Depreciation of the Dollar

Good news for importers and store owners, bad news for exporters. Governments cannot afford to ignore this problem.

Thursday, August 19, 2010

The causes of the appreciation in the value of Latin American currencies relative to the United States dollar are varied. The main reason is the current weakness of the US economy and the low expectations of a quick recovery. In addition, Central and South American economies are doing well, boosted by high commodity prices and the way their financial systems withstood the last crisis.

Domestic markets have enjoyed cheap imports due to the weak dollar and this has led to an increase in consumption. However exporters receive less and less local currency for their production, which will eventually make it less attractive, particularly for manufacturing sectors. Governments need to take action.

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More on this topic

Guatemala: Dollar Once Again Strong Against the Quetzal

May 2011

U.S. currency rose last week after having been at its lowest value for the last five years.

The upward trend that the dollar began showing last week against the quetzal, could continue in the coming months as it seems that factors that pushed the dollar down are no longer present in the Guatemalan economy.

Guatemalan Quetzal On The Rise

March 2011

Investors are focusing on local currency due to its renewed value and the issuance of bonds at higher interest rates. outlines, "The Bank of Guatemala (Banguat), informed that payments in foreign currencies reached Q21.3 billion in December and Q23.0 billion during February, while payments in Quetzals went from Q106.2 billion to Q105.6 billion over the same period of time.

Costa Rica´s Choice: Low Dollar or High Inflation

November 2010

The loss of competitiveness in exports and tourism generates unemployment, but intervening in the exchange rate will generate inflation.

There seems no good solution to the problem Costa Rica has with the appreciation of its currency, which has meant a loss of competitiveness of its exports, especially agricultural, by about 5% annually over the past 4 years.

Costa Rica's colón 'at realistic level'

April 2008

The Costa Rican colón may have appreciated in value, but the nation's exports remain competitive, says the IMF.

A Fund report indicates that the colón's exchange rate is close to its real level, as measured by export performance.
Terms of trade remain favorable and are expected to remain consistent with the advance of the economy, according to the report.

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