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FOREIGN EXCHANGE RISK IN CHILE

The Chilean peso has been somewhat volatile over the past year. Since 1 January 2003, the peso has gained strength against the dollar overall moving from 696 pesos to the dollar to 638 pesos to the dollar. However, the peso reached a high of 747 to the dollar and fell as low as 595 to the dollar, movement of more than 25 percent. This suggests that while the currency is currently stronger than at the beginning of the year, investors and others face some risk with regard to the peso ("Currency Table," 2003).

Chile has enjoyed a high level of foreign trade for many years, and its economic growth has been steady. However, the nation does not depend on any one nation, or even any one region, for its foreign trade. Its trade partners are well balanced between Europe, Asia, Latin America and North America, and these relationships are likely to continue over the next ten years. Chile has been careful in its economic growth to refrain from making the mistakes that other developing countries have made; one of these differences has been emphasizing foreign trade as part of its economic progress. Chile has signed free trade agreements with several countries and the EU, and maintains membership in international organizations such as MERCOSUR (which includes Argentina, Brazil, Paraguay and Uruguay in addition to Chile) (de Lambert, 2003). These strategies are likely to help the Chilean peso remain a relatively stable currency, and perhaps will help the currency gain ground against traditionally stronger currencies on the world markets.

However, there are some indications that Chile needs to be vigilant in its economic affairs. The nation's nominal GDP feel from 2001 to 2002, although it rebounded slightly in 2003. The nation's real growth rate remained positive during that time, although it feel from 3.1 percent in 2001 to 2.1 percent in 2002; the real growth rate increased to 3.2 percent in 2003. Also of concern is the nation's ...

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FOREIGN EXCHANGE RISK IN CHILE. (1969, December 31). In LotsofEssays.com. Retrieved 10:20, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1688452.html