Preliminary analysis of inflation and foreign trade

Abstract

Global inflation as of June 2022 is marking historic milestones, on average reaching 10%, both in industrialized countries and in emerging and third world countries. Current inflations have been increasing since mid-2020, due to different causes: the pandemic, the economic and fiscal stimuli delivered by states to mitigate the effects of lockdowns, including wage increases, increased demand for services, inflation due to supply rather than demand, collapsed supply chains and increased freight rates, in addition to war. Additionally, in Latin America, the increase in inflation, according to the IMF, was due to late monetary practices that were not very independent of the policy implemented by central banks and the monetary financing of fiscal deficits. In this scenario, Bolivia seems to be the exception, with a year-on-year inflation of 1.79% to June 2022 and an accumulated of 1.18% in the year. This is due to the high state subsidies for energy and food, two of the main causes of the increase worldwide. This is due to the high state subsidies for energy and food, two of the main causes of the increase worldwide. Since Bolivia is mainly an importer of raw materials to consumer and capital goods.

In this article we will analyze the behavior of the country's foreign trade and its effect on prices, especially of the basic basket, despite the low official inflation and the statements of the authorities, the citizen already feels the effects in their pockets. 

Keywords: inflation, foreign trade, imports, exports.