The largest economies will face “stagflation,” a period of slow economic growth coupled with high levels of inflation and unemployment. Brazil and Mexico (as well as Chile) will experience stagnant GDP growth of 2% or less this year, according to IMF projections. It downgraded its 2022 GDP growth outlook for Latin America from 3% in October 2021 to 2.5% as of April 2022.
Rising gas prices will pinch consumers’ already constrained budgets. Latin America had some of the highest gas prices in the world—save oil-exporting nations such as Bolivia, Colombia, and Venezuela—during the week of August 1, 2022, per GlobalPetrolPrices.com.
A strong US dollar will drive up import prices. The currencies of all the Latin American markets we track have depreciated against the US dollar, trading below their pre-pandemic rates as recently as the week of June 13, 2022, according to data from OANDA, a provider of currency data and exchange rate services.
Supply chain woes and rising logistics costs are chipping away at retailers’ profit margins. These issues are particularly acute in Chile. As of May 2022, nearly two-thirds of companies there reported that operating costs had surged by more than 20% since the start of the pandemic, per the Cámara Nacional de Comercio Servicios y Turismo.
Despite this, less than one-third of respondents had increased prices by the same percentage—indicative of their anxiety about losing customers over price hikes.
Political uncertainty and policy reforms loom for multinational and local players alike. Brazil’s upcoming presidential election and proposed tax changes pose a potential headwind in Latin America’s largest ecommerce market this year.