A hot dog on Times Square in downtown New York costs $2. The same amount may have been paid for 10 years but not paid for a Spaniard or a European. In 2008, the classic American dish cost a European almost 1.25 euros and now 2 euros, although the merchant did not change its price. What happened? Although the European economy is not yet in recession, its currency. The euro is experiencing one of its worst situations against the dollar in recent years. This means that dollar gained value and capacity against the euro.
How did we get here? On January 1, 2002, Germany, Austria, Belgium, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, the Netherlands and Portugal adopted the euro as their common currency. Although it was worth less than the North American currency at the time of its release, strong European growth in the first decade of the 21st century more than doubled its value. In the prime of the Old Continent, you had more than three dollars for two euros. But after the housing bubble burst, nothing was the same. economy United States of America recovered much better from the banking crisisCompared to Europe, which should save many countries such as Italy, Greece or Portugal, as well as the financial system of Spain. This allowed the dollar to regain some of the ground it had lost against the euro.
The depreciation of the euro in the domestic economy great effectespecially in such a country Spain, which imports 17,089 million Euros of US products. In 2021, our country imported 5,000 million euros worth of energy from the USA. Had the same amount been purchased in 2022 as in the past, the amount would have risen to over 5,500 million, taking into account the US currency revaluation alone. Between January and August, the dollar has appreciated between 10% and 11% against the euro so far this year.
It should also be added that Spain accelerates gas purchases He was sent to the USA due to the Russian invasion of Ukraine. According to a report by Enegás in April, acquisitions have increased by nearly 500%, making it Spain’s leading supplier of gas and more than 43% of all imports of this fossil fuel.
According to economists consulted by El Periódico de España, this situation It doesn’t look like it will be fixed in the short term. and they open up the possibility that the current parity between the two currencies will become a spread that takes the euro to its 2002 entry levels.
The same sources point to this It would be a terrible thing for the Spanish economy and it would produce more. inflation. Generally speaking, the weakness of the euro has to do with the European Central Bank’s slow response to the inflation plaguing Europe. Instead, the US Federal Reserve removed the economic stimulus it maintained after the pandemic and raised interest rates. For its part, the ECB delayed these measures much longer. To put it in context, rates are 0.5% in Europe, 2.25% in the United States and 1.75% in the United Kingdom.
Real estate
this Real estate It is one of the sectors most affected by this factor.. Why? Why? Most of the large funds investing in our country are of North American or Canadian origin, along with British and German funds. Spanish brick moves more than 10,000 million Euros a year in investments. A manager who, like Blackstone or Brookfield, has dollars-denominated funds and invests in euros in Spain, receives a return on his investment, which must be added to that derived from the currency.
Mikel Echavarren, CEO of international consulting firm Colliers in Spain, points in another direction: “This factor comes into play when there is a wave of populist governments in Latin America that is driving capital outflows to invest in the United States and Europe. . . It has a positive effect on them. individual purchase of luxury homes by dollarized economies. Wealthy families will be able to buy an apartment in Madrid or the Costa del Sol for less than a few months ago. “As the dollar strengthens, the presence of Chileans, Colombians, Peruvians and even more Mexicans in Spain will accelerate.”
Turning to the investment market of big funds, Reno Cardiff, director of the Capital Markets division at advisory firm Cushman & Wakefield, believes the euro’s weak condition could attract more investment. Generally, funds go by region, meaning they allocate a certain percentage of all capital to invest in each country. “If this translates to continued growth, a stronger dollar will attract more funds that want to be here,” he explains. He also notes thatThe dollar’s value helps and strains some ongoing operations, but that doesn’t mean we’re going to see a wave of investors. as a result, it enters in the short and medium term”.
Echavarren agrees, adding that “Although the funds have higher purchasing power, this should not lead them to buy expensive assets.” However, he adds that we will have to wait to see how it will affect it, but that this will undoubtedly be good news for the Spanish real estate market.