{"id":417,"date":"2015-10-15T09:51:20","date_gmt":"2015-10-15T15:51:20","guid":{"rendered":"https:\/\/trends.ufm.edu\/en\/?post_type=articulo-semanal&p=417"},"modified":"2016-11-28T15:31:54","modified_gmt":"2016-11-28T21:31:54","slug":"whats-behind-the-quetzals-recent-appreciation","status":"publish","type":"articulo-semanal","link":"https:\/\/trends.ufm.edu\/en\/article\/whats-behind-the-quetzals-recent-appreciation\/","title":{"rendered":"What\u2019s Behind the Quetzal\u2019s Recent Appreciation?"},"content":{"rendered":"

By Daniel Fern\u00e1ndez M\u00e9ndez October 12, 2015<\/p>\n

d.fernandezm@ufm.edu<\/a><\/p>\n

Translated from Spanish by Andr\u00e9s Contreras<\/p>\n

Latin American economies tend to be highly dependent on raw materials. When the prices of oil and other commodities collapsed in the second half of 2014, Latin American currencies depreciated greatly. The capacity for those countries to generate foreign exchange (FX) reserves was severely affected, resulting in a scarcity of US dollars in their domestic economies that drove the price of dollars higher and plunged local currencies lower.<\/p>\n

\"Currency<\/a><\/p>\n

Source: Central Bank of Chile, Bank of Mexico, Central Bank of Colombia, Bank of Guatemala, Central Bank of Brazil<\/p>\n

 <\/p>\n

Since 2014, these depreciations range from 30.17% for the Mexican peso to 65.71% for the Brazilian real. Yet, in this environment of significant depreciations, the Guatemalan quetzal (GTQ) has appreciated by 2.11%. What has held back the pressure on the Guatemalan currency?<\/p>\n

Like other Latin American countries, Guatemala\u2019s main export products are raw materials. So we would expect similar pressures on the country\u2019s currency. However, the key difference is that Guatemala is also a major importer of raw materials.<\/p>\n

The reason why the GTQ has appreciated is that the price of import products has fallen more than proportionally with the price of Guatemala\u2019s export products. In other words, while the drop in export prices has effectively lowered FX reserve accumulation, the savings derived from lower import prices has more than offset the decline in dollar inflows from exports.<\/p>\n

\"Import<\/a><\/p>\n

Source: Bank of Guatemala data<\/p>\n

At UFM Market Trends we have developed two import and export price indexes that include the prices of Guatemala\u2019s main foreign traded goods, weighted by their relative importance in imports\/exports. Our indexes show that import prices have fallen 31.7% year-over-year, while export prices have declined by only 11.3%. This gap generates an FX inflow that places downward pressure on the exchange rate, generating GTQ appreciation relative to the USD.<\/p>\n

Our finding is consistent with the country\u2019s balance of payment data. As seen below, Guatemala\u2019s structurally negative current account balance suddenly turns positive in the first quarter of 2015.<\/p>\n

\"Current<\/a><\/p>\n

Source: Bank of Guatemala data<\/p>\n

It\u2019s important to keep in mind that the quetzal\u2019s recent appreciation, during a period that has seen significant currency depreciations in other Latin American countries, has little or nothing to do with the central bank\u2019s efforts or the strength of Guatemala\u2019s economy. The appreciation is a result of sudden price variations in international goods that accidentally benefit the national economy.<\/p>\n","protected":false},"excerpt":{"rendered":"

Latin American economies tend to be highly dependent on raw materials. When the prices of oil and other commodities collapsed in the second half of 2014, Latin American currencies depreciated greatly. The capacity for those countries to generate foreign exchange (FX) reserves was severely affected, resulting in a scarcity of US dollars in their domestic economies that drove the price of dollars higher and plunged local currencies lower.<\/p>\n","protected":false},"author":104,"featured_media":424,"comment_status":"open","ping_status":"closed","template":"","meta":{"anio":"2015","mes":"October","id_estadisticas":"","newsletter_link":"","portada_informe":"","subtitulo":"","footnotes":""},"tags":[12],"class_list":["post-417","articulo-semanal","type-articulo-semanal","status-publish","has-post-thumbnail","hentry","tag-guatemala"],"_links":{"self":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/417","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal"}],"about":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/types\/articulo-semanal"}],"author":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/users\/104"}],"replies":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/comments?post=417"}],"version-history":[{"count":1,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/417\/revisions"}],"predecessor-version":[{"id":430,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/articulo-semanal\/417\/revisions\/430"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/media\/424"}],"wp:attachment":[{"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/media?parent=417"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trends.ufm.edu\/en\/wp-json\/wp\/v2\/tags?post=417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}