Prices rise in Latin America and the Caribbean (IMF) due to the war in Ukraine

The global economy suffers from a shock wave of Russia's invasion of Ukraine, which increases inflation by increasing food and energy prices in Latin America and the Caribbean, the International Monetary Fund (IMF) warned in a blog post.

“Food and energy prices are the main means of side effects, which will be significant in some cases,” IMF economists warn that the steep rise “may be at greater risk of anxiety in some areas.”

“High commodity prices will accelerate inflation considerably” in the region, which has already recorded an average annual interest rate of 8% in five major economies: Brazil, Mexico, Chile, Colombia and Peru.

According to data this Tuesday, Argentina recorded an annual inflation rate of more than 52%.

This situation will force the Central Bank to intensify its fight against inflation, a catastrophe that affects demand by eroding the purchasing power of wages.

Russia and Ukraine are the main producers of raw materials, and fear of, for example, the cessation of trade in goods and a shortage of grain has led to a surge in world prices, especially for energy such as oil and natural gas.

As the price of wheat soared, the cost of some foods has also risen. Ukraine and Russia account for 30% of the world's exports of this cereal.

In Latin America and the Caribbean, the effects of the increase are mixed.

Rising oil prices are harming importers in Central America and the Caribbean, while exporters of crude oil, copper, iron ore, corn, wheat and metals can charge more, thus mitigating the impact of the conflict on growth, estimate IMF economists.

The financial situation is still relatively favorable, but if the war intensifies, it may deteriorate, making domestic monetary policies that affect economic growth become more stringent, they say.

Earl/Mister