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Beating
the Exchange Rate You surf the Internet, you pick up a book or two, you join writing groups, unobtrusively network with other writers at home and overseas, and suddenly the world of long distance writing seems to be within your reach. You pick up your pen, or rather, switch on you computer
these days, and type away at a furious pace. You know you have the muse. You
even know you have the right pitch, and know the publication that you have set
your eyes on. Far away in South Africa, a country smaller than Texas, but which
holds the distinction of being the largest producer of gold and diamonds and the
third largest producer of platinum in the world. You are excited. You are tired of editors at home not
even sending you rejection letters that you could store in your pink box in the
attic, along with your first love letter and knick-knacks from Spain and
Portugal, waiting to be pulled out the day you get your Pulitzer. You know you
have the talent and the gumption so essential for being a writer. Only the
snobbish crowd back home refuses to let you into the hallowed precinct of
acclaimed writers. So you look outwards, like the pioneering fathers who
first came to America and roughed it out to make a place for themselves in the
land of the Apaches, and shoot off your “most brilliant ever” query letter.
You know it’s not merely the best. It is the “bestest,” the perfect blend
of craft and salesmanship that you picked up from friends, foes and every free
e-zine on the worldwide web. You shoot off your letter and push off for your annual
fishing holiday in Wales, knowing fully well that editors don’t respond so
fast. You are wrong. Some editors do and yours in South Africa certainly does.
You open the e-mail, full of trepidation, convinced that such an early response
could only mean rejection. No, it isn’t. It’s actually an acceptance letter,
offering to pay you 327 ZAR. You literally salivate. You know you were right.
The world at large, which you know recognizes talent better than those at home,
has passed its verdict. Your craft is worthy of being paid at least six times
the $50 you normally get paid at home. Still, to be on the safe side, you run down to your
computer and plug on to a currency converter. You feed in the data and look
stunned when the converter spins out an unexpectedly low figure: $40. Now, that
has to be a mistake. You recheck, first on one converter, than another. All the
standard converters, the Universal Currency Converter (www.xe.com)
and the FX 164 Currency Converter (www.oanda.com)
have the same thing to say. You grow dejected. You wonder what could be wrong. When you zeroed in on
South Africa, you had been convinced it must be at least moderately prosperous.
It is. But what you have encountered here is known as the exchange rate. As a
norm, the exchange rate reflects the economic strength of the country. It is
also the rate at which the currency of one country is converted into another.
And unless payments are negotiated in dollars (assuming you are from the US)
everyone working across borders receiving payments in multiple currencies must
factor in exchange rate risk when negotiating with editors and publishers. How much is the
exchange rate risk: As a thumb rule, the exchange rate risk is pegged at 6
percent per annum. Simply explained, this means that if you were promised 410
ZAR ($50) in January for your article on publication and assuming it is
published in December, it is possible that the 410 ZAR that you are paid at the
end of the year is worth $50. It is also possible, that the 410 ZAR is worth $53
or $47, or anywhere in between, depending on whether the South African Rand has
strengthened or weakened against the dollar, and to what extent. How to guard against the exchange rate risk: For traders who buy and sell in bulk in different
countries, there are specialized tools available to them to safeguard their
earnings from the vagaries of the exchange rate. These tools are called hedging
instruments. For individuals and writers in particular, however,
hedging instruments are luxuries. It costs money to hedge and it’s too much of
a headache. So what does one do? Well, the answer is that you create your own
hedges, so that your $50 at least remains the equivalent of $50 by the time your
article gets published and you get paid for it. How to create such
hedges: Step 1: Study the new currency in which you propose
to deal. Let’s assume that you are a US citizen about to write for the Indian
market. You are comfortable with the thought of working at $1 a word. The rate
of exchange at the time your article is submitted is $1 = Rs 50 and the magazine
is one that pays on publication. Apply the thumb rule. Since the exchange rate
variation would be about 6 per cent up or down in a year, the best thing to do
is to try to negotiate for a payment of Rs 53 per word. That way, you could
ensure that you have worked in a 6 per cent hedge against the depreciation of
the rupee. This means that though the rupee itself may have depreciated between
the time you were commissioned a piece and by the time you wrote it, your check
remains unaffected. Step 2: However, not all writers are capable of
negotiating payments. Besides, many publications are governed by their own
budgets and payments system and may not accommodate demands from individual,
unless the writer is well-known or an expert. The next best alternative then is to write for
publications in a country whose currency is stronger than your own. The thumb
rule here is to write from south to north. Thus, for most writers living in the
southern part of the hemisphere or closer to the Tropics-- China, Egypt, Hong
Kong, India, Indonesia, Israel, Jamaica, South Korea, Malaysia, Mexico,
Pakistan, Philippines, Russia, Saudi Arabia, Singapore, Australia, Argentina,
Brazil-- it makes sense to write for the US and Euro markets. And contrary to
the thumb rule, for those in Canada and Norway, the US and Euro Land are still
the best bet. But what about those who live in the US? Head for British,
Japanese and Irish markets. And if you do write for the European markets,
negotiate for payments in Euro, which is a stronger currency than the dollar,
rather than Deutsche Mark or the French Franc. If you are a US citizen who
wishes to play it safe, there’s always Bermuda to add an international clip or
two. The Bermuda Dollar is the same in value as the US Greenback. And if you are
British, there’s nothing like writing for pounds to milk dry the exchange rate
advantage. Jayanthi Iyengar
was a full-time news journalist for 15 years before she took to freelance
writing four months ago. She has written on every subject from crime to
corporate finance, mental health to environment. Yet, according to her, never
has writing been this challenging, considering that she has to compete with so
many others, each time she wishes to see her story in print. She lives in India
and writes op-ed pieces and news analysis regularly for two publications, Asia
Times (Hong Kong) and Hindu Business Line (India), but is trying to develop the
requisite skills to break into new and far-off markets.
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