The Impact of Political Change on the Chilean Exchange Rate: A Comprehensive Analysis

2024-04-05 12:43:39
The political change in Chile has been reflected in the exchange rate. (Infobae)

The US dollar was initially traded at 944.37 Chilean pesos on average, so it represented a change of 0.19% compared to the value of the previous day, when it ended with 942.55 pesos.

In relation to the profitability of the last week, the American dollar records a drop of 3.53%; On the contrary, in the last year it still has an increase of 15.97%.

Compared to previous days, it puts a stop to three consecutive days with a negative trend. In the last week, the volatility is somewhat higher than that accumulated in the last year, which indicates that it presents greater changes than the general trend of the value.

After a year without economic growth, Chile might have a rebound by 2024 and 2025, according to estimates from the Organization for Economic Cooperation and Development (OECD).

He anticipates that the outlook will improve due to the rise in real wages due to the decrease in inflation and the fall in interest rates, allowing Chileans to improve their consumption.

It indicates that production will increase by 1.8% and 2.5% in 2025. The outlook is positive since business confidence has improved, as well as the demand for minerals, which will sustain exports. It estimates that inflation will reach the central bank’s goal in the second half of 2024, from then on it will decrease at a slower pace.

The Chilean peso has been the legal tender of Chile since 1975, it resumes the use of the peso sign ($) and is regulated by the Central Bank of Chile, which controls the amount of money minted.

The Chilean currency was established in 1817 following the country’s independence, but it was not until 1851 that the decimal system was established in the Chilean peso, which is now made up of 100 centavos. As time has passed, the Chilean peso has changed, but It is currently counted in whole pesos.

To date you can find coins of 5, 10, 50, 100 and 500 pesos, the latter was the first bimetallic coin produced in the country. In 2009, an attempt was made to make 20 and 200 peso coins, but the project was repudiated by Congress. Meanwhile, in 2017 it was approved to stop issuing 1 and 5 peso coins.

Likewise, in October 2018, the Chilean Central Bank announced that it would begin withdrawing from circulation the 100 peso coins manufactured between 1981 and 2000, in order to reduce their coexistence with current coins, although they are still valid.

In terms of economic matters, Chile had a strong fiscal response in 2021, which allowed it to grow up to 11.7%, being one of the fastest recoveries in the world following the coronavirus pandemic. This situation is explained by consumption driven by the withdrawal of pension funds and direct fiscal support.

Despite this, the recovery in the labor market has been slower and inflation has also affected Chile, fueled by strong pressures on demand, increases in raw material prices, interruptions in supplies and the depreciation of the peso, which which finally led to having the highest public debt in three decades (37%).

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