MercoPress. South Atlantic News Agency

Chilean exporters complain strong peso against US dollar

The current levels of the United States dollar in Chilean money markets where it dropped to 528 pesos this week, is in line with international markets, according to the country's Central Bank president Vittorio Corbo.

During a conference Wednesday at the Monetary Club of a local university in Santiago Mr. Corbo mentioned some of the depreciation percentages suffered by the US dollar against other world currencies. Taking December 2001 as reference, the Chilean peso appreciated 19.8% against the US dollar; the Japanese Yen, 9.1%; the Euro zone, 34.3%; UK, 26.9%; Norway, 33.4%; Brazil, 11.9% and Australia, 38.8%, illustrated Corbo. "What we must watch is the real exchange rate and we can see Chile has avoided the so called "Dutch disease", which means Chile has not suffered a real appreciation of its currency. Actually the Chilean peso has a 20% higher depreciation than in 1997/98. And this is not magic, it simply means that instead of spending the copper money, we saved it", emphasized Corbo. The Central Bank president statements come at a sensitive moment for Chile's exporting sector which has been demanding measures to prevent the quick appreciation of the local currency that endangers overseas shipments. "Although we're still away from the serious 517 pesos to the US dollar of April 2006, we believe authorities must be prepared to stop the US dollar from continuing to drop in Chilean markets", said Patricia Perez, president of the Manufacturers and Services Export Association. Ms Perez said the greatest impact is suffered by small and medium companies since big corporations are "better prepared, have more financial resources, lower fixed costs and can better resist the falling cycle", adding that the sectors most vulnerable are those with a high percentage of costs in Chilean pesos, --such as labor costsâ€"and involve "wines, agribusiness and textiles". As to prospects Mr Corbo said the Chilean economy faces a favorable international scenario with the world economy expanding again in 2007 and strong prices for commodities. "There are some risks, minor risks, we have a flexible exchange rate and therefore it's the market that decides prices, particularly for copper. The Chilean peso might experience a further appreciation, but it's not easy to make predictions with a free floating market", added Corbo. Electronic transactions in Santiago's Money market reached 850 million US dollars plus another 10% by telephone. Forward operations, 7 and 42 days, were closed at 529.50 and 530 pesos to the US dollar. Chile's economic success has seen its currency strengthen against the US dollar (from over 720 pesos to 530 currently), which makes imports cheaper and exports, particularly when local costs in pesos are involved, less competitive. This has been a recurrent situation in the last few years as Chile becomes the show case of the region.