IMF: Russian invasion of Ukraine raises prices in Latin America and the Caribbean

The global economy is suffering from the shock wave of the Russian invasion of Ukraine, which is driving up food and energy prices in Latin America and the Caribbean, which increases inflation, warns the International Monetary Fund (IMF) in a blog.

“Food and energy prices are the main route of collateral effects, which will be substantial in some cases”say the economists of the IMFwho warn that the most pronounced increases “can generate a higher risk of unrest in some regions”.

“High commodity prices are likely to accelerate inflation considerably” in the region, which already registers an average annual rate of 8% in five of the main economies: Brazil, Mexico, Chile, Colombia and Peru.

Argentina, according to data from this Tuesday, registers an annualized inflation of more than 52%.

This situation would force central banks to step up the fight against inflation, a scourge that erodes the purchasing power of wages and thus affects demand.

Russia and Ukraine they are major producers of raw materials, and disruptions to trade in these products and fears of grain shortages, for example, have caused world prices to soar, especially for energy sources such as oil and natural gas.

The cost of some foods has also risen as the price of wheat soared. Ukraine and Russia represent 30% of world exports of this cereal.

On Latin America and the Caribbean the effects of increases are disparate.

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

Financial conditions remain relatively easy, but could worsen if the war escalates, leading to tighter domestic monetary policy that would weigh on economic growth, they say.