Price increases upending politics across Latin America

Governments globally are coming under immense pressure to cushion the blow of surging food and fuel prices. In Latin America, the response risks igniting a tinderbox.

From Mexico to Brazil, persistent high inflation is widening the gap between rich and poor in what is already the world’s most unequal region. It’s stoking political upheaval that could be a foretaste of what lies ahead as policy-makers the world over struggle to meet demands to increase social spending.

Across Latin America, a burgeoning middle-class is seeing its prospects eroded. For society’s poorest, the latest wave of consumer price increases will be a full percentage point higher than for the richest, estimates by the Economic Commission for Latin America and the Caribbean show. One third of the entire region is poised to meet the criteria for poverty, defined as those living on US$1.90 a day.

Evidence that the impact is weighing most heavily on the poorest is already bubbling over into social unrest. In Panama, protestors blocking highways and ports prompted a freeze in the prices of 72 essential goods in July. Strikes in Peru the same month forced a pledge of more state help for the poor. Ecuador’s government is in talks with indigenous organisations after rioting broke out over the soaring cost of living. A common refrain is that only the rich can now afford even basic foodstuffs.

Interest rate rises in at least seven of the region’s nations have yet to make much of a difference, leaving governments to deploy tax cuts and social programs at the expense of fragile public finances.

Surging prices are also dominating the election in Brazil, where Luiz Inácio Lula da Silva, the leftist former president, is attempting to unseat the incumbent, Jair Bolsonaro. Hunger now affects 33 million people in Brazil, the most since at least 2004.