Inflation In The Financial Crisis

” As the teacher pointed out, control of inflation will be a key factor to cope with the crisis. And some Latin American countries do not seem ready to fight, according to the statements made by the director general of the International Monetary Fund (IMF), Dominique Strauss-Kahn, last July, when he warned that inflation was out of control in some countries emerging in the region. According to that body, Chile could end the year with a rate of 7.5%, Argentina has already reached the figure of 9.1%, while Brazil stands at 5.6% and in Peru, at 5.4%. However, by contrast, some of these countries have other shields that can help balance a bit. This applies, for example, in Peru, where Tuesta Cardenas notes that “has managed to consolidate its strong growth, with an average of 6% in the last seven years, accompanied by a prudent fiscal management, which has resulted in savings in revenues generated largely by the high prices of minerals such as gold, copper, silver and zinc.

This has been of tremendous help to have a fiscal rule, at the Act of Congress, in operation since 1998. They have also been fundamental progress in terms of trade liberalization since the 90s, which have continued to deepen in this decade and has allowed balance in a way, the trade balance, with gains on trade in manufacturing sectors such as textiles and agribusiness. Within that line, maintaining an independent Central Bank has been fundamental. ” Another lifeboat from Peru, according to Professor Tuesta Cardenas, is “the fact that much of the current growth is anchored in domestic demand, which gives some respite in the short term.” In contrast, countries more dependent on international consumption, such as Mexico and Venezuela, may suffer from financial crisis northern neighbor. Richard Obuchi, a professor at the Institute of Higher Administration Studies (IESA) in Caracas, said that “Venezuela’s country risk, as happened in other emerging economies rose significantly following the bankruptcy of Lehman Brothers. In Venezuela, in particular the perception of risk is increased further by events that affected diplomatic relations between the U.S.

and Venezuela during the week (such as Hugo Chavez’s decision to expel the U.S. ambassador). However, the main risk for the Venezuelan economy is in the high country’s dependence on oil market conditions internationally. In this sense, if events in the United States lead to an economic recession, the risk of a weakening of oil prices, a decrease in energy demand, which would negatively affect the country’s economic performance . Definitely, as indicated Universia Knowledge Wharton, although each country has its own idiosyncrasies, in general, everyone is going to be seriously curtailed its exports, and will be most exposed to them the most shaken by the crisis will be, as the teacher Tuesta Cardenas, who expected “a slowdown in export sectors more tied to the U.S. market, such as textiles.” Similarly, his colleague Kon notes that “the export-focused sectors such as steel, minerals and other inputs, will also reflect the decline in global demand.”