Revaluation puts agricultural exporting companies at risk

“Six of the main agricultural export associations expressed our concern about the decrease in the value of the dollar.

The behavior of the currency in recent months has led to a decline in export revenues in the face of a more than significant increase in production costs.

The revaluation and high increases in labor costs are a combination that directly threatens the stability and sustainability of many companies.

We represent six of the country's main agricultural export sectors and together we generate the majority of formal rural employment.

In whole or in a significant portion, these sectors depend on exports, and in turn, the domestic market depends on import prices.

The current level of a revalued exchange rate, in the context of high increases in labor costs over the last three years, coupled with increases in input costs, puts the viability of many companies in these sectors at risk.

Many factors influence the behavior of the exchange rate, including the weakness of the dollar in international markets.

A competitive exchange rate is necessary to encourage exports, but it is also the best tariff on imports of cheap and sometimes subsidized goods, without the need for safeguards or renegotiation of trade agreements. It also helps to reduce smuggling.

It is not easy to establish an equilibrium exchange rate or to influence it; however, there are possible actions: lowering the interest rate to reduce the incentive for speculative capital, increasing the reserves of the Central Bank, and reviewing the origin of remittances to take measures are the easiest to implement.

With an exchange rate at this level, it is difficult for the government to achieve its goal of diversifying and growing agricultural exports.

A dynamic and growing export sector contributes to the generation of formal employment and well-being.”

Source: Corpohass