The same strong euro that hurts France devastates African export competitiveness

Evidence

The international price of primary products is often fixed in dollars, which remains the main currency used in international trade. This is the case with cotton. But its price in dollars varies as much as the euro–dollar exchange rate. Consequently, the cotton producers of the franc zone can lose out twice: when the price of cotton in dollars falls and when the euro appreciates against the dollar. To understand why an appreciation of the euro implies a decrease in the value of the dollar in CFA francs, let’s take an example. Suppose that 1 euro is exchanged for 1 dollar: based on this parity, 10 dollars will give 6,559.57 CFA francs (since 1 dollar = 1 euro = 655.957 CFA francs). Suppose now that the euro appreciates and that 1 euro is now exchanged for 2 dollars: this is equivalent to 1 dollar = 327.98 CFA francs; therefore, the equivalent of 10 dollars in CFA is now 3,279.8 CFA francs, a reduction that reflects the evolution of the euro–dollar exchange rate. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 642 (#exemplifies, via linked claim)

The fact that the CFA franc’s parity was set at an artificially high level, as we saw in Chapter 1, penalised African products: they were hard to sell on world markets, except in the context of the commercial preferences granted by the metropole. Conversely, the high external value of the CFA franc favoured imports, especially from the metropole. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 128 (#corroborates, via linked claim)

Categorization

• XREF: connects to: Financing local food production would save rather than deplete African foreign reserves; African economists warned that fixed euro pegging would exclude African economies from global competition; Euro pegging diverts trade toward France and blocks local industrialization. (+8 more)

Related

• Euro appreciation deteriorates franc zone trade balances (similarity 0.92)
• Euro appreciation against the dollar penalizes franc zone cotton exporters twice (similarity 0.92)
• A strong euro penalizes French exports far more than German ones (similarity 0.91)
• An overvalued CFA franc penalised African exports while favouring imports from France (similarity 0.91)
• France’s strong-franc policy worsened CFA countries’ competitiveness (similarity 0.90)
• African economists warned that fixed euro pegging would exclude African economies from global competition (similarity 0.89)
• Euro pegging diverts trade toward France and blocks local industrialization. (similarity 0.89)
• Eurozone membership merged CFA extraction with neoliberal austerity, worsening African prospects. (similarity 0.88)
• An overvalued CFA franc was engineered to reorient colonial trade toward France (similarity 0.88)
• France’s own anti-inflation policies against the mark caused the CFA overvaluation that forced crisis. (similarity 0.88)
• The euro–dollar rate doubles the currency risk borne by franc-zone cotton producers. (similarity 0.88)
• The CFA franc was deliberately overvalued against the metropolitan franc. (similarity 0.87)
• The CFA franc’s fixed peg forced colonies to absorb French devaluations helplessly (similarity 0.86)
• A strong CFA franc forced colonial trade to flow through metropole markets. (similarity 0.86)
• The CFA franc’s parity was set without regard for local economic realities (similarity 0.86)

Broader Connections

• Euro appreciation against the dollar penalizes franc zone cotton exporters twice #exemplifies (0.80) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 642
• France’s strong-franc policy worsened CFA countries’ competitiveness #corroborates (0.75)
• An overvalued CFA franc penalised African exports while favouring imports from France #corroborates (0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 128
• An overvalued CFA franc was engineered to reorient colonial trade toward France #corroborates (0.65)
• Euro appreciation deteriorates franc zone trade balances #corroborates (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 299
• A strong euro penalizes French exports far more than German ones #complicates (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 301