ABSTRACT
The inflation caused by the attempt to pay the foreign-debt interest will set in motion a cumulative process that is bound to add to the pressure originally created by the foreign debt, the fiscal deficit, and monetary growth. As the rate of inflation increases, so further inflationary pressures are created. A rise in the inflation rate and the worsening of the peso's exchange rate produces drastic changes in relative prices and income distribution. A rise in the inflation rate leads to increasing pessimism in economic circles, which aggravates the inflationary tendency. The increase in the rate of inflation leads to a drop in the real liquidity of the system as a whole. The increase in inflationary pressure has thus hit the financial sector particularly hard. The fiscal deficit, inflation, and social tension paint a highly unstable picture. The structuralist analysis of inflation makes the distinction between fundamental inflationary pressures and the mechanisms which spread it.
