Exchange Rate

Hunter says on Nov 27, 2004, 05:47:

The peso to the US$ Will only get stronger in the next year or two, unless something very negative happens to Colombia.

Hunter

Miguel says on Nov 27, 2004, 06:52:

Opinions? If the law is passed to allow Uribe to seek a second term, what does that mean for the value of the CP?

caslug says on Nov 27, 2004, 10:22:

many reasons for that... US high deficit, high spending, other nations economies getting stronger, etc., It sucks to be an american tourist now... our dollars are weak, and many nations don't like our gov't.

Mr. Hollywood says on Nov 27, 2004, 11:41:

To echo what others said This isn't really about the strength of the peso but, rather, the weakness of the dollar. The dollar is getting creamed against the Euro and Pound. It's a global vote of no-confidence about the current US gov's economic policies.

Dan says on Nov 27, 2004, 12:17:

makes sense... ...that because other countries distrust the US and relying more on Europe that the US economy would take a big hit and the Strength of the Dollar goes right along with it.

God Bless America!

caslug says on Nov 27, 2004, 12:35:

weak dollar means the following... suppose to at least...

foreign imported products get more exp so US consumer buy less foreign products helping ease the trade deficit - hasn't happen, we still buy tons of foreign good. Partly because some country like CHINA purposely keep their exchange rate the same to protect their exports to US.

US export increase because our products are now cheaper, foreign consumers are suppose to buy more helping ease the trade deficit and helping the US economy recovery faster - hasn't happen, yet. Maybe/hopefuly this will happen at least that what US Gov't Economist and politicians would like to see.

Foreign tourist get better bargain coming to visit US - not a noticable increase, because with the stronger euro/pound other places (s. America, E. europe, asia, etc.,) are also cheaper.

US tourist lose purchasing power - definitely has happen. We lost about 10% versus the COL peso in the last 5 mos. alone.

kernow62 says on Nov 27, 2004, 14:14:

According to official figures the US economy is growing ... but who publishes those figures and how do they back up those figures.

Call me a sceptic, but when more and more people are out of work and when my products cost my company more, the economy is not doing too well. Perhaps if I was in the defense industry it might be different.

I can no longer purchase American made products, because the companies have moved production to China or elsewhere, or the companies have been purchased by European firms. I think most of our quality goods come from Swedish & English owned firms now & a few US (made in Mexico or Venezuela), and our lower end produts tend to come from China, Taiwan & Korea.

The latest hit to our business has been the increase in price to the few US products we can still buy, this is apparently (to quote a document sent to us explaining the two consecutive 15% price hikes in one month)because China purchased most of the US supplies of steel.

I think it is perhaps best that I don't try to understand the complexities of a good economy versus a bad one. I would take a lot of convincing at this point.

YEP says on Nov 27, 2004, 14:28:

How is the exchangerate between the Euro/Peso currently/lately ??

------------------------------------------------------------------- Just another scandinavian getting ready to explore South America

gregshav says on Nov 27, 2004, 18:30:

US economy The economy is growing here in the US. Spending continues to grow, housing continues to grow, unemployment is low, interest rates are historically low, and home ownership is at an all time high. The exchange rate is right where the government wants it, a weak dollar makes our products cheaper to sell, and makes it more expensive for imports. This allows domestic production to grow, which helps the overall economy. It's true more and more production is moving overseas, but there are still billions of dollars worth of production coming out of the US, and even though we have a large trade deficit, the US just recently set an all time record for exports. A weak dollar could eventually create problems down the road, but short term it is helping. Also there's a sense to some that the weak dollar is hurting Europe's ability to import products here, and that sits well with Bush, kind of payback it seems.

I'm in the financial industry, and we follow the markets, economy and interest rates closely. For every action there is a reaction, and the weak dollar could later hurt, but if the deficit is dealt with, and I think it will this year, then things will reverse.

Per the colombian peso, I think there is some strength in the peso due to the fact that the economy is growing, it still is a long way from strong, but Uribe seems to have the confidence of world leaders in correcting the long term problems in the country. Although I know some here dislike him, the reality is if foreign companies feel safe in coming to Colombia, then there will be strong growth, and jobs will come. You have to admit, things in Colombia are better than they have been in a long time, and the outlook among the people is one of a positive nature.

kernow62 says on Nov 27, 2004, 19:59:

Unemployment low compared to what? Perhaps compared to other countries, but to a few years ago there is no way it is lower. Home ownership may be at an all time high, I will take your word for that, but so are the costs of home ownership. The wages have come nowhere close to keeping up with the increase in housing costs. So the only reason for the sales must have been the low interest rate, much like in Britain. Now as the rate goes up, assuming a good percentage have adjustable rates (many first time buyers opt this way)many will not be able to afford these houses. So it is an economy built on credit which is not a true picture of the economic well being of a society.

Anyway I have strayed too far off-topic, this is a Colombia forum after all.

Calena67 says on Nov 27, 2004, 20:23:

Unemployment unemployment is low, 5.4%. A few years ago it was in the 4's, but then again 10 years ago it was in the 6's, so historically speaking it is low. The major cost of home ownership is interest rates, since they are so low, then costs of home ownership is down. Actually, wages have increased, not alot, but since interest rates are down, wages have outpaced the cost of home ownership, thus the reason home ownership is at an all time high. The reality in the US is this, any able bodied adult can find a job, maybe not the exact job they want or desire, but there is a job. Not many places can say that, and also, the reason Europe is so upset about the Euro-dollar exchange rate, is they depend on our consumption to fuel their growth. The US does not depend on Europe for growth.

This topic applies to Colombia too, if Colombia can develop alternative industries that they can export, they can grow their economy. The US economy will continue to look for imports, if Colombia can supply some of that, it can improve its situation, and maybe down the road eliminate the rebel problem. Most Americans will not want to venture to Colombia to buy real estate, so an invasion of tourists won't happen anytime soon, the benefit Colombia can realize, is exporting their specialties to a country that is always ready to buy something new.

Also, if the peso strengthens against the dollar, inflation in Colombia will subside which will help tremendously. I truly think if Uribe is re-elected Colombia will experience a period of tremendous growth, and if the government handles it correctly, has the opportunity to become one of the stronger economies in Latin America.

My wife and her daughter are from Cali, and we visit Cartegena regularly. All her family still lives there and she calls almost daily. I follow Colombian news avidly. That doesn't make me an expert, just informed.

Dan says on Nov 28, 2004, 01:15:

YEP: Exchange for Euro: $3302,60

God Bless America!

kernow62 says on Nov 28, 2004, 05:07:

5.4% well if one goes by official figures then it is worse than in the UK, I don't keep up with the news from the rest of Europe.

Nobody in the UK holds much store in the figures being accurate, and it is highly regional, one are might have extremely low overall unemployment and another might have double digit unemployment. Officially everyone in the UK can get a job, not the one they want.

A few years back I even bought a car in the England with 0% interest, no I lie it was in Scotland.

Perhaps the area I live in the US is not the norm, houses have doubled in price in the last 4 years, wages have increased minutely (service industries and few unions), home insurance has doubled in the last 2 years if you can buy it, health insurance has increased, the only thing that I can buy for less now than 4 years ago are computer parts and digital cameras. Interest rates being low does not help with the associated costs of living except larger purchases.

I just know that myself, and a good many of my middle class and lower middle class friends, my fellow small business owners, have never been worse off financially. I assume the same cannot be said of the wealthier citizens in my area, they do not seem unduly burdened by the economy at present.

I am of course grateful for what I do have, I just hope this "good" economy changes.

gregshav says on Nov 28, 2004, 07:01:

Good Economy if home ownership is at an all time high, and prices of houses have doubled, then that would be a good thing for home owners, if you don't own a home, then you made a mistake in not buying one. I don't
want to dispute what your saying, but if insurance doubled in 2 years, you must live where catastrophes are happening on a regular basis. I live where forest fires occur regularly, and homes in my immediate neighborhood burned to the ground just two years ago, and my insurance has gone up 25% in those two years. Sometimes to take advantage of the economy, relocation to more affordable parts of the country is necessary. That's why California is going to have problems in the future, businesses and working people are moving out, while immigrants and illegals are moving in and straining the system.
The financial institution where I work does 0% loans at times, and you can find 0% car loans frequently. When I was in Cartagena, I talked to an Englishman who was planning on selling his house in the London area an moving to Cartagena and buying 5 or 6 condos cash and renting them out and living off the income. He said living in England had become very expensive. This is what people are saying in most of Europe. The US is becoming that way too. But it's all relative, in the late 70's, interest rates were 14%, inflation was 10% and unemployment was 13%. I can't imagine how people made ends meet. They did, and since then, the US economy has been relatively strong except for a couple of short, minor recessions.

In the 50's the US economy was manufacturing and production oriented, it has since become service oriented, people in manufacturing jobs have either had to re-train themselves, or they suffered financially. The economy changes and moves quickly, people who don't continually anticipate change and aren't prepared can become stuck in industries that are dying. To steel workers in the Rust Belt, they probably think the economy is as bad as it ever has been, but just think, if more people own homes than ever before, then how are they doing it. They adapted. That's the key to business in general, adapting to changing times. That is why I think if Colombia can adapt to a new age in their country, they can be one of the stronger latin countries if they play their cards right, time will tell.

I don't think all is peachy in the US, we have to deal with the deficit, and health care and social security, if we can do that, things will continue to be solid. One way we look at business at financial institutions is by how much business we do, not just loans and mortgages, but how much activity is going on. Activity continues to grow, when there are recessions, activity slows to a crawl. According to the Federal Reserve, activity is up everywhere.

People talk about China becoming a major force, it will happen, but it is a long way off. They will have to deal with their own society when they start instituting capitalism, when they do, they could have the same thing happen to them that happened to other communist countries in Eastern Europe and the Soviet Union.

Hunter says on Nov 28, 2004, 08:54:

Dollar weakness There are several reasons for dollar weakness against most other currencies.

The US has a large trade defcit, this can be cancelled out by foreign money being invested in the USA. This foreign money can take two forms, the first is direct investment, building things in the US, or the norm is foreign companies buying US companies. After the tech crash in 2001, foreign companies greatly reduced their purchase of US assets.
This was replaced by the second form, foreign goverments (central banks), buying US liquid assets, either dollars directly, or in most cases US goverment bonds.

Most of the buying was done by Asian goverments to keep their currencies low against the dollar. The EU Countries have not been buying many dollar assets. There has to be some give in the financial system, so that is why the Euro (and some other Countries) has been appreciating against the dollar.

The US goverment also has a large budget deficit, which is also neagative for the dollar.

As to comparing the European economy to the US, there is nothing to compare, overall the old European economies are going nowhere, they are stagnating, whith their ageing populations, all the laws connected with employiong people, they are dieing a death of a thousand cuts. Basically they have to run to stand still.

There is no way the Euro is worth what it is now against the US$, but I expect it to go 1.4-1.6 to the dollar very soon, possibly more.

Anyway enough of this, seeing as this is a Colombian forum not US$ forum.

Hunter

Hunter says on Nov 28, 2004, 09:15:

Europe just talks, but doesn't do a lot.

Japan intervening will help the Yen, not a lot else.

On the flip side there are other Countries taking of exchanging some of their dollar holdings for Euro holdings.

The dollars has a lot further to fall.

Hunter

YEP says on Nov 28, 2004, 09:25:

Thanks Dan ... nice to know that the Euro does well down there

Is that exchangerate at the ATM or anywhere ??

------------------------------------------------------------------- Just another scandinavian getting ready to explore South America

Dan says on Nov 28, 2004, 12:08:

Yep I think it's the interbank rate which includes transfers when withdrawing from ATM's

God Bless America!

Miguel says on Nov 29, 2004, 09:36:

Thanks Everyone Your insights are appreciated on economics, since that's not an area of expertise for me. I asked early in this post about IF the Colombian law changes, allowing Uribe to run for re-election, and he wins, which way would the peso go...judging by this thread, I'm guessing it would go up. ¿Verdad?