourism trade.
``It`s probable that we won`t see the bad news for Maine until next summer,`` he said. ``Those visitors from Canada may all of a sudden be less likely to visit us.``
The swing back to a strong dollar comes just weeks before Gov. John Baldacci heads north for a Canadian trade mission. He`ll be there Nov. 16-21.
Canada is Maine`s top trading partner, purchasing nearly $890 million worth of Maine products in 2007 -- almost one-third of all of Maine`s $2.7 billion in exports that year.
``Obviously, it`s going to make our products a little more expensive, but it`s really getting back to the level it was historically at,`` said Janine Bisaillon-Cary, executive director of the Maine International Trade Council, which is organizing the trade mission.
VanderLinden also noted that the dollar was normalizing against historic exchange rates.
``We`ve had abnormal circumstances,`` he said. ``We`ve somewhat been re-established as the safe-haven currency.``
Bisaillon-Cary said she didn`t think the stronger dollar would undo the gains made by Maine exporters this year.
Exports were up 14 percent through August, she said. That`s on top of a 4.7 percent increase in exports in 2007.
The double-digit gains of 2008 are due to the weak dollar and ``sluggish`` U.S. market that sparked interest in exporting, she said.
``I can`t see how the exchange rate is going to reverse`` the 14 percent gain, Bisaillon-Cary said. ``It could slow down the volume in the last quarter. We`ll just have to see what happens.``
L.L. Bean, which has seen double-digit...
Reader comments
Click here to view or add comments on this story
Were you interviewed for this story? If so, please fill out our accuracy form