Posted Wednesday, Feb. 22, 2012, at 2:41 PM
A lot of the discussion around the U.S.-China currency valuation controversy can leave a person with the impression that what you want as a country is to have the cheapest possible currency. After all, that will make your goods very "competitive" and gain you lots of jobs, especially valorized export-oriented manufacturing jobs. The reality is that having an expensive currency can be a valuable thing indeed. Brazil has spent the past several years combining catch-up economic growth with a floating exchange rate that's made the real much more valuable and now Brazilians are buying up Manhattan:
Already, eight of the 181 condo units in their building have been bought by fellow countrymen, part of a Brazilian buying spree in New York that shows no sign of slowing. The city is already teeming with Brazilian tourists, and many of them, flush with cash from a booming economy back home, are snapping up their own pieces of Manhattan. [...]
“For many, Manhattan is their dream town,” said Marcos Cohen, a Brazilian broker at Prudential Douglas Elliman who said he had closed more than 15 deals over the past two years for Brazilians paying from $5 million to more than $15 million for Manhattan apartments. For Ms. Benz’s husband, a native of Rio de Janeiro who works at a São Paulo investment fund, buying a New York apartment was a passion project.
Nobody should get the impression that the typical Brazilian is buying a $5 million apartment in Manhattan. But what holds for rich Brazilians is true up and down the income ladder. Traveling abroad, buying stuff made in foreign countries, or purchasing real foreign investment assets is getting cheaper thanks to the strength of the currency. This is what China has been missing out on (to an extent) thanks to its currency undervaluation, and that's one reason why it's been smart of China to allow this quiet reduction in the level of undervaluation.