Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: elmatador who wrote (19658)	6/11/2002 10:06:16 PM
From: EL KABONG!!!	Read Replies (1) of 74559

elmatador, I was the one who had originally asked Jay about the effect of the falling dollar on South American nations. I realize that the price of oil is dollar denominated, and therefore, the price of oil drops. But what I was looking for was more in the way of how their domestic currencies are affected. For example, some nations peg their domestic currencies to the dollar, so a falling dollar (in effect, and quite perversely) inflates their currency (I think). It affects their people even greater, since so many South Americans have chosen to keep their investments in dollar denominated vehicles (sometimes in a non-domestic bank) to avoid the spiraling inflation endemic in their own currencies. Sort of a damned-if-you-do and damned-if-you-don't situation for them... Other nations might benefit. (I'm thinking primarily of Chile and Uruguay here, and maybe Colombia a little bit.) But I'm looking for how others feel, or what they sense may happen. My own gut feel is that South American emerging market plays are in seriously deep doggy-doo now, and it's not likely to get better any time soon. Would you agree? Thanks... KJC

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