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What the Ukraine Conflict Means for Latin America

The aftermath of Covid Latin America has left Latin American economies brittle and less prepared to weather additional economic shocks. When global GDP contracted 3% in 2020, Latin America and the Caribbean experienced a combined 7% recession. The economic impact was uneven, and Peru and Argentina fared worse than most, contracting 11% and 10% respectively, as both countries implemented extremely long lockdowns. [1], [2], [3], [4]

COVID led to the loss of 157 million jobs in the region in 2020 and pushed at least 22 million people back into poverty (2020). Most governments financed their responses by borrowing, aggravating fiscal deficits, and resulting in 20 sovereign credit downgrades. [5], [6]

Despite those challenges, most countries experienced strong rebounds in 2021, and the economic outlook for recovery appeared positive, if tempered. Before the Russians rolled into Ukraine, most economists had predicted at least moderate growth for nearly every country in the region. Now that the war has begun, those same economists have tempered their outlooks, knowing that economic missteps could result in a more enduring recession. As economies began to recover and inflation began to rise, many governments had already begun raising rates before the war to rein in inflation, and as a result, Latin America has already seen a surge of investment, suggesting that leaders have the tools to successfully traverse the hazardous economic landscape.

Double-Edged Sword

The region is going to face potentially severe economic headwinds this year. As inflation rises, and central banks continue to raise rates in response, many of these economies will remain fragile and overly vulnerable to economic shocks, supply shortages, and steep price increases. And although several countries have already successfully implemented rate hikes that could offer stability and attract investment, these increases also stifle job creation, slow momentum, and hurt indebted businesses. Similarly, the increasing costs for commodity imports will undercut anticipated financial gains from price increases in commodity exports. For example, while Brazil and Argentina may reap financial gains from higher prices for wheat, corn, and cereals, the spiraling costs of fertilizer and fuel needed to cultivate and harvest these crops will likely offset these benefits. Many oil-exporting countries in Latin America must also import refined petroleum and petroleum products. They will be fighting each other for increasingly scarce resources at premium prices. Petroleum and petroleum-based products are essential to fuel economic growth as they are required not only to produce and transport goods, but are found in everything from plastics, fertilizers, and pesticides to asphalt, tires, and antifreeze.

Risks and Opportunities

A continuation of conflict in Ukraine will be a mixed bag for Latin America. The economic consequences of the invasion will amplify existing risks, but will also potentially accelerate prospects and opportunities for regional economies, small and large. The challenge for Latin American leaders will be determining how to best reap the rewards of rising commodity prices while simultaneously protecting their economies from rising commodity prices. It will be an uneven playing field, as many of the regional economies that would ordinarily be best-positioned to take advantage of these rises, have not yet recovered from Covid-related economic stresses. Regrettably, Covid is still wreaking havoc on global supply chains and economic growth. And while Latin America is said to be near herd immunity, Covid still gets a vote in the interconnected global economy. That said, commodity exporters who plan for these risks and strategize appropriately will benefit most from these opportunities.

The commodities that the war will most directly impact in Latin America include minerals, hydrocarbons, fertilizer, corn, and wheat. Supply chain snarls, interest rate hikes, intermittent Chinese lockdowns, and the enduring supply and demand imbalance could dampen the positive economic impact in the near term, and potential food and fuel insecurity could reverse economic progress in the longer term.

Some of the most obvious risks include potential litigations over project delays or terminations, sanctions and sanctions-evasion, business disruptions from social unrest, the inability to deliver essential goods, or even the violence that often accompanies increasing poverty; but the most dangerous risks are country-specific, and they revolve around individual governments’ ability to adequately address and mitigate inflation, price volatility, supply shortages, and corruption.


The biggest risk to Latin America is uncertainty: uncertainty about the trajectory, scope and length of the war in Ukraine; uncertainty about leaders’ capacity and skills to navigate potentially perilous economic waters, and above all, uncertainty about what the future holds for the rest of the globalized world and how it will weather this paradigm shift.

[1] 2020 global recession: IMF

[2] 2020 Latin America recession: World Bank

[3] 2020 Argentina recession: EIU

[4] 2020 Peru recession: EIU

[5] Job losses in LAC: ILO (via statista)

[6] Poverty levels: ECLAC (via France 24)

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.


c-russia, global strategic advisory, f-conflict, f-distress, f-risk, risk & compliance, strategy, energy & mining, geopolitical intelligence, global advisory, crisis and litigation communications

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