We all talk about the economy and its interest rates but today we start to think because Latin American countries have lower interest rates; but what we do not know is that these rates affect an entire country in general, a banking entity lowers or raises its rates that directly affects companies, and in doing so the bank exchanges react which force investors to invest capital from others people, the low or negative interest rate affects an entire country because its consumption encourages the consumption of people who do not measure or calculate the cost of what they buy, usually Latin American countries have compulsive buyers; which buy and do not measure their expenses.
Experts explain about economic factors
Economists comment on their networks or news that a low interest rate is not synonymous with the economy of a country is well, one of the countries that daily mention their low interest rates is Japan already known as the country of the rising sun which describes the world as a country with a good industry consolidated with a stable economy, which part of its industrial success goes hand in hand with its interest rate which has been set at 0 as part of a bank strategy to incentivize investment, which explains that Japan does not have a bad economy if not that it manages its interest rate as a strategy for citizens to seek monetary investments in banks and thus banks obtain their profits, another country that has its rates of low interest is Sweden which has a very solid or stable economy, its degree of development has allowed the central bank to make the decision to set its referential interest rate of 0.2%
Four effects that have a growth in the US interest rate
In general, four effects that have a growth in the US interest rate on Latin American economies can be pointed out. The price of raw materials is lowered; In recent years, the combination of financial deregulation with the creation of new financial instruments provided the raw material market with a speculative component. A part of the demand depends on financial investments. When the rate of the United States increases, the attractiveness of the other type of financial instrument increases, so the demand for raw materials is reduced thus reducing its price, which increases the cost of sovereign indebtedness: countries, and also companies local, must face a higher cost when borrowing.
Since the interest rate is calculated from the sum between the interest rate (which is supposed to release the risk) the country’s risk is a matter, a rise in the US rate impacts the rise in local rates. In other words, as the investment is more profitable, they expect a higher profitability in operations ̈more risky drives up local interest rates in the domestic market, securities are quoted from which investments could be released, attracted by higher remuneration in other markets, impact the rise in the exchange rate by increasing the cost of indebtedness, reducing the price of exportable goods and boosting capital outflows.
Raising the interest rate may imply a currency indent that impacts the exchange rate rise, In conclusions, Latin America is covering external imbalances with external debt, which catalogs it as sustainable, causing deficits in the external and internal sectors. The product of this indebtedness process, the internal fragility, the rates increase are exposed in the financial rates because a person with economic stability is a good loan but never calculates s u interest rate.
The common people go out to a bank to borrow from a need either study travel or housing and a bank stipulates and comments on the interest rate but we do not realize that this is variable and people by necessity borrow up to for 5 years not noticing the expense that is going to increase the rise in interest rates is reflected daily is like VAT but a little more conserved since it is covered by legal requirements is covered with procedures that financial commercials accommodate to your profit regardless of people’s shortcomings without looking at their day-to-day conditions such as interest rates in countries people do not calculate the expense we only spend this is what we know or evaluate as interest rates ask a server public the interest rate of a bank and notice its benefits ask a humble person and look at the plagiarisms of the economy in it the poorest poor and the richest rich.