Fall in oil prices a net positive for most of Lat Am

The drop in oil prices this month is clearly bad news for the region’s large net energy exporters, Colombia and Venezuela; a fiscal squeeze in on the cards in the former and the latter’s crisis will get even worse. But for the rest of the region, lower oil prices should be a net positive. Large energy importers, Chile and Peru, will receive a boost from a lower import bill, which should narrow current account deficits. (Brazil and Argentina are net oil importers too, albeit only marginally so.) Lower oil prices will deepen the problems at Mexico’s state-owned oil company Pemex, but a drop in the cost of refined oil imports should mean that in aggregate its economy benefits too. Finally, with fuel prices now liberalised in most places, lower oil prices will put downwards pressure on fuel inflation. That is likely to delay interest rate hikes in Peru and could help to build a case for rate cuts in Mexico later in 2019.