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'Premature' to say how US-Russia standoff will affect LatAm – Moody’s

Bnamericas
'Premature' to say how US-Russia standoff will affect LatAm – Moody’s

It is still premature to say whether the current tension between the US and Russia over Ukraine will cause specific economic impacts in Latin America and the Caribbean, according to an expert from credit rating agency Moody’s.

“We do expect that an immediate incursion will result in sanctions being imposed on Russia and the key will be the sectors impacted and the degree of coordination among the countries involved,” Marianna Waltz, head of LatAm ratings and research at Moody’s Investor Service, told BNamericas during a media session.

Following Russia’s decision to recognize the independence of two regions of eastern Ukraine held by Moscow-backed rebels, the US and the EU responded with financial sanctions.

One of the most significant moves was made by German chancellor Olaf Scholz, who ordered the suspension of the certification process for the Nord Stream 2 gas pipeline, construction of which was completed last year. The pipeline, which runs over 1,200km under the Baltic Sea to the coast of northern Germany, is designed to carry up to 55bn cubic meters per year of Russian gas to Europe.

This led to a spike in natural gas prices on Tuesday, which will probably affect Latin America at some stage.

Considering that, Waltz said that energy prices are the most likely link between the situation in Eastern Europe and Latin America, especially in countries where energy generation and oil and gas exploration are key parts of the economic structure.

However, she pointed out that factors such as China’s increasing investments in the region, which have now transitioned from commodity extractions to infrastructure, communications and energy, in combination with rising interest rates, will be more likely to impact the Latin American economy in the short term rather than the tensions in Europe.

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