The inflationary winds of war are blowing away

Madrid, Spain
The effects of the Russian war and Ukraine have begun to dissipate. As a result, the impact on prices is starting to fade, and what we are seeing is a moderate decrease in prices, with lower inflation as summer arrives.

According to the prestigious Spanish economist Juan Carlos Martínez Lázaro, a “forgotten war” phase has already been reached.

The FAO (Food and Agriculture Organization of the United Nations) announced this Friday that its price index with a downward moderation compared to January. Also, in an international trade note, the WTO (World Trade Organization) gave an account of the impact of the measures assumed by the member countries after the effects of Covid- 19, the seguía and the Russian war in Ukraine, with applications of trade restrictions, subsidies and other provisions that affected prices in 2022.

“The problem of the Russian war in Ukraine has become chronic, and we have learned to live with it,” said economist Martínez Lázaro, who notes that many of the foreseen effects did not occur and have begun to be diluted this summer. He argues that we have learned to live with the normality of the war on the European border. Although it will continue to be complicated, many of the effects, such as the increase in the price of raw materials, especially energy, are being diluted. For example, in the case of the cost of diesel, the value is cheaper in Europe than a year ago, when Russian President Vladimir Putin had not yet advanced in the invasion. The economist from IE University in Madrid, Spain, explained that other goods and raw materials, such as oil, are also below pre-war levels.

He estimates that if the war did not persist, these products would have lower prices.

“I believe that although the war will become chronic, most of its economic effects have already passed and, for Latin America as a whole, especially for those countries that export raw materials, it could be an opportunity,” Martinez Lazaro explained to Listin Diario.

Russia is a significant supplier of energy raw materials and grains, goods imported by the region but can be substituted by regional productions.

In the case of Ukraine, the country was a substantial producer of sunflower oil, whose production has been affected by the war. In the case of olive oil, produced mainly in Spain, there is a higher price due to the drought, which the economist attributes to a conjunctural point, independently of the war. Sunflower oil is of great industrial use in Spain, so the prices of many foodstuffs have been affected. Another effect of the conflict was the cutting of maritime routes from those countries at war, considered the granaries of Europe, where the impact has also been diluted, and production has been moving. As a result, the increase in food prices has been moderating, he said.

DR, a booming economy

In the case of the Dominican Republic, the economist affirmed that it is clear the development and stability that this economy exhibits, which he proves are booming. Martínez Lazaro is the director of the Report on Spanish Investment in Ibero-America, presented in Casa de América in its fifteenth version, with the support of Auxadi, Iberia, IE University, and LLYC.

The report was prepared based on a survey of 108 Spanish companies, 75 of which are multinationals and 35 are listed on the stock exchange, between September and December 2022. Mexico was once again the country where most Spanish companies plan to increase their investments in 2023, followed by Colombia, Chile, and Brazil. Meanwhile, Panama, Uruguay, Dominican Republic, Mexico, and Colombia have the best valuation.

When asked about this, he explained that the reason for not seeing a higher percentage proportion of investments in the Dominican Republic than the size of investments in Mexico is due to the large size of the Mexican market and the large number of industrial and maquila companies it has.