After the start of the geopolitical conflict between Iran and Israel, the monetary authorities began to know scenarios of its possible effects on the Guatemalan and Central American economies and at the moment, no immediate impacts are expected, although in any case, this will depend on how they escalate in the future. those tensions, which were already posed as threats to the global economy and trade.
This was reported by Alfredo Blanco Valdés, vice president of the Monetary Board (JM) and the Bank of Guatemala (Banguat), commenting that in recent sessions the analysis of the external environment has been reinforced, based on documents issued by entities such as Standard & Poor’s and other institutions that have commented on the matter.
For example, following Israel’s event once morest the Iranian Embassy in Syria, there was a slight increase in the price of a barrel of oil, but then it returned to normal, as the market quickly discounted it, the central banking official stated. , since these conflicts directly affect the price of crude oil and, consequently, the prices of fuels imported into Central America.
Possible effects
In relation to the above, Blanco Valdés reiterated that, geographically, the Central American region is very far from the conflict area, apart from the fact that events and trade with those countries are very low. Therefore, the channel of trade and economic growth through this channel is very insignificant, as is the financial channel and family remittances.
But a negative effect that might be foreseen is in the price of oil, which in turn can affect other economies, “and in the case of Guatemala and Central America, we are net importers of fuels so variables such as inflation and production costs “They are subject to those prices.”
“A negative effect that might be foreseen is in the price of oil, which in turn can affect other economies, and in the case of Guatemala and Central America, we are net importers of fuels so variables such as inflation and production costs are subject to those prices”
Alfredo Blanco Valdés, vice president of Banguat and JM
He added that the oil price scenario being used is US$80 to US$90 per barrel, but an escalation of the conflict might take it above US$100, “although this is not the case at this time.”
WTI Volatility
Precisely in relation to the price of oil, the Texas Intermediate (WTI) closed yesterday with an increase of 0.9%, to US$83.57 per barrel, in a day marked by geopolitical tensions and the latest economic data from the United States.
At the end of the session on the New York Mercantile Exchange (Nymex), WTI futures contracts for delivery in June added 76 cents compared to Wednesday’s close, following the Israeli army concentrated around thirty tanks and armored vehicles at along Rafah, south of Gaza.
In addition, the Israeli War Cabinet met behind closed doors to discuss the steps to follow in the face of the expected ground invasion of the city, which led operators to fear an imminent invasion of the city, which would immediately result in a rise of crude oil prices. So far this year, oil is up 17%, driven in part by geopolitical tensions.
Given this, Enrique Meléndez, executive director of the Guatemalan Association of Gasoline Retailers (Ageg), confirmed the above to Free Press, adding that an impact is observed in the local market, especially in the prices of super and regular gasoline, which have risen Q5 per gallon so far this year.
The cost of diesel has been more moderate, since global demand for the latter fuel has been reduced, so there is no upward trend as is the case with gasoline, he stressed.
When analyzing the future of crude oil prices, Meléndez stated that the expectation regarding the geopolitical issue is the risk premium that it has in the price, which will greatly depend on any escalation of the conflict.
“For example, following the last event between Iran and Israel last Saturday, April 13, investors reacted in an unusual way and prices trended downward, which was reflected in the prices of gasoline and diesel at the stations. service in the country,” he explained.
For now, the reference prices in the self-service modality in the metropolitan area, according to Ageg are:
- Super: Q34.99
- Regular: Q33.49
- Diesel: Q29.69
message of calm
Blanco Valdés sent a message of calm to economic agents in Guatemala due to this situation in the Middle East, and recalled that the economy is quite resilient in the face of external shocks, and this has been demonstrated with the conflict between Russia and Ukraine, the pandemic and other events.
So, if there had been a scale, Guatemala maintains resilience in that sense, and the macroeconomy is very solid, so the 3.5% growth forecast for this year is maintained.
Transmission effect
The vice president of Banguat announced the transmission channels of a worsening of conflicts in the Middle East and its possible effects:
- Exchange channel: Guatemala trades very little with Middle Eastern countries, and on that side there is no effect that might be foreseen.
- Financial channel: There is also no connection between the systems of that region with that of Guatemala and Central America.
- Remittance channel: There is no significant flow of Guatemalans to or from that region.
- Oil Price Channel: It is the only one that can influence raw material prices, but this year the base projection or estimated average price is US$78.42 per barrel.
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