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The impact of the war in Ukraine on Latin America

In the analysis of the war in Ukraine, it tends to confuse levels. We tend to be confronted with emotional reactions, disseminated by the media and amplified by social networks; with propaganda disguised as news and rigorous opinions, which are less widespread. In parallel, we are subjected to constant updates on the conflict zone combined with more global but also more out-of-focus visions. We know there is censorship. But we refer to all this mixture as information and on that basis, we build our criteria and make decisions.

However, it would be convenient to refine why Russia and Ukraine are not Yemen, Iraq, or Afghanistan. Neither are they the Caucasus nor the former Yugoslavia. In fact, the structural impact of a hybrid confrontation that overflows Eastern Europe and is spread far in the military, will be global and will have more significant consequences, but also more distant and more lasting than what is usually thought and published.

Latin America has traditionally been exposed to the ups and downs of the world system because its relationship with the global economy is dependent, its main role being that of a commodity exporter. Moreover, the fragilities of our financial systems expose our currencies to ups and downs that, like the current inflationary spirals, segment our economies and condition the lives of the most vulnerable. 

On the other hand, the current juncture does not help either. Before all hell broke loose in Ukraine, the situation in this part of the world was already worrying: the impact of the pandemic had been devastating. The slowdown seemed an accomplished fact, while inequality was once again running rampant. By 2021, extreme poverty had grown by almost 14% across the region. Until a couple of months ago, Latin America seemed doomed to trade disruptions (due to changes in international demand) with the potential to provoke turbulence such as those experienced in recent times in Paraguay or Colombia.

The war in Ukraine, however, is changing everything. Even before Russia made public its response to the Western sanctions, the international prices of commodities such as oil, gas, steel, nickel, uranium, methanol, phosphates, and wheat soared. There have already been global consequences: from sudden increases in energy bills to uncontrolled price hikes or huge losses for various companies. According to experts, if the situation does not improve, there could be supply problems for the production of such basic goods as microchips (and therefore technological devices), plastics, and even foodstuffs.

What are the implications of this situation for Latin America? 

In the short term and at the micro level, there will be, of course, generalized increases in inflation. But thinking in the long term and at the macro level, in less than a month, our region has once again become a geopolitically bullish region. The rapid and eloquent rapprochement of the United States with Venezuela is an example. But Maduro’s oil (which is not the only one: Mexico also has large reserves) is only one of our great strategic assets in the face of the shortage of raw materials that is looming for the West. Trinidad and Tobago and Guyana have gas deposits; Colombia and Guatemala, nickel; Bolivia, lithium; Chile, copper; Brazil, besides producing biofuels, is, like Peru and the entire Andean arc, a mining power. Venezuela has phosphates and finally, Argentina produces wheat. 

All these attributes in the form of raw materials are allowing us to suddenly recover, especially in the eyes of the United States and its allies, a strategic interest that Asia has had for the last twenty years. This region, in the light of economic growth, is supported not only by the strength of the Chinese economy but also by a consistent network of multilateral organizations (such as the Shanghai Cooperation Organization, which accounts for a third of global GDP; the AFTA; the AIIB or the Chinese initiative of the Belt and Road) had been becoming a locomotive of the global economy and a magnet for foreign investments. 

But, great paradox, the geopolitical pressure to which Russia is now being subjected as a consequence of the Ukrainian War may contribute to the consolidation of an economic bloc that has at its core a solid (and recently relaunched) strategic alliance between Moscow and Beijing. 

The best proof of its geopolitical importance is that virtually no Asian country – including India, Pakistan or the United Arab Emirates – will apply sanctions against Moscow. Moreover, these institutions are not detached from reality: little by little they have been developing concrete financial tools -such as UnionPay, CIPS, or the digital Yuan- that allow citizens and traders to circumvent the day-to-day routine and, therefore, predict the feasibility of large-scale geopolitical insubordination that may benefit Beijing, also laying the foundations for a progressive ‘de-dollarization’ of the world economy.

In Latin America, however, although most of our countries will not impose sanctions on Moscow either, the geopolitical panorama is different. The key is that here there are neither multilateral institutions with sufficient political power, nor an export capacity of manufactured goods comparable to Southeast Asia, for instance, nor, of course, financial tools of our own. 

Furthermore, our economies are highly dollarized and, due to the geographical distance, it is foreseeable that even the desire of some not to block Russia will not be fulfilled. Rather, everything points to immediate problems with certain supplies (especially fertilizers, which are key for agricultural production); probable stagflation, and to renewed geopolitical pressures that are very likely to take shape at the Summit of the Americas to be held in June in Los Angeles. 

In this context, neither political stability nor social equity is guaranteed. At the same time, Chinese interests in the region could come under pressure. In fact, although Beijing’s presence in Latin America is not as decisive as in Africa, strategically speaking there are elements that may be of concern from a Western point of view, such as the Chinese construction of critical infrastructures in the Caribbean area or the intense agricultural relations established, based on the soybean trade, in the continent’s Southern Cone

Thinking ahead, it could also be worrying how receptive our region could be to the establishment of trade compensation systems such as those promoted by Beijing. In this field, it remains to be seen how far Western pressure could go, although Colombia’s possible ‘association’ with NATO could be interpreted as a warning to mariners.

Another possible vector of external pressure could be environmental. In recent days, the heat of the war in Ukraine prevented us from assessing the seriousness of a recent United Nations report which warns, for the umpteenth time, of the irreversible ecological deterioration suffered by the Amazon and of the serious climatic risks facing our region. With Antarctica, environmentally fragile and geopolitically sensitive for the Southern Cone countries, something similar is happening: the international treaty that protects the area from irresponsible incursions will expire in 2048, and right now several actors are taking positions with the possible exploitation of resources as a backdrop.

In the end, the geopolitical problem that lies beneath remains substantially unchanged, even in the strategic context that the war in Ukraine seems to be inaugurating. There is still an international commodities boom that the hybrid nature of the conflict, insofar as it politically fragments the global space, complicates it, but does not change. From Latin America this should be considered the real common strategic problem: will it end up being the case?

Translated from Spanish by Janaína Ruviaro da Silva


Associate Professor at the Latin American Institute of Economics, Society and Politics, UNILA (Brazil). PHd in Sociology from the École des Hautes Études en Sciences Sociales - EHESS (Paris).


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