Mixed Inflation Trends in Latin America

Many Latin America are experiencing relatively low rates of inflation as measured by the year to year percent change in the consumer price index. For example, the March inflation was 1.87% for Peru and 2.40% for Chile.(See the first chart.)

Even the 4-5% rates of inflation shown by Mexico, Colombia and Uruguay are not unusually high for emerging markets. Moreover, Colombia and Uruguay have shown good progress in reducing inflation over the past few years while Mexico has maintained a 4-5% range of inflation in the same time frame. (March data for Mexico are not yet available.)

Venezuela's inflation rose sharply as its oil bonanza and populist government led to big increases in consumer demand. It has since abated but is still among the highest in the area. Inflation in Argentina rose sharply, spiking at over 40% by late 2002 after it had abandoned its currency board. Inflation began to moderate subsequently and reached a low point of 2.26% in February, 2004. Since then, however, inflation has been rising sharply in Argentina. The second chart contrasts the recently declining trend of inflation in Venezuela with the rising trend in Argentina.