MercoPress. South Atlantic News Agency

“Dramatic” situation for Chilean salmon and fruit exporters

The US dollar dropped to its lowest so far this year in the Chilean money market reaching 509 pesos from Monday's 511 pesos.

According to Santiago money dealers the drop follows on the greenback's international sliding tendency but they also point out to copper which on Tuesday broke another milestone in the London Metals Market, three US dollars the pound.

But even when a strong Chilean peso favors consumers (including lower electricity bills beginning May) it's causing havoc among Chilean farm and fish exporters. Fruit and wine as well as salmon in the extreme south of Chile are the victims of a weakened US dollar against the local currency.

Economists and academics from regional universities are warning that a sustained drop in the exchange rate could represent dramatic consequences for several regions (including Magallanes), among which production disincentive, investment retraction, reduction in jobs and eventually unemployment

Miguel Ramirez head of the Austral University Economics Institute said that the most threatening of consequences "is the potential loss of competitiveness that cost so much time and effort to consolidate".

In April only the US dollar dropped 16 Chilean pesos and reached an all time record real low since 1973.

"The situation for Chilean fruit farmers is desperate", said Manuel Jose Alcaíno, since over 90% of their production costs are in Chilean pesos and "income is in US dollars, with many businesses already in the red".

"Non traditional exporters are suffering and the whole sector will be forced to contract", warned Maximo Antonioletti from Los Lagos University Economics Department.

Bloomberg reported that the Chilean peso ranks fifth among the world's currencies that most appreciated in the last three months, 4.49%. Only Romania, Indonesia, Brazil and Thailand figure ahead of Chile.

The great influx of US dollars given the booming price of copper and molybdenum has caused the strong appreciation of the Chilean peso, said Alberto Bernal from the Bear Stearns agency in Santiago.

Chile is the world's main copper exporter and March sales were 63% above the same month a year ago, revealed the Chilean Central Bank, 2.75 billion US dollars against 1.7 billion.

In 2005 total copper exports reached 18.3 billion US dollars, 21% above 2004, and in the first three months of 2006, were above 6 billion.

Meantime opposition Senator Alberto Espina said he would demand further explanations from Central Bank president Vittorio Corbo and Finance minister Andrés Velasco who did not show up at a Senate Agriculture Committee hearing on the strong peso and its consequences.

"Let's hope that the non presence of the Minister of Finance and the president of the Central Bank were because of agenda problems and not a political decision", he emphasized.

Mr. Corbo said he had previous appointments and Mr. Velasco a meeting with President Michele Bachelet.

Senator Espina highlighted that 2.8 million Chileans are going through a "dramatic situation" and the government must "urgently react".