Is Peru Firing Shots in the Currency Wars?

The Peruvian Sol

In today’s Gestion is an article regarding comments by Eduardo Amorrortu of Peru’s Association of Exporters, who says the Peruvian Sol needs to fall further in order to remain competitive.

While Brazil and Columbia currencies have fallen considerably more than Peru (Brazil 2.66 vs dollar at the beginning of the year- now 3.51, Columbia then 2377.50 – now 2960.89, both had fallen double digits before as well.)

The Peruvian Sol started the year at 2.985 vs the dollar (at this writing 3.23, having fallen even more since the China devaluation.)

As each exporting nation seeks to gain an advantage (which ultimately no one can,) China has fired the latest salvo in the recent devaluation, but already there are calls to respond:

China Devaluation Rolls a Wave of Deflation into the Latin American Markets

As the commodity producing countries lose external investment, due to the shelving of projects caused by the slowing Chinese economy, the massive overinvestment in the mining sector will continue to result in oversupply and deflationary pressures on commodity exporting countries.

For anyone who has money in Latin American currencies, they just took a pretty big hit. Add that to the losses of the last year, many are headed to the exits.

Via Gestion Peru (Google Translate – Authors Editing for Clarity, full link below)

Adex: The dollar Should have a Higher Price

Eduardo Amorrurtu, president of Adex said that improving exports by dollar needs with real value.

Although the appreciation of the dollar is walking to a higher value, it is still not where it should be as the government intervenes to avoid a rapid rise, Eduardo Routledge, president of the Exporters Association said.

“The dollar is not high and has only risen less than Brazil and Colombia. The dollar should have another price, a higher one. We are not at an effective parity that can help us to improve exports. What is needed to improve exports is a dollar with a real value, “he said.

But this is not the only thing that remains for us in competitiveness, since the moderate increase in the dollar against the nuevo sol, the decline of the Chinese currency is additional.

“China has devalued its currency to enhance their exports and make them more competitive. They will definitely achieve more competitive product pricing. Whenever you compete with someone, it can affect parity “he said.

As you recall, the Central Bank of China (PBoC) said that the depreciation of its currency reflects a strategy to give a bigger voice to the market in the yuan’s value.

He notes that the main destinations of Peruvian food (a total of 163,) are: USA, Netherlands, China, Spain and Ecuador.

Source: Adex: El dólar no está alto, debería tener un precio más elevado | Economía | Gestion.pe (Spanish)

This is just another shot in the ongoing currency war. After China’s “nuclear option,” will things get hot south of the border?

©2015 Ben Gangloff

You might also like:

Peruvian Sol falls to 3.20 vs the US Dollar

Number of Foreigners Coming to Peru for Work Grew 800% in the Last Decade

A Peruvian Adventure Honeymoon

Why the Peruvian Economy Matters to the World

Peru Ranked Third for Adventure Tourism, Here’s Why

Fruit

Did you enjoy this page? Have questions? Would like information on something to be posted here? Please drop us a line, or sign up for our email list in the box to the right.