Santiago, Jun 6 (EFE).- The effects of the war in Ukraine, especially the increase in energy and food prices, will increase poverty in Latin America by 33.7 percent and extreme poverty by 14.9 percent this year, a 1.6 percent and 1.1 percent rise over 2021, respectively, the Economic Commission for Latin America and the Caribbean (ECLAC) warned on Monday.
The regional organization, based in Santiago, Chile, said in its report titled “Repercussions in Latin America and the Caribbean of the War in Ukraine: How Should the Region Face This New Crisis?” that the conflict will push 7.8 million people into extreme poverty, for a regional total of 86.4 million in that category who suffer food insecurity.
These levels are markedly higher than those seen prior to the coronavirus pandemic and further reduce the chances for a quick recovery, ECLAC said.
Inflation began to climb in Latin America in mid-2021, mainly due to the financial aid authorized by governments during the pandemic and the increase in consumption, and the countries in the region ended the year with an average inflation rate of 6.6 percent.
Last April, regional inflation shot up to 8.1 percent and the majority of the central banks are expecting it to remain elevated for the rest of this year.
The impact of the rise in prices, along with the reduction in growth and increase in poverty, will vary by country, the organization said, adding that in Colombia, Mexico, Paraguay and Brazil there will be sharp reversals in the fight against poverty.
ECLAC said that inflation harms not only extremely poor people but also middle class and lower middle class households in terms of income distribution because the percentage of household income spent on food rises as the gross household income falls.
To deal with this spike in food prices, ECLAC is calling for international trade in foodstuffs and fertilizers not to be restricted, for governments to maintain or increase food subsidies and to reduce or eliminate tariffs on the import of grains and other basic products.
To inflation must be added the external context of uncertainty and deceleration in economic activity and trade in the region, ECLAC said.
After the 6.3 percent economic recovery registered in 2021, the regional GDP will rise in 2022 by an average of 1.8 percent, according to ECLAC’s projection made public in April.
Latin America is thus tending to return to the slow growth it experienced during 2014-2019, when annual average GDP growth was just 0.3 percent.
The higher prices for raw materials, the increase in transportation costs and the perturbations in international supply chains will also impact the export of goods throughout the region.
In December 2021, ECLAC projected a 10 percent increase in the value of regional product exports and 9 percent in the value of imports.
However, the rise in the prices of several of the region’s main products raises the projection for 2022 to an expansion of 23 percent in both exports and imports.
Mario Cimoli, the interim executive secretary for the regional organization, said that “the present juncture must not be seen as an isolated phenomenon, since its effects combine with those caused by more than a decade of accumulated crises: the international crisis, the economic tensions between the United States and China and the pandemic.”
He urged governments to “expand the fiscal space and increase incomes, also allowing investments to increase at the same time” and “expanding the role of regional approaches in the responses to the crisis.”
“It’s a region that wins when united and loses when separate in food, hydrocarbons, energy … It’s something we have to be very clear about if we want to move forward toward regional integration,” he said.