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All-time Low Euro: the Latin Countries That Will Suffer The Consequences

With the low price levels of the euro, compared to the dollar, these are the Latin countries that may suffer the most .

Euros hanging with hooks

Photo: Pixabay

LatinAmerican Post | Santiago Gómez Hernández

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Leer en español: Euro por el suelo: los países latinos que sufrirán las consecuencias

The price of the euro against the dollar seems to be in free fall. For the first time in 20 years, the value of the euro stood at 1,029 dollars. Precisely, it would be necessary to go until December 2022, to find similar values.

What is worrying for Europeans is that with the increase in the price of fuel and energy, the European economy does not seem to have an encouraging future, and it is estimated that the price may remain at similar levels or even lower.

As detailed by Antonio Sanabria, professor of Applied Economics at the Complutense University of Madrid, for Newtral it is that as long as the interest rates of the United States Federal Reserve remain high, foreign investment will be more inclined to invest in the North American country.

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The expert explains that an adequate way for the values to return to the usual ones, it is necessary for the European Central Bank to also raise its interest rates to counteract the inflation that almost all the economies are experiencing due to the war in Ukraine.

While this is happening, European exports benefit from becoming more competitive against the dollar. However, imported products will increase in price and this may continue to exacerbate inflation in the old continent.

The relationship between Spain and Latin American countries is very important. Not only because of a past of colonization, nor culturally by sharing the same language and similar values. The relations of Latin America also cover commercial and immigration aspects. 

According to data from Statista , Colombia occupies the 4th position of migrants in Spain, with more than 297,000 registered migrants in 2021; Venezuela is in 6th place with more than 209,000 residents; In 9 position, is Ecuador with about 127,000; 10 is Honduras with more than 123,000 citizens; 13 is the Inca country with 112.00 Peruvians; and 16 is Argentina with 96,000 migrants.

Migration is also linked to the sending of remittances from Spain to Latin America. International money transfers from the global north represent a large percentage of the GDP of countries in the global south.

For example, Mexico, in 2020, received more than 42 billion dollars in remittances from the United States. Followed by Guatemala (USD 11.4 billion), Dominican Republic (USD 8.3 billion), Colombia (USD 6.87 billion), El Salvador (USD 5.9 billion) and Honduras (USD 5.58 billion), according to data from Statista .

Likewise, Spanish investment in Latin America is one of the most important. Behind the United States, China and Latin America itself, Spain represents an important source of foreign investment for several countries.

According to figures from the Mapfre company, Spain manages to invest 150,000 million euros in the region. Approximately half goes to Mexico, which places it as the main destination for this flow of money in the area. With an investment of 45,000 million, Brazil is positioned as the second main destination. The top 5 is closed by Chile, Argentina and Peru.

This just naming one of the countries with the highest investment in the region. But the European bloc's investment in Latin America is only behind the United States and China, according to ECLAC . Being Spain, obviously, and France the first commercial partners of the subcontinent. In third place is Germany. This shows that, inevitably, a European recession will end up affecting the Latin American and Caribbean economy.