At the country level, however, it must be said that production, employment, wages and investment are growing strongly. Our economy is totally back on its feet after the global recession and the outlook is good. 5  I am convinced that our country must grow in a harmonious way and the benefits of progress must spread to all the country. Economic growth and global integration generate sectoral and regional adjustments; some economic activities expand and some contract, with all the associated tensions. This is what progress is all about. To mitigate the costs of sectoral adjustments – and, above all, the social costs involved – without hurting economic growth, public policies face a tremendous challenge, but the instruments with macroeconomic reach such as the exchange rate are ineffective when it comes to resolving sectoral difficulties. Next week we will be presenting our Monetary Policy Report. We hope that our economy will continue dynamic over the next 24 months, boosting higher income and employment for our people. Our role is to ensure that the process is sustainable in an environment of stable prices. We will watch over it taking every measure necessary. In this presentation I have shown all the factors that may explain parity adjustments. However, many of the elements now pressuring the exchange rate may be reversed in the long term. As a matter of fact, today the real exchange rate is around the minimum levels believed to be consistent with its long-term fundamentals, hence the importance we assign to this issue.
We must also consider the coherence of the intervention with the rest of the economy. A sufficiently bulky intervention could sustain a more depreciated nominal exchange rate, even if fundamental forces point to appreciation. However, these pressures to appreciate will take the form of higher inflation as they will drive demand for national goods to grow too fast. In the medium term, the real exchange rate is the same, but inflation is higher when the foreign 4  exchange rate adjustment mechanism is locked. Some emerging economies that have tried to avoid the nominal appreciation of their currencies are seeing a faster acceleration of inflation because the acceleration of expenditure squeezes internal production capacity. As I said, currencies are appreciating around the world, even in Asian and Latin American countries that have intervened in the market and adopted other types of financial measures to contain this appreciation (figure 7). In fact, interventions may have attenuated somewhat the nominal exchange rate appreciation, but at the end what we are seeking is to affect the real exchange rate, and the evidence on the matter shows that, on average, there is no obvious connection between the level of the countries’ interventions and the behavior of their real exchange rate (figure 8). In Chile, the latest intervention occurred in April 2008, with visible effects on the exchange rate.