Impact of the devaluation on exports.

DEVALUATION AND REVALUATION
Impact of the devaluation on exports.
An interesting Article of www.TheEconomist.com

According to an article in "The Economist" published on January 9, 2016, propose the issue of the consequences and what facts leads to the devaluation of major currencies are.
In the first part, presented a chart like this, although it is not Colombia, could be assimilated activity regarding the recent events of the year.

An interesting fact that is conducive to highlight the current state of Venezuela, practically it is the country that has led the coup of devaluation and is in considerable losses.
But well, taking up the theme of the article, the author wonders if do products "Made in Russia" become commonplace ?, since the currency depreciation alone could boost exports, then yes. According to our latest Big Mac index, the Russian ruble is one of the cheapest currencies around 69% undervalued against the dollar. The index compares the cost of the famous burger at McDonald's outlets in different countries by converting local prices into dollars using the market exchange rates. It is based on the idea that in the long run, exchange rates should adjust so that a dollar buys the same amount everywhere. If a burger looks like a bargain in a single currency, the currency could be undervalued.
Americans to hunt for burgers abroad have reduced choice price: the index shows most currencies to be cheap relative to the greenback. This is due in part to the decision by the Federal Reserve to raise interest rates when the central banks of the euro zone and Japan are loosening monetary policy. The euro is undervalued by 19% against the dollar, according to the index and the yen 37% .Another force that weakens many currencies, including the ruble, it has been the continued fall in commodity prices since mid-2014. the decline in demand from China and oversupply have undermined the value of exports from Australia, Brazil and Canada, among other places, causing their currencies to wither, too. For the index, which are respectively 24%, 32% and 16% undervalued. If commodity prices continue to fall, they could slip further.

These large devaluations of the currency can hurt, by raising the price of imports and stimulate inflation. But although devaluations can not be pleasant, they are meant to be nutritious. Imports more expensive should encourage consumers to switch to domestic products and stimulate local production. A cheaper currency should also boost growth by stimulating exports.
Between 1980 and 2014, according to an analysis of 60 economies by the IMF, a depreciation of 10% relative to the currencies of trading partners boosted net exports by 1.5% of GDP in the long run, on average. Most of the improvement occurred in the first year.

However, there appear to have provided exactly the same momentum recently devaluations. Japan is the best example. The yen has been depreciating rapidly. A Big Mac was 20% cheaper in Japan than in the United States in 2013; now it is 37% cheaper. However, export volumes have barely budged. This is a surprise: the IMF estimates that Japanese exports are about 20% lower than I would have expected, considering what the yen has weakened. Devaluations in other countries, including South Africa and Turkey, have also disappointed.

A contraction of world trade in dollar terms may be obscuring the benefits of devaluation. Although exports from countries with weakening currencies may have a flaccid appearance, many of them are still secure a shrinking pie bigger slice. The collapse of commodity prices also mask some signs of life. Take Brazil, where the volume of exports increased by 10% in 2015 even though its value plummeted 22%. Some of that is caused by exporters of raw offset falling revenues from the sale of increasing oil and mineral materials. But not all of it. In Australia, for example, exports of products other than commodities rose by about 6% in mid-2015, according to the Commonwealth Bank of Australia.
Russia is a good example. non-energy exporters seem to be struggling despite the ruble crash. During the first half of 2015, as the volume of exports increased energy, non-energy exports fell, according to Birgit Hansl the World Bank. She says it is not enough to have a change in price ". You first have to produce something that someone wants to buy" The weakness of the ruble is an opportunity for industries that are already exported, such as chemicals and fertilizers. But other boost exports requires investment in new production, which takes time.
Both the IMF and the World Bank have highlighted another possible explanation for the weak performance of exports in countries with falling currencies: the prevalence of global supply chains. Globalization has become a lot of countries in way stations in the manufacture of individual products. Components are imported, enriches and re-exported. This means that much of what a country earns through a devaluation in terms of the competitiveness of its exports, is lost through imports more expensive. The IMF believes that this explains much of the sluggishness of exports from Japan; the World Bank argues that accounts for about 40% of the impact of devaluations decreased globally. That leaves many manufacturing economies in trouble.