Latin American politics to feel the impact of recent fuel hikes

From Peru to Honduras, multiple countries in Latin America have recently experienced political turmoil linked to high gas prices. Going back a few years, we can mention protests which disturbed Mexico in 2017, halted Brazil for a week and a half in 2018 (and had a massive impact on growth), and nearly brought a president down in Ecuador in 2019.

In a region where infrastructure and public transport are so underwhelming, citizens are very exposed to the fluctuation of fuel prices — which can eat up families’ purchasing power. Gas prices not only affect people’s daily transportation routine but also pressure the prices of goods and services upwards, as trucks still account for the lion’s share of cargo transportation.

For decades, Latin American governments have resorted to fuel subsidies to keep prices down — a move that can easily become unsustainable depending on the economic circumstances. 

This is one of these situations, with governments now left with few instruments to contain rising fuel prices after two years of a pandemic that has worsened the state of public accounts.

Skyrocketing fuel prices have contributed to Latin America being one of the regions in the world where inflation has surged the most. Per the Economic Commission for Latin America and the Caribbean (ECLAC), the basic basket of goods and services in the region got 42 percent more expensive in 2021.

And, as the International Monetary Fund