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News Article

Ukraine-Russia War Could Affect Mexican Markets, Economy

By Sofía Hanna | Thu, 02/24/2022 - 13:45

Days after the mobilization of almost 190,000 troops to Ukraine’s borders, Russian President Vladimir Putin ordered a military operation against Ukraine. Now that there is war on the horizon, the rest of the world wonders what will happen to Russia and Ukraine and how the consequences of the attack will impact other countries.

 

The war is expected to bring higher inflation, disrupt financial markets and reduce growth, further straining the economic recovery after the COVID-19 pandemic. In Mexico, after the invasion, the peso fell 1.4 percent and the Mexican Stock Exchange (BMV) fell to levels not seen since the end of January, according to Reuters. Given these effects on the economy, President Andrés Manuel López Obrador said that his administration is already prepared for the economic effects that the conflict between Russia and Ukraine could generate. “We are prepared for the economic effects that are already taking place. In addition, the peso is strong, closing on Wednesday at MX$20.26 per dollar, one of the best levels of the year. Until yesterday we had a favorable situation for our currency, a strong peso. It may be going up due to this situation but we have a margin.”

 

Other global markets were affected. Wall Street, for example, sunk by over 1 percent mostly due to losses in bank stocks. Western countries have already announced numerous sanctions due to the Russian military operation in Ukraine and President Putin said today that he is closely following the situation in the financial markets and that additional measures will be adopted to guarantee their stability if necessary, reported by Reuters.

 

The war has already impacted the oil and gas sector. According to the Economist, “oil prices surged, the international benchmark, soaring past US$ 100 for the first time since 2014.” However, President López Obrador has claimed that the increase in oil prices will not affect Mexico’s economy. “If the price of imported gas increases a lot, we can start up all electricity generation plants that do not require gas to avoid the increase in electricity costs. We already have that plan. The same for gasoline, there is a subsidy so that even if the price of imported gasoline or crude oil increases, we are prepared," said López Obrador.

 

Mexico will maintain diplomatic relations with Russia, said Minister of Foreign Affairs Marcelo Ebrard. A Joaquin López Doriga report said that Armina Wolpert, Russia's honorary consul in Quintana Roo, resigned from her position arguing that she could not continue to represent Russia because she does not share the principles and values ​​of her government.

 

President López Obrador criticized the invasion and called for a diplomatic solution. “Mexico does not accept that one country invades another. We will not waver in our call for de-escalation, diplomacy and dialogue; a diplomatic solution is the only way to avoid falling off the precipice that a war in the EU would entail,” he said.

The data used in this article was sourced from:  
The Economist, Reuters, Joaquin López Doriga
Photo by:   Duncan Kidd, Unsplash
Sofía Hanna Sofía Hanna Journalist and Industry Analyst