Sat | Oct 16, 2021

Think again: Devaluation drives imports

Published:Tuesday | October 13, 2015 | 12:00 AM


The usual effect of devaluation is to cause imports to be more expensive, and our exports to cost less, causing the foreign importers to buy more from us, since to them, our prices will seem to fall.

This will result in an improvement in our balance of trade, and provide us with more money to repay our International Monetary Fund loans. But it seems to me that this is not what will happen here. Devaluation means that when a local person receives remittances from abroad in US dollars, his local income will increase, and this will enable him to purchase more foreign goods (since we don't produce all our necessaries). Of course, it will boost our exports.

Unfortunately, our main export is skilled personnel - managers, nurses, teachers, and technicians - and this will further reduce our ability to produce the growth everyone says we need.

If the United States knows what it is doing, how come Puerto Rico, which it governs, is broke?


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