Input inflation bother Latin American economy

Xinhua News Agency, Rio de Janeiro, September 9th (International Observation) Input inflation plagues Latin America economy

Xinhua News Agency reporter Chen Weihua Zhao Yan

Since this year, under the influence of the Fed's continuous radical rate hikes, the Ukraine crisis, and the high level of international commodity prices, the local Latin American economy's local currency exchange rate has fallen, import costs have increased, and input inflation is becoming increasingly serious. To this end, countries such as Brazil, Argentina, Chile, Mexico, and other countries have recently adopted response measures to follow up interest rate hikes.

Observer pointed out that the interest rate hike measures of the major central banks in Latin America have limited effect on alleviating inflation. This year and even the next few years, Latin America will face challenges such as increased inflation pressure, decline in investment, or re -return to low growth.

According to data from the Argentine Statistics and Population Census Research Institute, Argentina's inflation rate in July reached 7.4%, the highest record since April 2002. Since January this year, Argentina's cumulative inflation rate has reached 46.2%.

According to data from the National Institute of Statistics and Geography of Mexico, Mexico's annual inflation rate reached 8.15%in July, the highest value since 2000. The inflation figures recently announced by the Latin American economies such as Chile, Colombia, Brazil, and Peru are equally optimistic.

The United Nations Economic Commission of Latin America and the Caribbean (Latgar Economic Affairs Committee) issued a report at the end of August that the average inflation rate in the Latagon region reached 8.4%in June this year, almost twice the average inflation rate of the region from 2005 to 2019. The outside world is worried that the Latin American region may experience the worst inflation after the "lost ten years" in the 1980s.

The Fed's radical interest rate hike caused concerns about the Latin American economy. From the late 1970s to the early 1980s, financial globalization accelerated, the international capital market was full of "oil dollar", and the scale of foreign debt in Latin American countries continued to swell. In order to resist inflation to start the interest rate hike cycle, the rise in interest rates made it difficult for Latin American countries to bear and fall into a debt crisis. In the 1980s, it was also called Latin America's "lost ten years".

In order to cope with the depreciation of the local currency, reducing capital outflows, and reducing debt risks, Brazil, Argentina, Chile, Mexico and other countries have recently followed the Federal Reserve to raise interest rates. The largest number of interest rate adjustments and the largest among Brazil. Since March last year, the Brazilian central bank has raised interest rates 12 times in a row, gradually increasing the benchmark interest rate to 13.75%.

On August 11, the Argentine Central Bank increased the benchmark interest rate by 9.5 percentage points to 69.5%, which marked the stronger position of the Argentine government on inflation. On the same day, the Central Bank of Mexico increased the benchmark interest rate by 0.75 percentage points to 8.5%.

Economists point out that this round of inflation is mainly input inflation, and interest rate hikes cannot solve problems from the root cause. Rating interest rate hikes also increase investment costs and suppress economic vitality.

Carlos Aquino, director of the Asian Research Center of St. Marcos University in Peru, said the Fed's continuous interest rate hikes made Peru's economic situation "worse". US financial policies have always considered their own economic interests, and the contradictions of "passing" through financial hegemony have made other countries pay a heavy price.

At the end of August, the La Jia Economic Commission raised the regional economic growth expectations to 2.7%this year, higher than the 2.1%and 1.8%predicted in January and April this year, but far below the area of ​​6.5%last year in the region. Mario Simerley, a temporary executive secretary of the Latgar Economic Commission, said that the region needs to better coordinate macroeconomic policies, support economic growth, increase investment, reduce poverty and inequality, and control inflation.

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