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YURI CORTES/AFP Getty Images
YURI CORTES/AFP Getty Images
The dollar is not just the currency of the United States, it is in many ways the world’s currency. About half of global trade and finance are conducted in dollars. So when the Fed takes actions that affect the value of the dollar, there are spillover effects on countries around the world.
Many countries in Latin America borrowed heavily in U.S. dollars in the 1970s. Then, in the 1980s, the Federal Reserve raised interest rates to historic highs, which helped strengthen the dollar and, in turn, made it increasingly difficult for countries to repay their debts. Countries such as Mexico, Chile, and Argentina fell into financial turmoil and subsequently entered a period of economic turmoil and stagnation known as the “lost decade.”
Now that the Federal Reserve is raising rates again and the dollar is at its highest level in 20 years, how much has the dollar changed since 1982? We look at three countries in Latin America and see how the strong dollar has affected them.
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