The economic and financial effects on Latin America and the Caribbean of the conflict between the Russian Federation and Ukraine Reflections by Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC)
28 March 2022
The conflict between the Russian Federation and Ukraine has come at a time of great uncertainty in the world, relating to several factors: uneven rates of vaccination against coronavirus disease (COVID-19) and new variants of the virus; inflationary pressure and difficulty in maintaining fiscal stimulus packages; trade tensions and risks in the Chinese real estate sector; disruption of supply chains and rises in freight charges; and extreme events caused by climate change. The conflict will have an impact on the economies of Latin America and the Caribbean through several channels, but primarily the trade channel (with direct and indirect effects), the commodity price channel (including terms of trade and inflation issues) and the financial channel.
A. Three channels that transmit the impact of the conflict to the region 1.
Trade channel
Global trade was already weakened before the conflict. The monthly changes in the volume of world trade reflect a collapse and a recovery following the outbreak of the COVID-19 pandemic (see figure 1). In May 2020, global trade underwent its largest year-on-year drop (16.9% compared to the same month in 2019). A strong recovery then began in the second half of 2020, peaking in April 2021, when world trade grew by 24.6% over the same month of 2020. Since then, trade has continued to expand, but the pace of growth has slowed. In August 2021 it grew by 8.2% compared to the same month in 2020. This slowdown is partly a statistical effect of the normalization of growth rates, due to the higher baseline. The slowdown has also been caused by the aforementioned factors fuelling uncertainty.
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