The good moment that the Peruvian sol is going through, as it appreciates during the last three months against the dollarhas caused many to wonder if the cheap exchange rate will have a positive impact on the economy Peruvian, especially in the price of foodwhich daily affects the pocket of thousands of Peruvians.
How does a cheap dollar influence the price of food?
In dialogue with La República, the economist Eduardo Recoba explains that the The impact of the cheap dollar on the basic family basket is uneven or mixed. On the one hand, it indicates that it is healthy to have a exchange rate down; however, on the other hand, it is complicated, especially for those who provide imported inputs.
“For example, if you import soybeans, when paying for it in dollars, there would be an effect in quotes that would favor the final consumer because they will pay less, but in the international market, inputs or raw materials rise in price. Although there is a cheap dollar, there is an environment of global, systemic and prolonged inflation, which will at least continue throughout 2023″Explain.
“It’s not so much that a cheap dollar favors the final prices of a basic family basket, what happens is that the exchange rate, being tied to an environment of international prices, will cause a disruption. You can have a cheap exchange rate, but what is happening abroad resists very high inflation. So the final effect is diluted,” she adds.
The cost of the basic family basket rose to S/415 in 2022. Photo: Andina
Recoba emphasizes that in 2022, the price of the dollar in our country was better positioned, when it reached levels of S/3,649. “Now we are claiming victory for the pure. It is not that this dollar is cheap, it is normal and responds to an environment of monetary stability due to the reserves and the exchange position”, he indicates.
“It will have a bit of an impact. Suddenly we are going to have cheaper vegetable oil, a chicken that returns to S/8.60 per kilo, but it does not go beyond that, because behind it there is an international environment,” he illustrates.
Will the inflationary phenomenon continue?
The expert explains that although in industrialized economies, the inflation is yielding, from the other side, in emerging economies such as Peru, Chile, Colombia, the convergence to a stable range of the price system is still slow.
“We will probably see a better price trajectory in 2024 as there is further stabilization globally, and as the Russian-Ukrainian war moderate the tone of prices, especially food and energy, because this war is causing a food and energy crisis,” he recalls.
Cheap exchange rate: who benefits and who loses?
Temporarily, a low exchange rate favors the importing sector, while exporters would have a negative impact because their shipments are priced in dollars. “Some things will change, for example, importers of capital goods will see that their financial statements at the end of the second quarter will be better than the first,” he says.
Along these lines, he specifies that the exchange rate will follow a path with very mild volatility for the rest of the year. “We are not going to see those obscene rises like in 2021, nor those falls in 2022, which were much more remarkable, but this year we will have a calmer dollar, moving in stable ranges,” he comments.
By way of recommendationRecoba advises that peruvian homes, Above all, those with medium incomes should take advantage of these dollar slumps to acquire more of this currencyeven if it is US$100 or US$/150 per month, because later the US currency will continue on a rising trajectory. On the other hand, he also recommends not neglecting the euro, which currently “is a cheap currency and has room to grow.”
The dollar goes down: what will the impact on fuel be like?
It is the same logic. The fuels are explained through the international price of Petroleum, which is a commodity priced in dollars. “To the extent that we have a temporarily cheap dollar, we would have a derivative such as premium diesel or gasoline that is priced at at least S/17.20 a gallon,” explains Recoba.
“But this will reverse to the extent that the dollar rises again, and it will be high again, because although it is true, the federal reserve is not going to aggressively raise its reference rates in the short term like 2022 , it will continue to rise. It will not be a dollar on steroids either, but it will continue to rise,” he points out.
Recoba attributes this logic to the large number of mining exports, reserves and the good performance of the Central Reserve Bank of Peru (BCRP), as well as illegal money laundering and drug trafficking operations.
“There is a lot of speculation”
In the words of the economist Javier Zúñiga, the low exchange rate should impact the prices of the basic basket; However, another factor that slows it down is that there is a lot of speculation in Peru.
“Logically, with a cheap dollar, the prices of imported food, the price of oil, steel, inputs that make cement, medicines, etc., should fall, but that takes a long time because we are a country where the speculator takes advantage of the circumstance , that is to say he loves to keep selling high when he should sell low”Add.
According to the BCRP macroeconomic expectations survey, economic agents estimate that the exchange rate would average at the end of 2023 between S/3.80 and S/3.82.
Source: Larepublica
Alia is a professional author and journalist, working at 247 news agency. She writes on various topics from economy news to general interest pieces, providing readers with relevant and informative content. With years of experience, she brings a unique perspective and in-depth analysis to her work.
