The Impact of Soaring Interest Rates Is Far Worse in the Developing Sector
Feb. 27, 2023, 2022 (EIRNS)—The continuous rise of interest rates that the Fed has embarked on, is creating a situation in the developing sector that is rapidly leading to a blowout. Take the case of Argentina, where the central bank’s basic rate rose from 35% one year ago, to 75% today. The actual cost of borrowing for a small or medium business, however, is over 300%, according to reliable sources consulted by EIR. Official inflation stands at 99%; but in the last two weeks alone, the cost of eggs rose by 40%, of cheese by 50%, and so on. The average retirement pension a year ago was $450 per month; today it is $150, a two-thirds cut.
In neighboring Brazil, the rising Fed interest rate has pushed that country’s central bank rate up from 10.7% a year ago, to 13.75% today—a 30% rise. Feb. 2023 official inflation was “only” 5.8%.
In Mexico, the interest rate has nearly doubled, going from 6% to 11.25% over the same period, and official inflation stands at 7.9%.
Nigeria’s interest rate rose from 11.5% to 17.5%, year-on-year—a more than 50% rise— and inflation is 22%.
Iran’s a particularly explosive case, due to sanctions and financial warfare being waged against that country. Although they have kept interest rates steady at 18% between Feb. 2022 and Feb. 2023, January inflation was reported at 53.4%.
As Fox reported, “the dire economic circumstances have wiped out the life savings of many and caused Iranians to form long lines at currency exchange offices in recent days in an effort to acquire increasingly scarce dollars.” As a result, the value of the Iran’s currency, the rial, plummeted to 600,000 rials to the dollar; that is down from 32,000 in 2015, when the JCPOA nuclear agreement was signed: something like a 95% devaluation of Iran’s currency!