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Chilean exporters want government support to face weakening US dollar

Thursday, September 30th 2010 - 02:49 UTC
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Agriculture produce, fresh fruit, wines represent almost 20% of Chilean exports Agriculture produce, fresh fruit, wines represent almost 20% of Chilean exports

Chilean exporters associations of farmers and manufacturers announced they will be requesting government intervention in the foreign exchange market because the “cheap” dollar is threatening their competitiveness edge and profits.

Ronald Brown head of Chile’s Exporters Association, Asoex, said that at the current exchange rate, exporters’ losses can be quantified in approximately 650 million US dollars.

“In practical terms the current exchange rate between the US dollar and Chilean peso means an average income loss of 22%, which is quite difficult to handle by any industry, service or activity”, emphasized Brown.

Fruit growers associations from the O’Higgins and Maule regions in central Chile said they will be delivering a letter at Government House (Casa de la Moneda) explaining the difficulties faced by the export sector and the urgent need to depreciate the Chilean peso or boost the US dollar in the local market.

The US dollar has been floating between 485 and 495 pesos in the Chilean money market, which means the local currency has advanced 4.45% so far this year, while during the twelve months of last year the greenback appreciated 26.4% having reached 560 pesos.

A “cheap” dollar means less pesos for exporters but also higher costs in dollars since labour, inputs, taxes, utility rates must be paid in “dearer” pesos.

Another important sector, the association of export manufacturers and services, Asexma, revealed that 80% of its affiliates see risks ahead for their export bussiness because the exchange rate has reached what they describe as a “dangerous level”.

According to a poll among its affiliates, 13% consider the exchange rate at a “dangerous level” when it is below 520 pesos to the US dollar. For another 29%, the “dangerous level” surfaces when the US dollar is below the 500 Chilean pesos and for 28% the US currency at 480 pesos simply puts them “out of business”.

The poll was done between August 26 and September 23.

Regarding profits for export manufactures, 62% estimate they will drop drastically with a US dollar below the 500 pesos; while for 33% the situation can be managed and for 5%, even improve.

“We are most concerned with the down tendency of the US dollar in the last few months, since this is eroding the Chilean export sector competitiveness”, warned Asexma president Eduardo Moyano.

The entrepreneur said that Asexma believes that it is a priority for authorities to act on time and effectively and consider if it is necessary for the Central Bank to intervene in the foreign exchange market.

“We believe the goals of the Central bank should not only be keeping inflation under control and stability of the financial system, but also concern about growth and employment”, underlined Moyano.

The poll also showed that 85% of export companies are convinced that the government must (will) intervene when the exchange rate reaches 480 pesos to the US dollars.

Finally when those companies were asked on which exchange rate they planned their 2010 exports, 11% said below 500 pesos to the US dollar; 58% between 500 and 530; 24%, from 530 to 560 and 7%, above 560 pesos to the dollar.

Categories: Economy, Latin America.

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