The large economies of the American continent resisted in 2022 the harsh attacks of a global inflationary spiral in the midst of a context of successive crises, although the prospects for 2023 continue to be complicated by the strong uncertainty in international markets.
Among the keys to this narrow victory external reasons are found, like herRising commodity prices after the Russian invasion of Ukraine -which benefits the region-, but also internal, such as the speed of Latin American institutions when it comes to fighting inflation.
For Brookings Institution monetary policy analyst Gian Maria Milesi-Ferretti, the region’s economic and financial institutions have gained a lot of credibility over the last 20 years, something that, in part, forced these countries to act quickly to contain inflation. .
"The emerging economies (of Latin America) began to tighten their monetary policy very early on, so they didn’t have to raise rates because the US Federal Reserve (Fed) did, they raised them because inflation was rising"explained the expert in an interview.
This has helped Latin American countries not only to better weather the storm so far, it also puts them in a good position to cope with the stress that the Fed’s rate hike policy will place on the global economy.
It is also an atypical cycle, as explained to EFE by the acting director of the Western Hemisphere Department of the International Monetary Fund (IMF), Nigel Chalk.
"Normally when the Fed raises rates they slow down the US economy, which slows down the global economy (…) and lowers the prices of raw materials"Explain.
But because of the war in Ukraine the situation is now completely different", something that has helped Latin America a lot, according to the expert, who shares Milesi-Ferretti’s assessment of improving the credibility of the region’s institutions.
For its part, the United States, which began to raise its official interest rate In March of this year, after defending for months that inflation was a passing phenomenon, it has managed to maintain maximum levels of employment and strong domestic demand.
As of today, the official interest rate of the largest economy in the world is in a range of 4.25 and 4.5%, in terrain considered restrictive, after this Wednesday the Fed raised interest rates by half a point reference.
The institution anticipates new increases during 2023, since inflation, which has been falling for a few months after reaching 40-year highs during the summer, is still very high, at 7.1% year-on-year in November.
In Mexico, whose central bank follows a policy of synchronization with the Fed, inflation has slowed since the end of October and in November stood at 7.8% annually, while analysts expect that the official target of 3% will not be reached. It will last until 2024.
The Mexican central bank It has also maintained its monetary policy of increasing interest rates for 13 consecutive months up to the all-time high of 10.5% announced this Thursday, to try to alleviate the highest price rise in the last two decades.
The synchronization of the institution with the US Fed "makes sense"according to Nigel Chalk, the IMF expert, due to the close economic connection between the two countries.
Mexico, however, began to raise interest rates well before the United States, since the history of high regional inflation did not allow us to wait to see if it was transitory, so now they have a little more room to put a stop to the rise of the prices, he said.
In Chile, where a low rate policy was implemented to boost the economy after the coronavirus crisis, the evolution has been similar to that of the United States, with historical inflation peaks and a tightening of monetary policy to put a stop to it.
On December 6, however, for the first time in a year and a half, the Central Bank of Chile decided not to make changes to the referential interest rate and kept the rate at 11.25%, its highest level in two decades.
The tightening of monetary policy has been a constant in countries like Colombia, where the official interest rate was at 11% in November -something that, according to the head of Economic Research for the Andean Region of BTG Pactual, Munir Jalil, It’s going to come at a cost in terms of growth.
And Brazil, a pioneer in this wave of rising money prices, has been able with it to moderate strong inflation, which peaked at 12.13% in April, down to 5.9% annually in November.
Argentina continues to be the great exception in the region, with inflation of 92.4% per year in November, as a result of a deficit fiscal policy financed with monetary issues and the global financial squeeze.