Chile Forum

Buy your pesos while you can. The Chilean government has announced that starting Monday it is going to sell $4 billion US to strengthen the peso after last weeks rapid slide (think I got that right).

Read here to see if you can figure out what their goal is in an economic downturn:
http://www.emol.com/noticias/nacional/d ... cia=345939

Seems they are doing this to stop inflation while they are lowering interest rates and injecting a stimulus plan in to the economy of an additional $4 billion.

I don't think we are going to see a major move as Chile simply does not have the clout to control the dollar that much, but they can sure make it sting.

What is going to happen this week is everyone is going to run out and buy pesos while they can, adding to the effect. So, they might actuelly drive it down to say something around 550 in the short term.

Now it looks like we got conflicting reports, this one in English:
http://www.reuters.com/article/marketsN ... 7120090223

It says $3 billion, starting in March

It looks like $3 billion of the $4 billion stimulus package and it is going to start in March, which does not make a lot of sense.

Thanks for the warning. I'm sure the rate will plummet first thing tomorrow though. Fortunately I've sold nearly all my dollars (& unfortunately I don't get paid till 2nd).

James.

Seems that it doesn't have a big effect untill now. Banco Estado pays today 621 pesos/dollar and 793 pesos/euro. But ok, if the idea was to stabilize the peso, then they succeeded for the moment because i don't see a lot of changes yesterday and today...

Charles - Thank you for the heads up alert!

yea, we are going to keep a close eye on it. I do believe it is a bit more comforting to know what direction things are heading, rather than closing our eyes and guessing every time we stick an ATM card in the machine.

As I understand they are not concerned so much with the dollar drifting around, it was last weeks sudden spike that spooked the central bank. They are concerned that with the interest rate drops and other stimulus packages, inflation will be a problem. Which, I don't know if we on the forum complained more when the peso was below 500 or inflation was running wild in 2007/2008.

I think as foreigners we feel the peso move more than inflation.

On the other hand, the idea that Chilean exports will become more expensive in an economic down turn has not got to be good for the economy either. Perhaps.

I think everybody is guessing. No one knows for sure what the impact will be at the end. As 2 weeks ago, chile cutted interest rates, and the peso was expected to fall, but in stead it rised even more.
Now exactly the same, they want to stabilize something that they don't know if it would give an impact. Especially in these economic hard times. I think there are 100 other factors that can cause a peak or a fall next weeks. Are they sure that those 3-4 billion US$ gonna have an impact at all?? I ask myself if this is a really smart move to do this in this moment of crisis...
The only thing i know for sure is that my face is almost green/yellow of the stress that this caused me...

Well, at $50,000 million US a pop, I am not really sure that will have that much impact. I don't think they will be able to move it much, but perhaps slow it down. $50,000 million at a time is really chump change in currency markets circles.

I was thinking, if we where just to add up (assuming this could be done at all) the economic impact on the peso of everyone that reads the Chile forum every year, we could likly come up with say 20 million to 50 million dollars between property purchases, living expenses, investments and so on fairly easily. Even collectively we are general the small fry of the currency world, but none the less in the context of such a small country we likly have some sort of small but measurable effect on the peso.

This is more of a thought experiment, than something that could be measured. I could likly run some sort of anonymous survey, to get an idea assuming everyone was honest.