Latin America currency appreciation to the US Dollar

Investment Opportunities in Regional ETFs

RGE - Latin America EconoMonitor: "So, the major outcome has been exchange rate appreciation. This is shown in Figure 1, in which exchange rates are shown in domestic currency per dollar, so down means an appreciation. Four of the six largest Latin American economies have had significant appreciation in recent months (Venezuela is excluded, as it has a fixed exchange rate). Brazil and Colombia had experienced substantial appreciation earlier on, and the currencies of the two countries now look overvalued. The appreciation of Chile and Peru are in line with that of the euro vis-à-vis the US dollar, but Brazil and Colombia have appreciated even in relation to the euro. Argentina and Venezuela are also experiencing real appreciation, through domestic inflation. So, Mexico seems the only large Latin American economy immune to the current malaise, but it is also the one that would be worst hit by US recession.

(Down on the graph means up appreciation)
In recent years, one of the most trumpeted aspects of Latin American performance was that the region was running a current account surplus (not all of countries, of course). The mix of rapid growth with current account surpluses has been common in Asia, but it has been unusual in Latin America, at least since the 1970s. It could be said that it was due to high commodity prices, but then in the past Latin America managed to run current account deficits even when commodity markets were booming, such as during the 1970s. Colombia is already running a sizable deficit, and Brazil joined the deficit club in the last quarter of 2007. Furthermore, excluding Venezuela, Latin America will be running a deficit in 2008. And, if we take out the terms of trade shock, the current account deficit had already gone back in 2007 to the levels of the crisis of the late 1990s and the early part of this decade (see Figure 2)."

Norton's comments: Try ETFs: EWZ for Brazil, EWA for Australia and FXA for the australian dollar against the US Dollar.