So what's all that about a strong dollar? LatAm is whuppin' yer tushes

This chart maps the progress of the US Dollar versus the six main traded currencies in LatAm over the last three months.

Chile Peso (CLP) and Brazil's Real (BRL) have both lost about 7% of value against the greenback in the quarter and as they are both headline-type currencies (Brazil the miracle and Chile the closest thing LatAm has to a serious country) they give the impression that the dollar has been all-conquering down this neck of the woods, too.

But it ain't necessarily so, Joe. Argentina's massively massaged Peso (ARS) has basically held its own vs USD. Meanwhile, three openly traded currencies down this way, namely Mexico's Peso (MXN), Peru's Nuevo Sol (PEN) and Colombia's Peso (COP) have all beaten out the dollar by a couple of percentage points.

Why is this so? My best guess is that LatAm isn't faking some sort of economic recovery. It's actually happening down here.

Regional currencies update

With Bloomie blasting silly headlines about Chile's Peso (CLP) being "the world's best currency this week" and Colombia's "the worst", I thought it was high time to revisit the evolution of local currencies versus the dollar and get a bit of perspective. This one year chart....

.....shows the various rises and falls (or in Argentina's case rises and rises) against the dollar for the major locally floated currencies (not much point in featuring the Vzla Bolivar Fuerte here, and Paraguay's Guaraní.....well, it's never going to attract the attention of George Soros, is it?).

The main takeaway? Some currencies are strengthing back more quickly than others. But in the end, when push comes to shove and despite all the worldwide handwringing about Helicopter Ben and his printing presses, the dollar is still the daddy. Every single major trade currency in LatAm is down against the dollar YoY, even the economic miracle packaged up for saps with a bow and labelled Peru. And with base lending rates dropping fast all over the region as countries try to stimulate growth, the attraction of parking cash at higher risk is lessening, too.

Anecdotally, if you ever need a lesson in what the term "reserve currency" really means come down here with a thousand British Pounds, or Euros, of Aussies or Loonies or even an ounce of gold in your pocket and try to exchange them for the local currency of your choice and at the same time get the same fair deal you'd get for the equivalent amount of USDs. They say travel broadens the mind..................

Mexico's Economy: A visual forecast

Necessary and deserved hat tip to the most wonderfullest source on all things Mexico, The Mex Files.

A loosely connected rant about LatAm currencies

Every now and again, even a dyed-in-the-wool, professional politician will say something that's actually the truth. I was struck by this line spoken by Argentina's Eduardo Duhalde yesterday (as reported in this post).

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"This crisis was born in the USA, it hurts all of us and they have the chance to print money and save their own people. We don't have that opportunity."

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It makes sense on plenty of levels, not least of which the context of Duhalde's argument yesterday, that of "sauve qu'il peut". A couple of mental connections later, and here are two charts that show the evolution of local currencies against the greenback. This one has a 12 month timescale......

.......and we see the Argentine Peso and the Peruvian Sol as having held up the best...so far. But looking at the shorter-term movements.....


.....it's the Chilean Peso that has kicked back strongest in the three month period chosen by default, care of Yahoo Charts. That would be the moment when Bachelet&Co stopped the free-floating rot and due to direct, Keynesian government intervention policies and self-protection, dontcha know....

(Glossary: COP = Colombia Peso, MXN = Mexico Peso, ARS = Argentina Peso, PEN = Peru Nuevo Sol, BRL = Brazil Real, CLP = Chile Peso)

As just one example of the consequences here, the relatively strong dollar helps LatAm exports, of course. However you would expect a strong dollar in a time of strong US economy, not right now in the biggest financial and economic crisis to have hit the industrialized nations (led by the US) in modern times. What's the use of a strong dollar and its ensuing export market advantage when there's no market, except of course to make breathing space and prepare the way for the next round of helicopter flights from Bennyboy?

I could go on and on and on with this particular post, as the angles and tangents are manifold. I could talk about that post way back when I said that the US was keeping its dollar as strong as possible to make sure it doesn't lose its place at the head of the world table. I could talk about inflation risk of weak currencies. There's the whole issue of how soft pegged currencies like the Nuevo Sol and the Argentine Peso have performed much better than the more freely floated regional currencies such as the Mexican Peso or Brazil's Real. The case of the Chilean Peso and its dependence on copper is a particularly fascinating one for a wonk like me.

All those and more. But no, let's stop here. What I really want to say is that Duhalde made a great point yesterday, whether or not he was looking at it in a wider context. The bottom line is that if the USA has decided to protect itself at all costs and let others like us guys down here drown in the muck of its making, then why the **** should we keep playing ball with you guys?

Seriously. What have you guys done for us lately? Your economic policies suck and you still try and tell us how to runs things. You screw up the whole financial world and now you're getting the innocent victims to carry the can.

It's taken me a while but I'm beginning to see that Rafael Correa is absolutely right, basically because I'm not as smart as he is. Take your sovereign bonds, gringos, and stuff them where the sun doesn't shine. We have an abundance of water, farmland, power supply, region-wide democratic governments and importantly a population of caring, kind, willing and hard-working people, from Tijuana to Tierra del Fuego who are evermore pissed at the way the USA and the wider world community has been treating them all this time.

Quid pro quo, dudes. Quid pro quo.