Mexico has the highest inflation among the countries of the Pacific Alliance

When evaluating the monthly inflation of the four countries that make up the Pacific Alliance, Mexico is the country with the highest increase in the prices of goods and services in the seventh month of this year (July), as it registered a variation of 0.38%.

Due to the annualized price increase, Colombia has the highest figure (3.79%) and is closely followed by Mexico (3.78%). Image: Pixabay
Due to the annualized price increase, Colombia has the highest figure (3.79%) and is closely followed by Mexico (3.78%). Image: Pixabay

In second place was Chile, where the cost of living increased 0.23% in July, followed by Colombia, with a monthly consumer price index of 0.22%, and the one with the lowest increase in inflation was Peru, with 0.20%.

While the figure for Mexico was the highest among the four countries, this was lower than that recorded in the same month of 2018, when it reached 0.54% according to the National Institute of Statistics and Geography (Inegi). It is worth mentioning that when taking Mexico's annual inflation, it stood at 3.78%, the lowest rate since December 2016 (3.36%).

Samuel Ortiz Velasquez, professor at the Faculty of Economics at Unam, said that the annual figure achieved in July is within the objective of the Bank of Mexico, which revolves around above or below 3%.

"In fact, the relatively low inflation rate was a factor that, along with the reduction of interest rates in the United States, led the Governing Board of the Bank of Mexico to reduce the interest rate in the country," he said.

Among the products that dropped the most in price are gas, electricity, and food such as eggs and tomatoes.

In the case of Chile, at monthly prices, three divisions showed negative variations. These were various goods and services (-0.6%), alcoholic beverages and tobacco (-0.4%) and communications (-0.3%). The education and recreation and culture sectors did not change.

As for the divisions that increased their prices, those that increased the most were clothing and footwear (0.9%) and household equipment and maintenance (0.7%). Among the prices of goods and services, the one that increased the most in July was the intercity bus transport service, with a variation of 19.8%. On the contrary, lemon was the product that most fell in prices, registering a decrease of 30% in the month.

Looking at annual inflation, the figure reached 2.57%, i.e. it remains in the lower part of the target range managed by the Central Bank of Chile, which ranges between 2.0% and 4.0%.

In the case of Colombia, four divisions were above the national average for the month. These were food and non-alcoholic beverages (0.66%), recreation and culture (0.51%), information and communication (0.33%) and finally, transportation (0.28%).

Sergio Olarte, chief economist at Scotiabank Colpatria, said the increase in food and transportation is largely explained by the country's climate, as its intensity has made it difficult to move some products.

"For example, the road to Villavicencio is a fundamental corridor to supply food to the center of the country, and due to climatic conditions, its passage has been restricted," he explained.

Given the scarcity of local produce in other parts of the country and the difficulty of getting around, food and transport prices are rising. In addition to the latter, gasoline prices increased in the seventh month of the year.

Looking at the annual inflation figure, the CPI (Consumer Price Index) figure stands at 3.79%, which although higher than that recorded in July 2018, remains within the target range of the Bank of the Republic.

In Peru, the increase in cost during the seventh month of the year is mainly explained by an increase in food and beverage prices (0.30%), transportation (0.24%) and communications (0.24%). In Lima, the greatest monthly variation was in food (0.30%).

The annual figure was 2.11% and the greatest variation was in alcoholic beverages and tobacco (13.16%), which was mainly affected by beer and blond cigarettes, and education (5.03%). The only consumer division with negative variation was communications (1.54%).

Prices in the region would tend to increase with dollar volatility

If uncertainty continues in global markets and trade tensions between the United States and China continue to escalate, it is likely that the dollar will continue to strengthen against the Pacific Alliance currencies, as investors will prefer to exit assets in emerging markets to take refuge in safe assets such as the dollar or Treasury bonds. This would eventually lead to higher inflation, especially in imported products.

By Mexicanist

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