I’ve heard commentators state that in places like Egypt, Turkey, and Argentina, that their devaluing currencies benefit tourists with strong currencies. If local prices rise to match the devaluation of the local currency, doesn’t that mean that you can’t exactly buy more with what you have since prices adjust?
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what it means that tourists find it cheaper to travel their, and their money goes “further”, so its more likely they go, so more money is brought in.
the flux is not exact and local prices don’t rigidly follow changes in the currency markets, theirs a significant delay. Also, if most of your transactions are to other locals who all use the local currency, changes in FTX markets have fairly low impact.
what it means that tourists find it cheaper to travel their, and their money goes “further”, so its more likely they go, so more money is brought in.
the flux is not exact and local prices don’t rigidly follow changes in the currency markets, theirs a significant delay. Also, if most of your transactions are to other locals who all use the local currency, changes in FTX markets have fairly low impact.
>If local prices rise to match the devaluation of the local currency
They don’t always. Assuming something is produced domestically then exchange rates don’t really matter at all. This generally means things like food, lodging, and services still stay largely the same price. There’s generally a small increase for sure, but it’s not 1:1 with the devaluation. And even then that increase tends to be delayed.
It’s only goods that are imported that will see a direct and immediate increase in price. Those are usually expensive things that tourists aren’t actually going to be buying a lot of. Stuff like cars and electronics is a big one.
Since tourists are almost exclusively buying items in that first category they end up benefiting from a devalued local currency.
>If local prices rise to match the devaluation of the local currency
They don’t always. Assuming something is produced domestically then exchange rates don’t really matter at all. This generally means things like food, lodging, and services still stay largely the same price. There’s generally a small increase for sure, but it’s not 1:1 with the devaluation. And even then that increase tends to be delayed.
It’s only goods that are imported that will see a direct and immediate increase in price. Those are usually expensive things that tourists aren’t actually going to be buying a lot of. Stuff like cars and electronics is a big one.
Since tourists are almost exclusively buying items in that first category they end up benefiting from a devalued local currency.
Local prices don’t change, since labor is local goods are local. Say the Argentine Peso falls by 50% to the dollar. But the 100 Peso steak dinner remains 100 Pesos, while it now costs half as many dollars to get 100 Pesos then the dinner costs half what it did before to tourists. Who might then end up splurging on that 80 Peso bottle of wine, too, and spend 180 Pesos (more money for restaurant/waiter) but the tourist still spent fewer dollars.
Local prices don’t change, since labor is local goods are local. Say the Argentine Peso falls by 50% to the dollar. But the 100 Peso steak dinner remains 100 Pesos, while it now costs half as many dollars to get 100 Pesos then the dinner costs half what it did before to tourists. Who might then end up splurging on that 80 Peso bottle of wine, too, and spend 180 Pesos (more money for restaurant/waiter) but the tourist still spent fewer dollars.
Food in Egypt is skyrocketing in price to match the ‘devaluation’, i.e. the government being forced to let the currency exchange price float in order to meet the terms of the IMF loaning Egypt money it desperately needs because of the war in ukraine both a> destroying tourism on top of COVID and b> driving wheat prices through the roof.
Food in Egypt is skyrocketing in price to match the ‘devaluation’, i.e. the government being forced to let the currency exchange price float in order to meet the terms of the IMF loaning Egypt money it desperately needs because of the war in ukraine both a> destroying tourism on top of COVID and b> driving wheat prices through the roof.
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