Ernesto Revilla, head of Latin American economics at Citi: “The Latin American idiom ‘we were few and the grandmother gave birth’ applies to global shocks affecting our region: just what we needed. Each shock of the last two years—the pandemic, the slowdown in China, a Fed hiking cycle and now the war in Ukraine—if faced by itself would have been challenging enough. Nevertheless, we are facing them all at once. The resulting impact is stagflationary: growth forecasts for the region are falling while inflation forecasts increase. There are two immediate concerns. First, the policy response. Should monetary and fiscal policy focus on the diminished growth (high unemployment) problem, or on the inflationary one? There is usually a tradeoff between the two. In Latin America, central banks have continued hiking rates to fight inflation in spite of weak economies, as they cannot risk unanchored expectations. This has opened the door for further fiscal spending to try to smooth out the impact of increasing food and energy prices to consumers. This will add to fiscal challenges down the road. Second, stagflation breeds political discontent and unrest. Latin America can hardly afford further political uncertainty. Ukraine and Russia are far away geographically and commercially from Latin America (there is little direct trade), but the war’s impact will be felt mostly through…”