The world in flight

September 2, 2018 – 6:25 am


Mauricio Cabrera Galvis

In Colombia we celebrate the unexpected but extraordinary voice of the nearly 12 million citizens who said seven times: "No more corruption" and we hope that this will soon be translated into changes in the way of politics and business, the world is shocked by economic crises and policies at different latitudes, which we must pay attention to because they can have negative consequences for the country. Especially the economic.

The closest is that of Argentina, where the peso has devalued more than 100% this year, with a dollar approaching $ 40. In December 2015, when the government of Macri began that supposedly went into the disorder of the previous government recovering, the price of the dollar was $ 9.70.

To defend its currency, the central bank has raised its interest rates to 60%, the highest in the world, and has concluded a loan of $ 50,000 million with the IMF, with the familiar conditions for fiscal sobriety. So far, none of the measures has reassured the Argentinians who still remember with bitterness the losses that the corralito exchange & # 39; caused in 2001.

The neighboring country Brazil has suffered the fear of international investors. The Brazilian real has devalued 31% against the dollar in the past year as a result of the outflow of capital, also under pressure from the political crisis. The impact in Colombia was less, but this is also reflected in the large volatility of the dollar in recent weeks and the upward trend despite the fact that oil prices remain high.

In another corner of the world, Turkey is the market's concern. As a result of the outflow of international capital, the Turkish lira depreciated 27% against the dollar in August, and until now this loss of value reached 80%, although it has recovered somewhat in recent days.

There the causes are somewhat different from Argentina: the excessive external indebtedness and, in particular, the consequences of the commercial sanctions imposed by Trump for the capture of a gringo shepherd accused of espionage and terrorism.

In addition to the contagion effect on international capital flows, the exchange rate crises of these two countries have a negative impact on Colombia due to trade flows. Two years ago, a Turkish lira was worth $ 1150 and today it is worth $ 426. Against the Colombian peso, the Argentine peso went to $ 100 in the same period of $ 330. This enormous appreciation of our currency makes our exports more expensive to those countries, while making imports cheaper there.

The other catastrophe in the world economy is the trade war declared by Mr Trump against Europe and China, where it imposes tariffs on products imported from those countries, to which they have responded with tariffs on the gringo products, in an escalation that tends to get worse

When the elephants fight with the one who suffers, it is grass, says the African saying that applies to Colombia as a spectator of this war because the markets for our export are closed and because we can be flooded with the products that China does not have in the United States. States can sell. We must prepare ourselves for the convulsions of the world economy.

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