U.S. price hikes, a jump in international raw material prices and U.S. Federal Reserve interest rate increases generate turbulence in the balance of payments of peripheral economies, including Argentina, which significantly impact debt conditions, said the economics professor at the National University of Quilmes, an Argentine university.
The jump in commodity prices has negatively impacted Argentina through imports of primary goods such as energy with a consequent increase in finished products.
Meanwhile, U.S. interest rate hikes would affect Argentina through the devaluation of exports, capital outflow and an increase in the cost of debt in U.S. dollars.
"Capital looks for the best remuneration and profit rates, and the fact that the United States is paying more makes it appealing to take capital from peripheral countries to the United States," Bergstein pointed out.
Argentina's inflation rate tops 100% for the first time since 1991, further eroding wages and purchasing power pic.twitter.com/XlrSUHgxTt
"We would have to ask (the International Monetary Fund) again for some kind of interest relief or some way of kicking the payments into the future because it will become more complicated for us," he said.
"The U.S. interest rate hikes imply less investment worldwide and may also mean that we will have difficulties exporting our products," Bergstein explained.
Argentina registered an inflation rate of 102.5 percent in February compared to the same month in 2022. The soaring prices forced the Central Bank to raise its benchmark interest rate by 300 basis points to 78 percent on March 16. Private analysts estimated that prices in the South American country would reach triple digits in 2023.
Bergstein suggested that Argentina consider alternatives to the dollar for certain commercial transactions and thus "try to avoid the effects and shocks from the U.S. that hit us hard."
The U.S. Federal Reserve has raised its benchmark interest rate nine times over the past year, including by a quarter-point on Wednesday, putting a strain on banks, on the wallets of ordinary families and exacerbating some countries' debt burdens.