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What is happening with the dollar in Latin America?

The rise in the exchange rate is due to fears within the markets that a global recession will break out in the second half of 2022.

The rise in the exchange rate is due to fears within the markets that a global recession will break out in the second half of 2022.

Photo: Getty Images

The dollar in Colombia broke a new record: the currency rose $70 and closed at $4,353. This implies the third consecutive historical maximum in the exchange rate: last Friday it exceeded $4,200, and this Tuesday it closed at $4,280.

In fact, the dollar has risen more than $200 in just five days, which represents the strongest period of devaluation of the year. And it is comparable to what was recorded in March 2020, during the toughest times for the markets, when the pandemic broke out.

Read: New record for the dollar: it rose $70 and closed this Wednesday at $4,353

Although the representative rate of the current market was $4,259.86, in some exchange houses it was sold between $4,140 and $4,170 dollars.

The phenomenon is not exclusive to Colombia. The US currency was quoted around noon at 1,000 Chilean pesos and closed the day at 965 pesos, a new historical maximum in the midst of a global strengthening and in the face of the decline in the value of copper, the country’s main export. The US currency fluctuated between 954 pesos and 1,000 pesos, according to local operators, and grew 1.36% compared to the previous day, when it closed at 953 Chilean pesos per dollar.

The rise in the exchange rate is largely due to fears that a global recession could break out in the second half of the year. Uncertainty has been growing due to the rise in interest rates that the United States Federal Reserve has been carrying out since March, as well as recent reports that confirm the weakness in the main economies.

Read: Taste continues to get more expensive: the foods that rose the most in price in June

Political uncertainty in Chile

The Chilean president, Gabriel Boric, blamed the rise on external factors, but also on the “uncertainty” generated by a possible change in the constitutional norm, since on September 4 the Magna Carta project presented publicly yesterday will be voted in a plebiscite. and that it was elaborated during a year by the Constitutional Convention.

“(The appreciation of the dollar) is tremendously worrying. There are different causes such as the drop in the price of copper (…) Now, there are also internal factors and uncertainty, without a doubt, contributes to this”, Boric considered. And he added that “it is important that the different political actors” give signs of certainty. Statements that arrive the same day that the electoral campaign for the plebiscite began.

For his part, the Minister of Finance, Mario Marcel, tried to reassure the market by stating that “the factors that in the past made Chile especially vulnerable to the exchange rate are no longer there today.”

Argentina and its harsh restrictions

In Argentina, the continuous devaluation of the peso against the dollar and the shortage of international reserves that the Central Bank has been dragging on for almost three years has maintained harsh restrictions and taxes on the sale of dollars in the official market.

This means that individuals and companies must resort to alternative channels such as the so-called “financial dollars” or the “black market”, where the parallel dollar, also called “blue”, is sold.

That is why in the controlled official price, the dollar has appreciated 1.34% since last Friday -from 130.25 pesos per dollar to 132 this Wednesday-, while in the parallel market, the US currency went from be sold at 239 pesos last Friday, at 280 pesos this Monday, to drop to 250 today Wednesday, that is, a final appreciation in three days of 4.60%.

Also read: The Fed is determined to keep raising rates to fight inflation

In addition to the usual distrust of the Argentine peso, the rise in the dollar in recent days is also motivated by the effect that the worsening of the internal political crisis suffered by the Government has had on the markets, after last Saturday the minister of Economy, Martín Guzmán, will resign in the midst of strong divisions in the ruling party.

Mexican peso devaluation

On the other hand, the Mexican peso closed this Wednesday at 20.69 units per dollar, according to official data from the Bank of Mexico (Banxico), which implies its fifth consecutive day of depreciation and its worst level since March.

The data supposes a weekly depreciation of the Mexican currency of 2.83%, compared to the record of the previous Wednesday -when the exchange rate closed at 20.12-, in addition to a daily loss of 0.53% compared to Tuesday, when was quoted at 20.58.

“The growing volatility of the exchange rate and concerns about a possible recession can take the exchange rate to the level of 21 pesos per dollar in the short term,” said Gabriela Siller, director of economic analysis at Banco Base.

In any case, the Mexican peso is still far from its worst level so far this year, when on March 8 it was exchanged at 21.38 units per US bill, in contrast to its best level on May 30, when it marked a price of 19.5 pesos per dollar, according to Banxico.

Also read: Is internal confidence no longer enough to lower the dollar?

Peru and Brazil are no exception

In Peru, the exchange rate closed today at 3.89 soles, the highest price of the year since last January, which represents a rise in the price of the dollar of 0.90% compared to Tuesday, according to the Central Bank of Peru. Reserve (BCRP).

However, the price of the sol per dollar has fallen by 1.62% in the last twelve months and by 2.41% so far in 2022, according to the issuing entity, since it has not returned to exceed 4 soles per dollar. dollar that marked last year after the election of Pedro Castillo.

Meanwhile, in Brazil, the dollar has strengthened in recent days, after falling 6.2% in the first half of the year, amid increased concern about the direction of the country’s fiscal accounts and the growing risk of a global recession.

The greenback appreciated 0.60% against the real on Wednesday and was trading at 5.421 reais for both purchase and sale at the commercial exchange rate, the highest level since January. In the last week, the US currency has already accumulated a rise of 3.6%.

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