Devaluation of Latin-American currencies and its implications

There are actually fourteen currencies used in South America, all

sovereign states have their own currencies, except Ecuador. Additionally,
the Chilean currency known as the Chilean peso is strong by the
exploitation of the industry of mining and wine. However since 2011 the
Chilean peso has shown an immediate devaluation due to very cheap
importations. Moreover Latin American currencies are being strongly
affected by the Yuan currency and in general, by the Chinese industry.
Currencies in the most important Latin American countries are losing its
value due of failing commodity prices; devaluation in Latin American
currencies is an immediate increase in Chinas economics.
In 2015, the Colombian peso has lost 21% of its value against the US
dollar, being the new record as one of the lowest devaluations in
national history, Chilean peso and Mexican peso has decrease its value
in a 12 and 10% respectively. According to the Wall Street journal, Latin
America has been at the forefront of a global selloff in emerging markets
ahead of an expected increase in U.S. interest rates as the American
economy improves. With low rates in the U.s, investor had flocked to
emerging economies markets, where yields were higher and assets
denominated in foreign currencies held out the promise of potential
profits.
Graph 1 explains the devaluation of Latin American currencies due to the
potential increase of the dollar

By now China is the biggest consumer of Chiles copper production,

meanwhile Colombia and Mexico represent a significant amount of
exports of crude oil to China. TheseheadwindshavereallyconcentratedonLatin

Americancurrencies,saidtheAmericanforeignexchangestrategistNickVerdi.Lower
commoditiesprices,theeconomicdecelerationinthemajorityoftradingpartnersandthe
frequentdomesticchallengesamongLatinAmericaslargesteconomiesrepresent
importantheadwindstothecompleteregionin2015.Inearly2016theLatinAmerican
currenciescontinuetotumble,theirweakeningagainsttheU.S.dollarhaveshown
significantproblemsinthefinancialmarketsinthecommoditiesprices,mainlyforoilsas
petroleumandbasicmetalsascopper.
Verylowcommodityprices,highinflation,largefiscalproblemsandapoliticalcrisishave
allcameaheadin2015inBrazilianseconomyandingeneral,LatinAmericannations
economy.Brazilscurrency,felltoa12yearlowinMarch.Therelationshipbetween
globalgrowthandtradeisbreakingdowninawaythatwecannotapplythepast
relationshiptopredictthefuturesaidStephenen,aninternationalmonetaryfund
economist.
Thedevaluationofthecurrenciesisaneconomicalstrategyforfutureinvestmentand
optimummarketingrelationshipsbetweenothernationsinanintercontinentalsystem,
countrieslikeMexicoandArgentinaalreadyusingthistechniquehavepresentan
economicalexpansionthisyear,2,4and0,2%respectively.
Key words: Commercial relationships, profit, investment, commodity
prices, devaluation, inflation, imports, exports, emerging economies and
macroeconomics.
Involved countries:

Colombia
Brazil
Mexico
Chile
Argentina
Venezuela
Ecuador
Peru
Bolivia
United states of America
Canada
China
Russian federation
United kingdom
Germany
United arab emirates

Guiding questions:
The highly volatile economy in Latin-American nations generates
complications when deciding what to do when trying to solve a crisis
within this region. As delegates have seen before the most affected
countries are all facing internal issues which force the nations to either
reduce their currencys value or sacrifice exportations and external
investments to preserve the citizens current lifestyles and commodities.
Depending on the current government, the economy is oriented towards
a certain goal, in Argentinas case it was international investments and
macro economical decisions, which ultimately led to the devaluation of
the Argentinian peso. Having all of this in mind all delegates as
economist should consider the following questions to guide their
thoughts and their proposals:
1. Which countries have intentionally devaluated their currency?
2. What is the rate of inflation in this nations? And what is the
projection for next year?
3. Should a loan or an investment fund be given to all of the LatinAmerican countries or just those who are currently aiming to
obtain a better international market?
4. How risky is it to devaluate ones currency to benefit imports and
exports whilst utilizing the dollar in terms of inflation and local
business?
5. If other nations should pay a tax or a bill to help out other nations
recuperation to benefit the overall economic development?
6. How much should the world bank loan or invest into one nation
and why?
7. Which are the nations with the most potential and the worse
economical state at the time?
8. How can you sell your countrys market and promote external
investment or a WB loan for your country? (only if you are a
delegate for a Latin-American nation)
Sources:

FocusEconomics
http://www.focuseconomics.com/regions/latinamerica
Currency Devaluation and Revaluation
https://www.newyorkfed.org/aboutthefed/fedpoint/fed38.html
Inflation, consumer prices (annual %)

http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG/countries/HTxj?
display=graph
GDP growth (annual %)
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/HTxj?
display=graph
World Bank
http://www.worldbank.org/en/news/pressrelease/2015/10/06/worldbank
latinamericasslowdownputspressureonjobsandhouseholdincomes
Forbes
http://www.forbes.com/sites/nathanielparishflannery/2015/05/29/investment
inlatinamericaisdwindling/#6a67b3606f92
FocusEconomics
http://www.focuseconomics.com/