Euro: Does the depreciation affect Latin America?

This week Euro reached its lowest level in 20 years, reaching parity against the dollar.

Although recovery was shown on Tuesday, there were still concerns that energy crisis cause an economic recession in Europe at the height of the war in Ukraine and the decision of the European Central Bank to keep interest rates.

Currently, according to Bloomberg, the euro is worth $10,035, one of its lowest levels since December 2002.

“The most important reason for the fall of the euro is the different speed of the monetary policy of the US Federal Reserve and European Central Bank”, commented Juan Carlos Martinez, Professor of Economics at IE University, BBC Mundo.

But what does this fall of the euro mean? The BBC Mundo report points out that this will mean a rise in the cost of living in Europe as imports become more expensive in the midst of the highest inflation since records were set.

“Every time the dollar continues to strengthen, it costs us more in Euro buy a barrel of oil. This is a big problem that we see now,” Martinez said.

To stop this massive depreciation of the euro, experts point out that the European Central Bank must raise interest rates in the eurozone, otherwise the war between Russia and Ukraine should end soon, which they consider unlikely.

But does this situation affect the economy? Latin America? For Elijah Oliveros-Rosen, Senior Economist in Global Economics and Latin America Research, the fact that the euro and the dollar have reached parity “does not have a direct impact on the region.”

In this situation, the region sees only the strengthening of the dollar at the general level.

“The strength of the dollar is not only against the euro, but also against most currencies in the world. developing countriesincluding Latin America,” he added.

Currently, the Latin American countries that have been hit the hardest by the dollar’s rise are Argentina, Chile, and Colombia, as they are showing the worst devaluation of their currencies against the US currency.