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Strong peso is a thorny issue

The rising currency aids many Colombians. But some, such as rose exporters, feel pinched.
By Chris Kraul, Times Staff Writer
May 19, 2007

BOGOTA, COLOMBIA — The Colombian peso is on a hot streak, and that's good for national pride, consumers of luxury imports and tourists heading to Disney World. But it's a bouquet of trouble for Bogota flower grower Carlos Borrero and the rest of this nation's export-centered rose industry.

Like most growers who sell abroad, Borrero is paid in dollars but absorbs his costs in pesos. That means the revenue he's taking in buys about 40% less locally than four years ago. Meanwhile, the cost of his labor and materials have risen 40% in the same period.

"It's like I lost a full year of income because of the exchange fluctuation since 2004. How the hell can a small business survive that?" asked Borrero, who has an engineering doctorate from Michigan State and whose 75-acre farm in the Bogota suburb of La Punta ships $2 million worth of roses and carnations to the United States a year.

Nearly all world currencies have gained against the dollar in recent years; the dollar has slid 30% in value since 2002 against an index of world currencies, according to the International Monetary Fund. But the greenback's decline has been steeper against the currencies of Third World countries whose economies have been lifted by booming demand for commodities such as copper, sugar and soybeans, and the incoming floods of dollars chasing them.

The dollar buys 20% fewer Colombian pesos than it did a year ago and 30% fewer than it did four years ago.

But there is more to the peso's appreciation than demand for Colombia's oil, coal, bananas, coffee and other commodities. As never before, foreign investors are here buying up banks, factories and real estate.

Total annual investment now equates to 27% of the nation's annual economic output, reflecting growing confidence in Colombia and the policies of President Alvaro Uribe, said Standard & Poor's analyst Richard Francis in New York.

The rise in the peso's value is visible even on the streets: Sales of new cars, most of them imported, are up 50% in the first four months of this year, said economist Mauricio Cardenas of the Fedesarrollo think tank in Bogota. The peso's increased purchasing power means more imports, which are growing at a 23% annual rate, he added.

The number of construction permits grew 26.5% over the 12 months ended in March, a reflection of a real estate market frenzy. The boom has sparked concerns about inflation at Colombia's central bank, which raised the benchmark loan rate by a quarter percentage point to 8.75% on Friday.

Many Colombian exports haven't suffered even though a strong peso makes them more expensive. But that's not the case with flowers.

After years of strong business fueled by Americans' appreciation of big-budded Colombian roses, the industry is fighting for survival amid stiff competition from Ecuador, China, Kenya and Mexico — relative newcomers to rose exporting.

Although Colombia shipped almost $800 million in flowers to the United States last year, the industry has cut margins to the bone to maintain its market share. Investment in new varieties and technology has shrunk, according to the grower industry association, Asocolflores.

Borrero, whose family has been in the flower business since 1969, said his company, Rosas Sabanillas, will chalk up its first annual loss ever this year, after barely breaking even last year. He worries about having to let some of his 230 employees go, many of whom are single mothers who took out mortgages to buy houses.

Other companies are faring far worse. Five major flower growers have either scaled back operations or gone bankrupt over the last year. Total jobs in the cut-flower industry have fallen by 12,000 since 2005, a 10% loss.

The industry is screaming for relief, going so far as to propose that Uribe stop letting the peso float freely and instead establish a fixed "exchange rate platform" of 2,500 pesos to the dollar. That would immediately strengthen the dollar by 20% over its current value of about 1,987 pesos and make flower exports more competitive.

"We are saying for the first time that we are in serious difficulties and at risk of extinction," Borrero said.

Fedesarrollo's Cardenas said the peso's high relative value was cyclical, and it would eventually devalue back to an "equilibrium" of 2,500 pesos to the dollar.

For Borrero, it can't come too soon.

"The revaluation of the peso is definitely cyclical," he said. "What we don't know is: Will we, the flower growers, still be around for the turnaround?"

________________________________________
chris.kraul at latimes.com

By elk on May 19, 2007, 04:37 in Friendly Talkzone.

panthdave says on May 19, 2007, 05:07:

I can Vouch for the Flowers In Miami I know of a couple big wholesales that are switching gears so they don't have t raise there prices to there customers which I work for one and they know we would review there prices if they are raised. Noticing many of our deliveries are in Ecuador boxes instead of Colombia boxes the flowers which we use for Centerpieces in Social Events and Corporate Events in Miami..

Just a notice I have seen and heard from our Floral Dept. in our company in the last month many boxes have Ecuador instead of Colombia for Roses..and per our floral dept. Per the wholesaler it makes sense now because the quality is better and 2 with the Peso stronger it just makes sense to look elsewhere for florals instead of Colombia..

panthdave Miami

panthdave Miami

panthdave says on May 19, 2007, 05:22:

My Opinion Strong Peso Hurts Colombia.. Unemployment will be up and Exports will be down..big time..

Great for the United States..for exports but if you notice the European Union is definitely watching the Euro on this situation and if the Euro gets stronger against the dollar there exports to US will definitely go down and that means one thing Unemployment and Exports down..

panthdave Miami

panthdave Miami

Waterdawg says on May 19, 2007, 06:54:

Many more Outfits are feeling the pain , not just flowers . The Fed. here better get a grip on this and fast !

cayita says on May 19, 2007, 07:19:

my cousin is a flower grower here in Colombia. As far as fed action...it is too late for that.

Waterdawg says on May 19, 2007, 08:19:

Not the US. Fed ! I'm talking about the Colombian Govt.. As mentioned they need to peg the peso at something like 2500 to the buck and roll with it for a while .

miamimike says on May 19, 2007, 09:51:

Anyone Notice the Greenbacks Fall could be Correlated to A event like when Mr Bush assumed(more or less) his seat in the WH? Odd both events happened in the same time frame(like a year or so afterwards) more or less,,,BTW, Look our Staggering US Deficit now and WHO owns all our(usa) Paper debt Instruments(china&japan),,,,

The Cut Flower in Colombia has seen nothing yet, wait 'til those Chinese Roses start coming to Europe and the USA. Chinese Wine is already starting to show up on the Shelves in the Winery stores here in Miami,our local news, (Do you hear that Chile and Argentina?) The Herald, just ran an article about that 2 days ago.China says it is now perfecting the Storage during Air Transit for Cut flowers to the USA/Europe and when that happens the market here will be flooded with Roses as it is now with cheap electronics,Bicycles,underwear ect,,,

Oh and less jobs will be the end stage result in Col as has happened in the USA,,,Like One time US Presidental Candidate Ross Perot once uttered(1991) in a not so eloquent but very true statement, "Hear that Giant Sucking Sound?" Now it can be heard from West to East as jobs leave the country,,,

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

CaritadeAngel says on May 19, 2007, 10:05:

Can you put a link to where you got that article? "Nolite id cogere, cape malleum majorem."

"I hope I never say anything worth quoting".

CaritadeAngel says on May 19, 2007, 10:08:

A strong peso will damage Colombia in the long term As will any increase in imports without development of Colombia's supply capasity in high-end value (ie technology, not agricultural products).

"Nolite id cogere, cape malleum majorem."

"I hope I never say anything worth quoting".

miamimike says on May 19, 2007, 10:12:

CAngel-Article on Chinese Wine Exports?? Here it is: http://www.miamiherald.com/277/story/108387.html

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

Ctg Bound says on May 19, 2007, 10:13:

panthdave A strong currency overall helps a Country, not hurts it, if you look at the best econmies in the world you will find they have strong currencies, that includes the US, whos currency at the moment is heading South against most currencies, but still is a strong currency.

Large currency fluctuations are a pain for a Country, not strong currencies as long as a currency doesn't become overvalued.

As to companies that complain like the flower companies, tough, if they can't compete, get out of the business.

For every one that complains, there are many that don't mind you, but they don't make the headlines.

As to the Colombian currency itself, it should not be taken in isolation, many of the things that Colombia sells abroad and competes with other Countries in export markets, also have their currencies rising against the dollar as well.

Ctg Bound says on May 19, 2007, 10:16:

miamimike As to less jobs overall in Colombia or the US because of China, we shall see, I doubt it, although certain things will move to China, then onto other Countries, but so what that has been going on for decades.

miamimike says on May 19, 2007, 10:18:

Colombia simply cannot compete against Big China with its floating currency fixed at an Artifically low rate. Impossible, as Col simply cannot retalitate in a like manner and subsidze any of its Industries like China can and does,,,

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

miamimike says on May 19, 2007, 10:25:

You have never observed the drain of American Jobs in the past 30-40 years as you see now. You don't have to wait and see the results-take a Road trip thru the Northern USA from Industrial Corridor Cities starting in Wisc going East into Ohio and Pensylvania, south from Michigan to the Carolinas who have had massive job losses in Textile and Furniture making. Many of these cities look like Ghost towns(my old hometown of Erie,Pa looks like this(midway between Buffalo NY and Clevland Ohio) Its Happened already! No need to wait and see, its a "done deal"! Ya se fue! LOL

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

panthdave says on May 19, 2007, 10:32:

CTG Bound...Your nuts Colombia Needs Exports Other than Cocaine. Colombia even with a strong Peso cannot be a center of financial activities like the First World countries.. Without Exports Jobs will be lost and matter of fact thinking about it growers might go back to Coca again since they cannot sell legit products because American is going elsewhere due to the fact of the stonger Peso.Money talks.. If they can get a better deal then thats it..there going in that direction..Even if they have to buy off Chaves which is still legal to buy products from Venezuela.. What don't you ask somebody who was just laid off in Medellin from the textile factory because orders have dropped and see what he says..Are you going to put food on his table..So I would rethink..what the Peso is doing right now..to the Country of Colombia Yes for the rich they don't mind but what about the middle class and poor..that depend on trucking jobs,factory jobs,Growers who have employees working..

Colombian needs the Peso to be weak end of story...

panthdave Miami

panthdave Miami

miamimike says on May 19, 2007, 10:36:

Ctg Bound-here on some links on those Job Losses that have already occurred in the US Textile and Furniture Industries.

Furniture: http://www.pkarchive.org/economy/Nightline080803.html

Textile Losses:http://www.soc.duke.edu/resources/docs/newsobserver_com_gereffi.htm

BTW, while some bemoan the current state of the Peso, it is still close to 120% higher then on my first trip to Col in the Mid 90s when the Peso was trading at 810cp:1USD so it is still a very good value for those who have dollars. Trouble is many look at the Peso's fall in the short term and one could guess since when they started to travel to Col in the recent past it has always been High(CP)so any short term drop is a relative disaster but in the long term reality, the CP is still a very good value for US Dollared Americans. Gator posted on this not long ago when he recalled it at like 150 CP to one USD! 150:1 !!! The 2800 CP was simply not reality and anyhow its not the Peso that is so strong, our Dollar has weakened. My US and Europe based stock Acounts OTH have soared in recent months with a record high DOW. I know this high Dow is not forever and not reality and sooner or later, History has shown it will go down and rise again. Same with the CP,,,

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

Ctg Bound says on May 19, 2007, 13:14:

Job losses There are always job losses and they like to blame it on somebody, the present bogey man is China, in the case of some industries that is correct like textiles and cheap toys for the last few years, not few decades though, but so what.

Some industries die in Countries and move to others and move again, this cycle is nothing new, in the case of textiles they have been moving to other Countries for decades from the 1st world, for most of that time, nothing do with China. Others companies that didn't exist start, later move to other Countries, it goes on and on and has been that way since the industrial revolution started.

Most companies in Colombia have no problem with the strong pesos, also most exports are un-affected either for the simple reason that China doesn't export most things Colombia does.

You quote the strong Pesos ansd the under valued Yuan, Colombia wage inflation is approx 5%, Chinas wage inflation in the textile sector is 20-30% and no sign of slowing down, even worse in other sectors

As to links I never looked at them, but I can post links out that show many problems that China is presently having and other to the problems they are going to have.

As to the Medellin textile sector, they were quoting three years ago it would disapper, it never did, some companies closed down others expanded, the way it always is.

The future will let us know what is going to happen, but at the moment I don't see a lot new.

scotty says on May 19, 2007, 14:06:

not us CB do you mean we(the US) arent the boogy man in this, China is actually getting blamed for something? Im shocked!

Get Rhythm, when you got the blues. Johnny Cash

tomtom33 says on May 19, 2007, 14:32:

US job losses. Yup, the US has been losing thousands for years. And look where they are today. With an estimated 12 million undocumented workers, the unemployment rate stands at less than 5%. That, my friends, is defined as full employment.

The US doesn't have to make textiles. Let China and Colombia do that.

Like it or not, the world economy is here. Tariffs are, or should be, a thing of the past.

And, yes, I know there is underemployment and some people have lost work. That shit happens as a free economy adjusts itself.

Believe it or not, Chica has some problems as well.

lpdiver says on May 19, 2007, 16:04:

tt33 true... China is under a growing labor crunch and it will continue to get worse. Industrial labor has risen from two cents an hour to approaching a dollar an hour.

Chinese manufacturers are having increasing problems staffing their factories and retaining employees. They are starting to have to fork over money and benefits.

Like it or not we now live in a world economy. I dispise Wal-Mart yet still shop there some. Money talks.

t

"cook some rice!"

Atrevido says on May 19, 2007, 17:31:

¡Solo falta café de China!
¡Solo falta café de China!

Gator says on May 19, 2007, 18:03:

Not To Bilittle Others But... Panthdave and Miamimike have a good take on this situation. ALL persons who are exporting to the USA are hurting. I also feel the peso has been artificially high for three or four years. Than God we liquidated just about all or business holdings and now only have the apartmento in Bogotá and a small place in Juamandi.

While we do have a lot of dollars in USA Banks who can forget the Mexican peso crisis of 1994–95 when a LOT of gringos really got whacked with Mexican Bank Accounts? Not me! We basically live off our pesos but you can bet we will not be doing any large dollar transfers just now. As my Grandfather, God rest his soul, used to say, "Save your Confederate money, boys. The South will rise again.

P.S. Unless you have pesos I would not buy property just yet.

"Brevior Sltare Cum Deformibus Mulieribus Est Vita!" .

"Brevior Sltare Cum Deformibus Mulieribus Est Vita!" .

poco says on May 19, 2007, 22:17:

Pie in the sky event like when Mr Bush assumed (more or less) his seat in the WH? Odd both events happened in the same time frame(like a year or so afterwards) more or less,,,BTW, Look our Staggering US Deficit now and WHO owns all our(usa) Paper debt Instruments(china&japan),,,,

No kidding !!! I thought it was the renewed popularity of Mork and Mindy reruns coupled with the introduction of edible female panties that caused all the U.S. markets to increase 50 plus percent during this time.

Well, despite miamimikes knowledge of all things global, coupled with a deep understanding of construction methods and the medical system, the facts are quite different.

Could it be the Japanese have large savings ? Right, those darn Chinese must have 4% !!!!! HUGE,, better 1.3 Billion have jobs and aren't rattling the sword.

"Violence is the first refuge of the incompetent" - Isaac Asimov

miamimike says on May 20, 2007, 01:38:

Tom Tom You mention Full employment at 5% unemployment but in what Job categories? Here in Miami and also in Pennsylvania(NW) there are a lot of help wanted signs in the windows but in places like BK and Wendy's flipping Burgers. UnEmployment is less then that in my field but Archie Bunker Factory Schlebs getting their jobs outsourced at 50 years of age in all probability won't be going back for that type retraining so its off to Mel's Diner, BK or a Greeter's Job at Walmart. Poco -don't like those long posts of mine,eh? LOL. You are entitled to your opinion as I am mine; they are like Assholes we all have one! Something like the Fotos of the Cell phone holders(anatomy) you are so fond of,,,LOL Actually I prefer fotos of that area of the Anatomy without the clothpocket,,,LOL Sincere Apologies for having worked(imagine that LOL)in Construction and the Medical field in my working years,,,damn that Osmotic process, try as I may to avoid it, at times it got the better of me and occassionally I retained a thing or two,,,LOL

Poco on that Pie Chart(I like Ross Perot's Chart better though, even a simpleton like me could grasp that one LOL)while I respect your total Federal Debt Pie, I see a Vast difference in yours(8708 Billion) and others like the one below by the Ben Franklin Patriots that show a Total Federal Debt of 8 Trillion + ,,,As "W" uttered in the 2000 Prez Debates, must be that Fuzzy Math,,,LOL For every opinion and Political persuassion there is a Pie chart or set of Figures, something like Maps showing Saddam's Cache of WMDs prior to the Invasion,,,In this it was a case of Fuzzy Maps,,,

http://benfrank.net/patriots/lootingamerica
Likewisethe following link differs with your Pie chart on what Countries hold the Larger percentages of Our IOUs! More Fuzzy Math LOL

http://www.usatoday.com/money/economy/2005-08-27-growing-debt_x.htm

Warning on use of Pie Chart Unless it is sliced up by Ross Perot!

http://www.usf.uni-osnabrueck.de/~breiter/tools/piechart/warning.en.html

Ross Perot's Famous 1992 "State of the Art" Pie Chart:

http://www.youtube.com/watch?v=ERlGndQ_xtM&mode=related&search=

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

Robert Jorge says on May 20, 2007, 09:35:

Hey miamimike. Good retort. Thanks for keeping a sense of humor about it too. I have only one question, and I feel very stupid for asking: but isn't 8000 billion the same as 8 trillion? I get all flustered when I see that many zeros.

--"I believe in making the world safe for our children. But not for our children's children, because I don't think that children should be having sex." - Jack Handy

poco says on May 20, 2007, 10:34:

Anatomy I am mine; they are like Assholes we all have one!

Yes, but some stink more than others.

"Violence is the first refuge of the incompetent" - Isaac Asimov

tomtom33 says on May 20, 2007, 12:04:

Mike that is a national average of all categories. You can pick all the nits you like, and tell all the sad stories of one family, one area, or even one industry. The bottom line is that less than 5% are unemployed in the US.

miamimike says on May 20, 2007, 12:34:

Tom, in my Area of pennsylvania its more then One Family and the area is huge from Wisc on down to Ohio south to Indiana. Sure if overall professions are factored in,they may come up with a 5% number. This current ADMIN IS FAMOUS FOR THIS. But in the Rustbelt states lets look at Steelworkers, assembly line Auto Workers ect. Thousands out of work that pay a decent wage but if you want to factor in Starbucks, wendys, BK then thats a different set of numbers. Could You retire to Col and set enough aside to buy 2 Condos on TodAY'S BK wages???

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

cayita says on May 20, 2007, 13:00:

of my limited understanding of the US debt isn't the US getting what amounts to a very low interest unlimited loan that has created that debt? I don't know about you but if I had people standing in line to loan me money at 3% interest or so to fund my projects I would be laughing all the way to the bank. I don't know a company that would not jump at that kind of money...

miamimike says on May 20, 2007, 13:12:

Tinto-I think its a Moot Point as far as the past,, we did not have the Industrial Job Losses in such large numbers as we see today. Now even IT jobs are outsourced to India ect. You can find a chart or Stats to fit any opinion/viewpoint. Who collected the Stats, crunched the numbers? Then in the case of my old home area(erie,Pa)you start looking at what factories closed and what old neighbors lost their Jobs and this puts a face on the Job Losses. Income taxes tabulated in India as well as some local Docs sending Xrays to India VIA the Net for Interpretation by an Indian Radiologist, Hope those OK with outsourcing are content with this aspect of Outsourcing. I personally want my Xrays read by a Doc of my Choice, be it the USA, Col Mexico ect and my Taxes tabulated by the CPA whose desk I sit at,,,.

"Wait a minute. What did you just say? You're predicting $4-a-gallon gas? ... That's interesting. I hadn't heard that." -- Feb. 28, 2008 --George W. Bush, Washington, D.C.,

tomtom33 says on May 20, 2007, 15:48:

I still maintain a home in Wis. I am familiar with the rust belt. Figures lie and liars figure. The US, despite great jobs losses over many decades, is still at full employment today. The current administration uses number provided by the Bureau of Labor Statistics. The methodology of the BLS has not changed much, if at all, from previous administrations.

cali373 says on May 20, 2007, 16:39:

maybe Mr.Borrero should cut down on so much pesticide amounts that are not needed.

Well if roses become inefficient to grow in colombia then colombia will have to switch to something that other countries are willing to buy. competition is better for the overall economy, in this case it would be the US economy. Colombia is still backwards when it coems to modernizing. I still do not understand why they are still growing coffee. get over it already.

Smile if you are a thinker!

cali373 says on May 20, 2007, 16:57:

While the EU does look in to the value of the Euro, the EU countries are not stupid like latin american countries. Within the Euro zone countries pay importers in Euros anyway so there is no currency exchange. Another thing is that most large trading partners of EU countries are NOT the US but countries within the EU so trade benefits the EU. Latin American countries have one major trading partner which is the US and that makes their economy and sovereignty very vulnerable. However they either do not learn or the US does not allow a change in the game plan.

Smile if you are a thinker!

cali373 says on May 20, 2007, 17:14:

The Fed and the US government want a weak dollar

While I see why a country´s desire to not have a very string currency for the sake of exports, I don't agree because Bernanke and company are very interested in inflation and policies have been against a weak dollar. Foreign patsies that purchase US bonds actually make the US dollar stronger (e.g. china, Saudi) not weaker. So far the party has been working since the 80´s. The Fed is more interested in inflation than unemployment.

Smile if you are a thinker!

cali373 says on May 20, 2007, 17:22:

"growers might go back to Coca again"

Like if they ever left growing coca. LOL

Smile if you are a thinker!

adrimm says on May 20, 2007, 17:24:

I'm not convinced it is strong peso.. I think it is a weakening US dollar. The Canadian dollar is hitting 30 year highs against the US dollar, and to Canadians the Peso hasn't really strengthened much in the last 3 months or so.