Thursday, February 2

7 economic perspectives that will impact the finances of Latin Americans during 2022

Trust Corporate, an expert consultant in financial and accounting matters, analyzed the behavior of the economies in the region, its challenges for this new year and the way it can affect the budget of its inhabitants.

For Jamez Hernandez, President and co-founder of Trust Corporate: “After a complex year for governments, companies and their workers as a result of the pandemic and its impact on the economy; The challenges for the leaders, local authorities and the business sector of the region must focus on their ability to articulate effective measures and incentives to promote productivity, drive economic reactivation and job creation.”

For Trust Corporate these will be the seven economic perspectives that could affect personal finances in Latin America:

Moderate economic growth: According to the study by the Organization for Economic Cooperation and Development (OECD) in 2021 the volume of world trade in goods grew by 10.8% in what will be the largest expansion since 2010. By 2022 an expansion of 4, 7%, equivalent to twice the average growth of world trade between 2012 and 2019 (2.4% per year).

“This year is shaping up to be a year of Gross Domestic Product (GDP) growth for most Latin American countries, where figures and behavior similar to those of three years ago and before the spread of Covid-19 began. ; however, this growth will depend on many factors, such as progress in the vaccination process and the appearance of new strains of the coronavirus,” explains Jamez Hernández.

Increase in interest rates: According to the World Bank, it is estimated that the growth of the Latin American economy will slow to 2.9% this year. Much of the region will take a long time to fully recover and return to pre-pandemic production levels.

“In 2022 we will see an increase in interest rates, which means that the cost of credits will be higher; Factors such as the one presented in the United States, where last October there was year-on-year inflation of 6.2%, the highest in the last 30 years, will directly affect the region’s economy. The countries that could be most affected are Argentina, Brazil, Colombia, Chile, Mexico and Peru, so we recommend being measured in spending and being attentive to these variations so as not to pay high costs due to the high interest rates of the credits and loans that are acquired during the year”, comments Hernández.

Financial inclusion: According to the Organization for Economic Cooperation and Development (OECD), social distancing measures promoted the process of digitizing transactions, by encouraging the use of non-face-to-face financial services and channels. For its part, a report published by Mastercard highlighted that in Latin America, before the pandemic, only 45% of the population had made an online transaction; however, during the last two years this figure grew to 83%.

“The banking sector will extend its offer and take advantage of the coming months to connect with its customers, the traditional ones and the new generations of users, who are mostly digital natives. Entrepreneurs and businesses have been incorporating technology-based solutions to benefit people by offering them alternative products and services, cost reduction and a wide range”, comments the Trust Corporate representative.

Dollar and the devaluation of local currencies: The currencies of the largest economies in Latin America suffered sharp falls against the dollar last year, one of the reasons that explains this phenomenon is that there is a wave of political changes and uncertainties that are affecting the foreign exchange market, which will be reflected in the increase in import prices, the value of automobiles, household appliances and toys, in addition to the increase in the value of the family basket by 20% throughout the region.

“We have seen how countries, currencies and companies have paralyzed the productive apparatus and that it represents a complex mechanism that will still take time to reactivate, and that is why we have seen a shortage in the supply chain of raw materials, electrical appliances, spare parts, automobile production that are not only the product of the challenges posed by the pandemic for industry and commerce, but also began in 2019, with the trade war that China and the United States are advancing from this moment and that will undoubtedly affect markets around the world.”

Cryptocurrency boom: There are currently more than 16,701 types of digital currencies, of which Bitcoin represents 39%, followed by Ethereum with 19.4%, and which together constitute a global market of 2 trillion dollars per year. The Latin American countries with the highest activity in these currencies, according to the statistics platform Coin Dance, are Colombia with 45% of the region; Peru (13%); Chile (12%); Mexico (11%) and Brazil (11%). In the region it is already possible to find more than 100 ATMs enabled to receive this asset.

“These types of assets are here to stay, and despite their instability, the trend indicates that they will be increasingly common and governments will join in their regulation. When investing, the important thing is to be cautious and diversify the risk in order to withstand the variations in its price, being aware that the greater the utility, the greater the risk and just as we can win a lot, we can also lose everything”, explains Hernández.

Increase in oil demand: According to the International Energy Agency (IEA), world oil production is expected to reach 99.5 million barrels per day this year, a figure that will exceed the levels presented before the arrival of Covid-19. This derives from the scarcity in supply and the high price that natural gas and coal have been presenting. The increase in the value of energy, and the rise in crude oil will cause a rise in the gallon of gasoline, which together with the increase in petroleum derivatives, will affect the prices of the supply chain and consumption of people for this year.

Consolidation of Electronic Commerce: ECLAC indicated that the pandemic and mobility restrictions accelerate the growth of eCommerce throughout the world. Latin America and the Caribbean was the second most dynamic region in the world in terms of growth between 2014 and 2019, and it is projected that it could lead the global progression in 2024. The opportunity that this activity represents for businesses, regardless of its size or location constitutes a great opportunity for entrepreneurship and economic reactivation and is in turn an important stimulus for the generation of employment, throughout the ecosystem of electronic commerce in the countries of the region”, concludes the CEO of Trust Corporate .

“During this year the global economy will be exposed to different factors that should motivate people to be prepared to a greater or lesser extent for its effects. Events such as political and military conflicts between nations, such as are occurring between Russia and its neighboring countries or the risky nuclear tests carried out by North Korea, will directly affect the price of commodities, capital markets and investments among other sectors; Given this, it will be necessary to interpret the events as they happen and act financially in accordance with the effects that they cause in the regional markets and their industries”, concludes James Hernández.