While the US economy.UU. It sank into recession and applied a monetary policy more lax, the dollar deepened its weakening against all major world currencies and almost all the currencies of the region. This behavior of the dollar has brought Latin American countries more adverse consequences that the very same subprime crisis. The weakening of the dollar worldwide has mainly attacked the Latin American economies from two fronts: by the side of the international competitiveness of these economies and the inflationary side. The majority of the Latin American currencies have strengthened against the US dollar.
The Brazilian real and the peso have been that most will have reassessed against the U.S. currency since the beginning of 2007. Followed by the Chilean peso and the Peruvian nuevo sol. The Argentine peso is one of the coins that are beyond the rule of the region, and product of the strong intervention in the market of currencies by the Central Bank, has seen a depreciation against the dollar from something more than 3% since early 2007. Exchange rate appreciation and an increase in the rate of inflation in the countries in the region have damaged the competitiveness of these economies and it has been struggling to various productive sectors. And the resurgence of inflationary pressures has seen its origin in the international increase in the price of food and energy. This has caused an increase in the cost of production and wage pressures which threatened to generate second-round inflationary effects.
If the cycle of us rate cuts.UU. It has brought him to Latin America a loss of external competitiveness and a higher inflation rate what happens from now on more since it seems that it has finished? Clearly this can brake in the policy of the Fed rate cut will be beneficial not only to Latin America but that it will be at a global level. This policy change will help to remove pressure on the upward trend in the international prices of commodities. And surely when give place to the beginning of the ascending cycle rates (cycle that hardly starts before year’s end), It will further contribute to alleviate inflationary pressures around the world. Then, by the inflation front, the possible change of trajectory of policy rates in the United States.UU. It will be beneficial for the region, but it will be the same with the competitiveness of the currencies of the region? I think it is likely that Yes, and to measure that the subprime crisis away and to calm the international markets again will find a region that has overcome the crisis with minimum cost and also has two countries more than they enjoy the privilege of being investment (achievement reached by Brazil and Peru) grade and one more that is about to be so in Latin America (Colombia). These factors the potential of growth and stability that are showing the most countries of the region (except, of course, certain exceptions), will be a magnet for foreign capital, which will increase the pressure on exchange rates.