Weak value of dollar could spur several South Florida industries
By Zachary S. Fagenson
Today's weak dollar may be just the thing South Florida needs to bolster its tourism, real estate, international trade and international business sectors and help lift the region out of recession.
Last week, the dollar fell to its lowest level in a year against major currencies. So far this year, the dollar has fallen 3.7% against the euro and 21% against the real of Brazil, one of Miami's largest trading partners.
While the downward spiral doesn't bode well nationally, analysts from several industries say, the trend makes Miami a cheap, attractive place in which to invest and do business.
"Overall, this is a plus," said Manuel Lasaga, president of Miami-based economics and finance consulting firm StratInfo. "Import-export companies in South Florida are going to see this as a growth opportunity in those countries whose currencies [will] appreciate with respect to the dollar."
He said the international financing of the growing US deficit, thanks to the Troubled Asset Relief Program and the federal stimulus, will continue putting downward pressure on the dollar but will make international tourism, real estate investing and trade through South Florida cheap and profitable for foreign companies and citizens.
Tuesday evening, one euro cost $1.4668, according to Bloomberg.com. Meanwhile, in Brazil, one dollar could be purchased for 1.8037 reals.
And even though some companies, such as those in Europe that have high manufacturing costs due to work rules, may be able to turn a profit by passing goods through the airport or seaport, the weak dollar has yet to bear fruit for the trade sector here.
Miami's worldwide exports fell nearly $2.3 billion during the first six months of
2009 from the same period last year, according to a WorldCity analysis of US Census data.
But if goods don't pass through here, South Florida's overbuilt residential and commercial real estate markets may be another way to attract foreign investments.
Albert Bolter, a real estate analyst for Colliers Abood Wood-Fay, said that just last week he toured Miami with German investors who said they had $1.2 billion to place in real estate.
Despite fire-sale prices, Mr. Bolter said, investors looking to buy commercial space are looking for "sexy" properties to take back home to pitch to closed-end or open-end fund managers.
"When you get the foreign funds coming into the states," he said, "they want the AAA type of office-class product. They want long-term leases and leased-up building with a fixed net return.
That kind of product "is tougher to find but that's what they're looking for," he added.
Meanwhile, Manny Mencia, senior vice president of international business development for Enterprise Florida, the state's economic development arm, said the weak dollar "would be a significant arrow in [Miami's] quiver to continue to attract projects."
Despite dismal trade numbers, he said, the low cost of shipping will help spur a recovery in the export sector, an industry that, statewide, accounts for nearly 1.3 million jobs.
"When we need job creation and investment [a weak dollar is] good from the standpoint of ensuring that we remain competitive," he said. It "will help our foreign investment side to continue to grow [and] I think it will keep the foreign real estate purchases humming."
And while it's been well-documented that the weak dollar makes Miami an even more attractive destination for international visitors, it also makes it appetizing for American tourists.
"Anything that makes it less expensive for international visitors will definitely have a net positive impact for our tourism industry," said Rolando Aedo, senior vice president of marketing and tourism for the Greater Miami Convention & Visitors Bureau. But "now, to travel internationally just about anywhere, not only do you require a passport but more dollars.
"Folks are still looking for that international flavor, and Miami is offering more value than ever," he added.
But the value of a cheap dollar won't last forever.
If the dollar becomes too weak, according to Frank Nero, president and CEO of the Beacon Council, Miami-Dade County's economic development organization, foreign businesses and companies will lose faith in the US economy.
The results of such a fundamental shift in the global perception of the US could be disastrous.
"If we expect the dollar to continue to decline in value as a trend, foreign investors are going to be less inclined if they feel that five or ten years down the road that the value of the dollar is going to be further down than it is today," said Mr. Lasaga of StratInfo. "Currency values are going to become increasingly important in the future because we will remain one of the biggest deficit countries in the world.
"We're going to have to rely on foreign investments to finance our deficits, and going forward that has big implications."