NEW YORK, March 16 (Reuters) – Poor people in Latin America and the Caribbean will bear the brunt of the economic fallout from Russia’s invasion of Ukraine as the region faces increased inflationary pressure, a senior official said on Wednesday. International Monetary Fund range.
“High inflation, especially food inflation, affects the poor in our region the most. So that is the main challenge that the region will face,” Ilan Goldfajn, director of the IMF’s Western Hemisphere Department, told Reuters.
The value of US crude jumped to its highest level since 2008 this month, while the price of wheat hit a record high. Ukraine and Russia account for 30% of world grain exports.
The current rally in wheat prices was triggered by the Russian invasion of Ukraine, the sanctions imposed on Moscow, and the trade disruptions that followed. The World Bank said several developing countries face near-term wheat supply shortages due to their reliance on Ukrainian exports.
Russia was the top wheat exporter in 2018 and Ukraine the fifth, according to World Bank data. “It is recorded when there is food and energy inflation before it is released from the previous choke inflation (reacted to COVID-19),” Goldfajn said.
Supply chain bottlenecks related to the pandemic have already put Latin America on a path of monetary tightening, with major central banks raising interest rates, both to fight inflation and to hedge against the expected outflow of capital in search of actions in developed countries. Now they will have to raise rates even higher.
According to Goldfajn, a further rise in borrowing costs, the corrosive effects of inflation on income and a slowdown in the global economy could undermine growth in the region.
With inflation-adjusted incomes falling and the global economy slowing, Latin America is facing a scenario similar to that of 2018-2019, when citizens took to the streets in protests that only stopped when lockdowns were imposed due to to the pandemic in 2020.
“Governments must continue to strengthen well-targeted social safety nets, trying to expand them and broaden coverage and reach,” Goldfajn said.
As the largest grain exporters in the region, Argentina and Brazil could conserve, at a time when Colombia could take advantage of its oil exports. Chile’s mining capacity should also be a positive element.
(Reporting by Rodrigo Campos; edited in Spanish by Daniela Desantis)