The ambivalent effects of the war in Iran on Latin American countries

Buenos Aires – The war in Iran is having repercussions in regions far removed from the countries directly involved in the conflict, including in Central and South America.
In the short term, Latin American economies may suffer ambivalent repercussions due to the conflict. While the crisis could lead to increased inflation, commodity exports could benefit from rising prices. In Mexico, the short-term impact on oil revenues may bring advantages for the government. The second potential impact concerns fuel prices. The government is attempting to reduce pressure on fuel prices by ensuring that prices remain unchanged for at least the next six months.
The situation in Argentina, which is undergoing sweeping, ultra-liberal economic reforms under President Milei, is examined in a recent report published by Morgan Stanley regarding the potential impact of the war on the national economy. According to the American bank, a rise in oil prices would lead to increased exports, particularly thanks to the reserves of the Vaca Muerta oil field, which would have a positive effect on the balance of payments. However, inflation is problematic, having proven to be the Achilles’ heel of the Argentine economy in recent years. In the model developed by Morgan Stanley, a 10% increase in crude oil prices would raise inflation from 0.2% to 0.4%. Another important sector of the Argentine economy, agriculture, is also affected. The war in Iran could have a two-fold effect here as well: on the one hand, world market prices could rise, which would benefit Buenos Aires, as agriculture accounts for 60% of its exports. On the other hand, Iran is a major exporter of fertilizer, and the lack of supplies from Tehran would increase the prices of agricultural products. While this might initially appear positive for exports, the domestic market is a cause for concern. Rising prices for agricultural products could lead to higher inflation than predicted in the Morgan Stanley report, with serious consequences for those segments of the population already suffering the effects of the ultral-iberal reforms. As for Brazil, two aspects need to be considered. The country could benefit in the short term from rising oil prices, as it has become an exporter in recent years; however, the agricultural sector will also be affected. Rising prices could influence fuel prices and, similar to Argentina, fuel inflation. Like Argentina, Brazil is experiencing a decline in fertilizer shipments due to the conflict with Iran. However, while this coincided with rising agricultural prices in Argentina, which may have had a positive impact on exports, it is leading to a decline in exports in Brazil. This is because Iran, and the Middle East in general, were the main consumers of goods such as wheat, which had to cross the Strait of Hormuz to reach their destinations. Latin American governments have reacted differently. Argentina’s President Milei is a close ally of Israel. Other presidents, however, have spoken out against the US action. For example, Colombian President Gustavo Petro wrote in an X post on the day the bombing began that Trump had “acted wrongly.”
The Venezuelan government expressed similar sentiments, regretting that military action had been chosen after the bombing began. Brazilian President Lula has repeatedly spoken out against the war and, at the summit of the Community of Latin American and Caribbean States , making a comparison between the current conflict and the 2003 Iraq War.

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