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Vietnam’s farm produce at a disadvantage because of exchange rates
It is reasonable to attribute the difficulties of Vietnam’s farm produce exports to the problems of the financial market or the supply-demand imbalance, however the exchange rate should also be seen as an significant factor.
Pham Quang Dieu, from the Centre for Agriculture and Rural Development Information (Agroinfo), in his article published in the Thoi bao kinh te Saigon newspaper, said that Vietnamese farmers have never before faced such big challenges as they have had in 2008. The global financial crisis has been pushing the price of farm produce down. According to Agroinfo’s report, the prices of most of farm produce will increase again in the middle term, but will not bounce back to the previous levels due to the global economic recession.
However, Dieu has also pointed out that the fluctuations of the US$/euro exchange rate has also been a reason behind the challenges of exporting farm produce.
Over the last one decade, the devaluation of the dollar against the euro and other hard currencies has stimulated farm produce exports, as countries that export farm produce use the dollar in their transactions.
Moreover, the weak dollar has prompted investors to hold commodities, including farm produce, instead of dollars, which also helped push the price of farm produce up.
However, the dollar has increased sharply in value against the euro since June 2008, which has led farm produce prices to decrease.
The farm produce exports in dollars has become more expensive, and that has forced exporters to reduce export prices
The sharp re-valuation of the dollar against the euro has led to decreases in demand from European countries, which has forced exporters to reduce export prices.
Investment funds have shifted to hold dollars instead of injecting money into commodities, including farm produce.
As countries that export farm produce, including Vietnam, collect dollars for their exports, the lower prices certainly have a negative impact on import-export turnover.
In fact, major farm produce exporters in the world have devaluated their currencies in order to make their products more competitive. Thailand, Malaysia, India, Brazil and Columbia, which compete with Vietnam in coffee, rubber, and cashew nut exports, have devaluated their currencies by 13-33%, while Vietnam has devaluated by only 5%. Therefore, Vietnam-made farm produce has become less competitive in the world’s market.
Vietnamnet Translation
TBKTSG
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