In what has been a rough three months for some of the major economic forces in South America, the currencies in Argentina, Brazil and Venezuela are falling in comparison to the U.S. dollar – drawing comparisons to the low levels reached during the 2008 financial crisis.
The Venezuelan bolívar and the Brazilian real are respectively the two currencies that have been devalued the most, with the U.S. dollar rising 43 percent against the real in the last two years, 19 percent of the increase occurring within the last six months.
Brazilian authorities announced last week a $60 billion program they hope will halt the slide of the real. Similar to moves in Indonesia and Turkey, the move highlights a growing fear in the region that devaluations highlight serious economic threats throughout the region.
“We are in the midst of a significant rebalancing, and the growth outlook for emerging market countries has deteriorated,” said Jens Nordvig, a currency strategist at Nomura in New York, according to the New York Times.
The bolívar, which has struggled under the control of former President Hugo Chávez, dropped 32 percent – going from 4.3 to 6.3 bolívares per dollar – following the death of the late socialist leader. The International Monetary Fund said that it expects Venezuela's economy to contract 0.1 percent this year compared to 5.5 percent growth in 2012.
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The leftist country is expected to have the region's highest inflation at 27 percent, forcing an inevitable cutback in the public spending that was key to Chávez's popularity.
Argentina, which has seen its fair share of economic ups-and-downs in the last 15 years, saw its peso devaluation rate reach 30 percent last year. This exceeded the inflation rate, which remains at an alarming 23 percent.
The U.S. dollar saw gains against other Latin American countries as well, earning 7.8 percent versus the Peruvian sol, 6.7 percent versus the Chilean peso and 9 percent versus the Colombian peso.
The currency issues have affected big business in Latin America, with the region’s largest airline struggling to weather what one analyst called a "perfect storm" of bad news.
The latest setback is part of what LATAM Airlines Group considers a campaign by Argentina's government to undermine the company's competitive advantages against money-losing state-owned Aerolineas Argentinas. That effort reached a critical stage Tuesday night with an eviction notice giving LATAM's subsidiary, LAN Argentina, until month's end to vacate its hangar at the downtown Buenos Aires airport.
"We understand that this isn't an isolated action, but yet another in a growing number of actions taken against our company aimed at damaging our operations in Argentina," LATAM Vice President Enrique Cueto said in a letter to Chile's securities regulator.
He called the eviction notice "illegitimate" and said the company would pursue every available legal action in Argentina to re-establish its contract.
Also this week, LATAM announced a quarterly loss of $330 million due largely to currency fluctuations in Brazil, and it was fined $1 million by Canada in a price-fixing case involving South American cargo shipments.
"This has been a perfect storm because it's all coming together to give the company poor results," EuroAmerica brokerage analyst Jorge Sepulveda said Thursday.
The Associated Press contributed to this report.
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