Buying food, filling gasoline and paying for services represented a challenge this year for Latin American families who have seen a exponential rise in prices while wages remain stagnant.
Venezuela and Argentina again reached peaks in their inflationary escalation this 2022 with 119.4% and 85.3% respectively, something that experts consider “endemic” in those countries, like Cuba, which closes 2022 with a price increase of 39 .7%.
Other nations such as Panama and Bolivia kept the brake on at 1.5% and 3.2% this year that is ending, marking a region that has experienced uneven inflation given the internal economic dynamics of each country.
The Economic Commission for Latin America (CEPAL) adjusted the projections in its report for the last quarter of the year and offers some light on the behavior of inflation in the region, where -according to the organization- factors such as “dependence oil”, economies that depend on imports, and even those countries that have had losses in food production.
The rise in fuel prices with the start of the russian war against Ukraine -since February- “represented a key role” in the rise in the cost of living at a general level in the region, according to ECLAC.
But not only that, when the United States Federal Reserve began to rise staggered interest rates to curb inflation that reached 9.5% at its peak, regional currencies experienced greater volatility as the dollar strengthened.
All this without neglecting the side effects of the COVID-19 pandemic in a region that has not managed to fully and homogeneously recover.
In Central America, Honduras closed the year with the highest inflation in this subregion with 10.4%, followed by Nicaragua with 9.8%; Guatemala with 9.2%; Costa Rica with 9% and El Salvador with 7.3%, the latter with a dollarized economy.
The Central Bank of Honduras (BCH) when closing the projections for 2022 last week reported that the monthly variation of the Consumer Price Index (CPI) shows that the greatest increases have occurred in prices of food of agricultural origin and transportation.
“Influenced –in part– by the loss of crops due to hurricanes Ian and Julia; in addition to the increases in the prices of foods with the highest consumption in the end of the year season; as well as fuels, which registered three weekly increases in the month associated with higher international prices for refined petroleum products,” the BCH specified.
Honduras considers the phenomenon as “imported inflation” that causes an incidence in the cost of the basic basket, and therefore with a high impact on the poorest families.
Guatemala, the largest economy in Central America, will close the year with a growth of 4% of the Gross Domestic Product (GDP), half of what it grew in 2021, after the rebound effect after the confinement due to the pandemic.
However, inflation weighs down expectations, as explained by the president of the Bank of Guatemala (Banguat), Álvaro González Ricci, because, despite the positive outlook at a general level, it is “one of the critical indicators” that closes this year above the goal set from 3% to 5%.
But “achieving this 4% GDP growth, despite the international conflict and what is happening in the world, can be said to be extremely good,” said González Ricci.
Panama, Bolivia and Ecuador came out well off
Panama is the country in the region that for years has maintained low inflation, which does not exceed 2% despite international turbulence. This year the indicator shot up to 5% in June, which triggered the alarms and the Executive of President Laurentino Cortizo activated the strategies to contain inflation when the malaise was already in the Panamanian streets.
The professor of Economics at the Inter-American University Felipe Argote has commented to the international media that six months later his country suffered “a gigantic increase” in inflation, but that the freezing of fuel prices as a government plan began to have an effect. even if it were a subsidy, rare in the economy of the canal country.
Hence the troubled waters have been decreasing as in other countries in the region, consequently with the strengthening of the dollar, and since Panama has a dollarized economy it has weathered the effect well, explains the expert.
“Inflation has remained low mainly because the country has a dollarized economy,” said Argote, different from its Central American neighbors, although its economy is sensitive to fluctuations in the international energy sector.
And the case of Bolivia, the experts explain it by the low inflation of 3.2% with which it closes this year is due to the fixation of the boliviano exchange rate compared to the dollar, 9.96 bolivianos per dollar for a decade.
In addition to the sources of the country’s currency with the sale of raw materials that facilitate access to the dollar and with this you can inject those dollars into the economy when there are rises.
Ecuador, also dollarized, closed the year with 3.6% inflation that President Guillermo Lasso, during his visit to Washington last week, highlighted as part of the “virtuous economic policies” of his administration.
Countries that fail to stop the rise.
Chile and Colombia, followed by Peru, have not been able to stop the bleeding in the pockets of their citizens, with prices rising under the pressure of imbalances registered in their economies in 2021, such as the side effects of the pandemic and processes of internal social crises.
The Central Bank of Chile summarized in its closing report for this year that “the Chilean economy continues in an adjustment process after significant imbalances”, it closes 2022 with year-on-year inflation of 12.5%.
But the institution that governs monetary policy maintains that the country would have seen its maximum peak at the beginning of the second half of the year that is ending, and they hope to stabilize and gradually go down, but warns that “inflation expectations will remain above 3 % two years term.
“The Council has made a significant adjustment in monetary policy, which has contributed to the gradual relief of inflationary pressures and will allow us to face such difficulties from a better position,” said the Central Bank.
In Colombia the situation looks the same, the third quarter of the year shows that the trend continues to grow, even well above the expectations set by the government of Gustavo Petro.
Colombia will close the year with inflation of 12.5%, price increases especially for food and services that end up being unsustainable for many Colombians, especially the most disadvantaged classes.
In the case of Peru, a country that is plunged into an institutional crisisthe year-end report from the Central Reserve Bank considers that the rise that reached a maximum of 8.8% in the middle of the year has been sustained to stabilize with fluctuations of 8.5%.
“The inflation rate has been gradually decreasing with oscillations and stands at 8.45 percent in November. Inflation excluding food and energy rose from 4.95 to 5.71,” the report says.
Throughout the region, food prices mark the main price and fuels mark the most significant peaks in the rise in prices for consumers.
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