Introduction
Geopolitical conflicts, even when far from the continent, often have a domino effect on Latin America. This was seen with Russia’s invasion of Ukraine, triggering a global food and energy crisis. Similarly, the escalating tensions between Israel and Iran could lead to a global impact.
Expert Opinions
Jorge Sahd, director of the International Studies Center at the Catholic University of Chile, explained to DFSUD that an escalation in the current conflict “would not only be a crisis in the Middle East but would have global repercussions,” primarily because about two-thirds of the world’s oil reserves are concentrated in that region.
Gabriela Siller, economic analysis director at Mexico’s Grupo Financiero BASE, confirmed to this media outlet that there would be “upward pressure on oil and gasoline prices.”
Ramiro Sciandro, economist at BlackToro, explained that “a more exposed world to risk is generally not good news for emerging markets, which may face capital flight processes of greater or lesser magnitude depending on their specific macroeconomic scenario.”
Impact on Agriculture
While increased inflation, exchange rate pressure, and disruptions in global supply chains are expected, some countries may see benefits. Brazil and Argentina, being significant agricultural exporters, could benefit from the price hike in the short term.
Sciandro detailed indirect effects on crops like soybeans, driven by the expectation of increased demand for biofuel production. This could also impact other crops like corn and sunflower.
Argentina, as a net exporter of food and energy, is “particularly well-positioned” in this scenario, according to Sciandro. However, Chile, as a net importer, may face deterioration and additional currency pressure.
Logistical Impacts
All experts consulted agreed that the logistical chain would face a severe impact.
Sciandro predicted “a significant increase in operational costs for the transportation and logistics sector and the manufacturing industry.”
Sahd forecasted “higher logistical and financial costs that would affect the competitiveness” of the markets.
He also warned that global uncertainty would “eventually affect investors’ appetite for emerging markets.”
Regional Impact
In Mexico, the Israel-Iran conflict could cause “disruptions in supply chains and potential shifts in U.S. consumption patterns, altering national export dynamics,” according to Siller.
Rodrigo Gallardo, secretary-general of Frutas de Chile, anticipates indirect effects on fruit, vegetable, and coffee exports due to increased transportation and insurance costs. He also foresees potential fluctuations in fertilizer and other input prices, raising domestic production costs.
Gallardo emphasized that the agricultural sector “needs stable international markets to remain competitive.”
Key Questions and Answers
- What is the potential impact on Latin American markets? The conflict could lead to increased oil prices, affecting import-dependent countries like Chile, Peru, and Mexico. It may also disrupt global supply chains, raising logistical costs and affecting sectors like agriculture and manufacturing.
- Which countries might benefit from this situation? Large agricultural exporters like Brazil and Argentina could see short-term benefits from increased prices.
- What challenges does the agricultural sector face? The sector may encounter increased production costs due to higher transportation and insurance expenses, along with potential fertilizer price fluctuations.
- How might consumer behavior in the U.S. influence Latin American exports? Changes in U.S. consumption patterns due to the conflict could alter export dynamics for Latin American countries.
