Inflation in Latin America is growing at its fastest pace in over 20 years. Bloomberg Línea provided a regional analysis and found out nearly half the countries are lagging on their minimum salary increases. To discuss more on what challenges the global inflation has created for multinational employers, please join our webinar, Global Inflation and its Implications for Multinational Employers on Pay Strategy and Union Relation, tomorrow.
In 2021, inflation in the region had doubled to reach 6.6% – a level comparable to the financial crisis of 2008. In 2022, inflation projections are even higher and should come in at some 8 to 10%. In some countries like Argentina and Venezuela, it’s over 100%. In a nutshell, the countries of the region can be classified into 3 groups:
Countries where inflation is completely off the rail like Venezuela and Argentina: In those countries, the local currencies largely disintegrate in value. In Argentina, the minimum wage has been increased a few times and could be raised by 75.5% by November, however, inflation reached 90% in the same month.
The major economies of the region with inflation between 8 and 10%. Mexico and Brazil have minimum wages ahead of inflation. The two biggest economies in the region, Mexico and Brazil, managed to control their inflation levels comparable to those of the Euro Zone and the United States at around 8-9%. Mexico has been raising their minimum salary significantly over the past few years, specifically to 22% in 2022, however, it is still below the average in the region around US$265 per month. Brazil successfully controlled its inflation, keeping it relatively low this year with a 10% minimum salary increase.
The final group of countries which exhibit lower levels of inflation, very often below 5%, include Panama, Bolivia, and Ecuador. These countries in general managed their minimum salary increase above inflation.
Outlook: For employees who are not impacted by the minimum salary increase, companies should still look at their compensation plans due to inflation. We invite you to join our discussion tomorrow and share your perspectives on this important topic.