Products whose price has skyrocketed in Latin America

Make the purchase in the supermarket or filling the tank of the car with gasoline has become increasingly difficult for millions of Latin Americans who see how the cost of living rises every day.

The common claim that “wages are not enough” is now at a critical point given the high levels of year-on-year inflation in the region.

“Latin America will be the region with the highest inflation on the planet this year,” he tells BBC Mundo Juan Carlos Martínez, Professor of Economics at IE Business School, Spain.

“What we see is a perfect storm,” he points out, because there is a global context of high liquidity, bottlenecks in supply chains, increase in the price of raw materials (especially food and energy), depreciation of Latin American currencies. and a strong recovery in consumption.

Just take a look at what is happening in the largest economies in the region: the cost of living in Argentina has shot up to 52.1%, while in Brazil it rose 11.1% and in Mexico 6.2% in October, in relation to the same month of the previous year.

It is followed by Chile with 6%, Peru with 5.8% and Colombia with 4.5%.

Like an airplane that took off suddenly after a 2020 recessive hit by the COVID-19 pandemic, the inflation Not only is it overflowing in Latin America, but also in countries like the United States where it reached 6.2% in October, the highest figure recorded in the country in the last 30 years.

“Inflation is a danger in the region,” says Benjamin Gedan, deputy director of the Latin America Program at the Wilson Center think tank, based in Washington, in dialogue with BBC Mundo.

“Latin America looks to a future of high inflation and low growth, a gloomy forecast for its post-pandemic outlook,” he adds.

The “most expensive” products

Clearly the prices of food, gasoline, gas and electricity are the ones that lead the inflationary rises.

As basic necessities, it is the most vulnerable families who suffer the hardest effects of the increase in the cost of living.

Comparing October of this year with the same month of the previous year, in Mexico cooking oil jumped 32%, while avocado and domestic LP gas are also through the roof (although in the case of gas, the government intervened by setting a maximum limit).

Inflation in Brazil reached its highest value in 19 years. Gasoline, electricity, food and clothing have led the price increases, a big stone in the shoe for President Jair Bolsonaro.

“The government of Jair Bolsonaro is trying to circumvent the strict spending limits to increase his chances of re-election in 2022,” argues Robert Wood, senior economist for Latin America at the Economist Intelligence Unit analysis center.

The country has had the worst drought in almost a century, with a drop in hydroelectric generation and, therefore, an increase in electricity rates. Added to this is a sharp drop in the exchange rate that has contributed to the inflationary crisis.

Venezuela’s hyperinflation aside, Argentina’s is by far the highest in the region. The third largest economy in Latin America has almost five times more inflation than Brazil and more than eight times that of Mexico.

Having costs that increase 1% every week, on average, pulverizes the income of Argentines.

The products that increased the most in October are food and non-alcoholic beverages, while so far this year the prices of clothing and footwear, together with health costs, have pushed inflation hard.

In order to stop the increase in the cost of food, the government of Peronist Alberto Fernández ordered at the beginning of October a freeze on the prices of more than 1,400 products of the so-called “basic basket” until next January 7.

“Argentina has taken an unsuccessful approach, which has been based on limits on beef exports, heavily subsidized energy and a wide range of price controls,” says Gedan.

In Chile, inflation reached its highest level in 13 years, while the Central Bank continues to raise the interest rate to counteract the increase in prices.

The products that have increased the most in the last year are: air transport service (79.5%), tourist packages, liquefied gas and gasoline.

Added to them are used cars and some food.

The basic family basket in Peru increased by 5.8% in October, driven by the increase in the value of raw materials worldwide, among other reasons.

This occurs because the country imports most of the corn, wheat, diesel, or soybean oil it consumes.

Imported products are used to make food such as chicken, eggs, bread, noodles and oil, as well as fuel for domestic use and for transportation.

That explains the rise in the cost of living in the South American country.

Internationally, the price of oil so far this year has risen 69%, the price of wheat since the end of 2019 has risen almost 69% and soybean oil has risen 100%

Food and non-alcoholic beverages, accommodation, water, electricity, gas and other fuels are some of the products that have experienced the highest increases in Colombia in October.

In relation to food, the prices of products such as meat, fruits and milk continue to rise, as well as potatoes, edible oils and tomatoes.

Venezuela, with a chronic annualized hyperinflation of almost 2,000%, according to the Central Bank of Venezuela (BCV), and with a projection of 2,700% for 2021 according to the International Monetary Fund (IMF), has led the increase in the cost of living for years in Latin America and the world.

What are the countries of the region doing?

Nikhil Sanghani, an economist specializing in Latin America at the British consulting firm Capital Economics, explains in a dialogue with BBC Mundo that the largest economies in the region are trying to control the rise in prices by raising interest rates.

“Some of the countries, such as Brazil and Chile, have done it quite aggressively,” he says.

The wave of tighter monetary policies “appears to be a major headwind for the economic recovery next year,” says Robert Wood.

It is that the strong increases in the cost of money will have an economic slowdown effect, which is why it is fundamental how each central bank finds a way to balance the challenges that are coming.

In this context, he projects, “the average regional growth rate will be 2.5% in 2022”.

An estimate that may vary as new signs appear on the horizon, but what is clear is that next year will come with quite a bit of difficulties along the way.