The Japanese Government has traditionally spent trillions of Yen to push the Yen down vis-à-vis the US $ and the Euro. They keep the Yen artificially weak to reduce competitive pressures from Europe and USA..Hence, they can export more and import less
China has resisted all efforts to revalue their currency (Yuan). They simply have not allowed the Yuan to appreciate in value, thus making/helping Chinese companies have strong cost-competitiveness.
-China has strong economic growth
- China has a large trade surplus
Argentina pegged the Peso years ago to the US$. Financial stability ensued but exports were too costly-recession occurred…. In 2002 they stopped the peg and devalued the Peso ( 1 US$ to .27cents) Imports were costly but exports started to grow!
Consider also the Free-Market reforms in Chile………..
Salvador Allende: President 1970-1973 Military coup (September) the economy was in shambles
-High national debt
-Government highly involved in economy
- high duties on imports
- huge subsides to select industries
New Government: Selected Group of New Economist from the University of Chicago “The Chicago Boys” were free market advocates( influenced by Milton Friedman
“ Chicago Boys” proposed programs based on the Theory of Comparative Advantage which immediately reduced import duties to 10% from 1000%. All other import barriers were completely eliminated. Capital equipment could now be imported which encouraged “business investment”
Bottom line: A “big” correction in the economy and industries followed
-Appliance Industry almost disappeared
-The electronics industry basically vanished
-Automobile Assembly plants closed
Those are products we should import. We have better opportunities for products based on our farm products, our timberlands, our fisheries and other natural resources that we should be making because they give us a “natural advantage” over other countries
It took time but by 2006 Annual growth >6%
Inflation lowered and standard of living increased
Chile has signed free trade arrangements with several nations and the E.U, Mercosur, The USA and Canada