In addition to the challenges posed by the coronavirus pandemic, 2022 began marked by severe tensions between Russia and Ukraine. On February 24th, Russian attacks commenced, triggering a series of events that have profound impacts on the global economy, including Brazil’s.

In the Modal blog, we will detail the origins of this conflict and how it significantly affects the Brazilian economy.

What You Will See in This Post:

• Understanding the War
• How the War Affects Brazil’s Economy

Understanding the War
Origins of the Conflict
The roots of this conflict date back to the Cold War, an ideological confrontation between the United States and the Soviet Union that lasted from 1947 to 1989. Although it did not involve direct armed conflicts, it was a battle for political, economic, and cultural supremacy.

During the Cold War, in 1949, the United States formed NATO (North Atlantic Treaty Organization) to support capitalist countries in Europe. The Soviet Union dissolved in 1991, resulting in the independence of several republics, including Belarus, Ukraine, Estonia, Lithuania, Latvia, Moldova, Georgia, Armenia, and Azerbaijan.

In the early 2000s, the United States saw an opportunity to expand NATO into Eastern Europe, with Ukraine expressing interest in joining the bloc. This was perceived by Russian President Vladimir Putin as a geopolitical threat, especially given the geographical proximity between the two countries.

Conflict Regions
Additionally, there are the regions of Crimea, Donetsk, and Lugansk, which are Ukrainian areas with strong pro-Russian leanings. Crimea declared independence and was annexed by Russia, while Donetsk and Lugansk are in the process of gaining independence, facilitating the advance of Russian troops.

Despite attempts at ceasefire negotiations, the conflict continues, and the world anxiously awaits a peaceful resolution to end the suffering of the population.

How the War Affects Brazil’s Economy
Impact on Ports and Transport
Even with the war happening on the other side of the world, the economic impacts on Brazil are significant. Ukrainian ports are closed, and several maritime and airline companies have suspended operations, affecting global trade.

Oil Prices and Fuel Costs
Russia, responsible for 11% of the world’s oil production, saw prices soar to around $130 per barrel. This resulted in a dramatic increase in fuel prices in Brazil, with gasoline reaching up to R$ 11 per liter in some regions.

Increase in Food Prices
Products like corn and wheat, widely exported by Ukraine and Russia, have also seen their prices inflate in the international market. This increase directly affects the costs of food production, including meat, since corn is an essential component of animal feed.

Fertilizers and Agriculture
Russia is one of Brazil’s main suppliers of fertilizers. With the conflict, the prices of these inputs have skyrocketed, making agricultural production more expensive and consequently increasing the prices of food on Brazilian tables.

The longer the war and sanctions persist, the greater the economic impacts on Brazil and the world will be. The situation requires continuous attention and mitigation strategies to minimize the economic and social damage caused by this global conflict.