Expensive oil, fertilizers and irregular weather raise risks for the Guatemalan economy

The increase in the international price of a barrel of oil, derived from the geopolitical conflict, together with the possible impacts of the El Niño phenomenon, are factors of concern, and its effects could be accentuated at the end of this year and in 2027.

It is anticipated a increase in products such as fertilizers, input used in agricultural production. This adjustment coincides with the possible prolongation of the drought. On May 1, the agricultural cycle began in Guatemala, with the beginning of rains in the different producing areas, amid these conditions.

During a conversation with journalists and editors of Free press, analysts Sergio Recinos, former president of the Bank of Guatemala (Banguat); Maynor Cabrera, from the Economics for Development Foundation (Fedes), and Hugo Maul, from the Center for Economic Research (Cien), provided economic scenarios.

“The duration of the conflict between Iran, Israel and the United States will deepen the scale it can reach; it will mark the future of this year and probably 2027,” Recinos highlighted.

Guatemala and the United States maintain a close correlation in several indicators, since they are integrated into the economic “cycle” and are also impacted by oil prices.

Therefore, there is the risk that, if the US economy falls, an impact will be generated in Guatemala and Central America through exports, that are already affected by tariffs, especially in the non-traditional agricultural sector.

Projections warn of impact on the economy

Cabrera stressed that the situation of the economy for the following months must be analyzed based on the indicators observed so far, and that Guatemala, like last year, when “turbulence” occurred due to the tariff and immigration policy in the United States, did not see its national production affected; in 2025, this was very positive, despite the negative forecasts.

At the beginning, he pointed out that the crisis does not “grasp” Guatemala in macroeconomic terms, which is favorable: exports are increasing and imports are registering a slight decrease, without this being pessimistic. However, Yes, there is a reduction in the import of consumer goods and inputs for the agricultural sector.

“This is when you begin to see that there are some sectors that are not performing so well and that this will affect them. The projections are changing and it is very likely that the economy will take a certain hit this year and there will be a moderation,” he stated.

Energy recovery will not be immediate

Cabrera explained that a weakening is already observed in agriculture, but “there are still some blows that this sector may suffer, just as the industry will suffer due to the higher cost of energy.”

He explained that, although there is an optimistic scenario in which an agreement is reached in the international geopolitical conflict, this will not be resolved immediately, since key infrastructure for the production of fertilizers and natural gas was destroyed, in addition to requiring demining in the area. Therefore, “this will not be immediate and the cost of energy will not be the same as last year, but higher in the first months and then it will go down.”

He relaxation of this “pressure” It will occur between November and December, Cabrera added.

Oil prices won’t fall anytime soon

Maul’s position is that, as long as the conflict in the Middle East is not resolved, the international price of a barrel of oil will be subject to disturbances, and there is no reason to indicate that crude oil prices can decline.

He clarified that the passage of ships through the Strait of Hormuz does not look “so simple,” especially because there is no quick solution to the conflict, and everything will depend on an international political decision. However, the fundamental problem is that large shipping companies and production companies worldwide face the same question: moving oil from those conflict zones or from other territories.

“In the medium and long term I see that prices, when all this is over, will have to fall, with an excess of supply that will take them to levels similar to those they had; but, for now, a positive scenario is nowhere to be seen,” he said.

The Cien analyst acknowledged that In recent years it has been shown that the increase in the price of oil in one period affects the growth of the subsequent period, when explaining the impact for Guatemala.

“We will surely feel this blow, probably with higher prices and revision of expectations; but in 2027 we could see the impact,” he assured.

The model predicts that by 2027 there would be a negative impact due to what happened this yearadded to problems in the United States, and that exports would be affected in their growth.

Input costs put pressure on food

Maul anticipated that some actors have reacted “scared” by the calculations related to the oil problem, which affect the price of inorganic fertilizers, which will directly affect food production in Guatemala.

He recalled that in Guatemala the agricultural cycle implies that currently what was harvested three or four months before is consumed; However, when winter begins, with the new fertilizer prices, this effect will be observed later. He pointed out that It is a “very important” factor that must be analyzed not only for food security, but also for the impact it may have on future prices.

Inflation and climate put pressure on the economy

Recinos explained that this conflict will bring an inflationary problem, due to the increase in oil and propane gas prices, as well as the impact on fertilizers, which will affect the primary sector of the economy, with important repercussions, especially in the second half of 2026 and next year.

Maul assured that there is also an issue that arises this year and that is related to the climate, since an irregular rain cycle could aggravate the situation, as several problems accumulate.

He cited, for example, that in energy production there will be a greater need for thermoelectric plants, with high prices, which represents an impact that is currently not paid attention.

On the other hand, due to the increase in oil prices, People will resort more to firewood, which, although it does not have a direct impact on transportation or the loss of purchasing power, does imply an environmental cost.

El Niño will put pressure on prices and energy

Cabrera stressed that, apart from geopolitics, the climate will be a factor that can affect the economy this year, and forecasts indicate that the El Niño phenomenon will affect again, with days of less rain, an increase in dry days, high temperatures, low cloudiness and greater solar radiation.

“There is a high probability that it will occur, which would directly impact the cost of foods such as corn, beans and other export products. It can also affect the additional generation of electricity. There we have a very delicate issue: a higher cost in the standard of living for the population, but also for the communities that depend on what they harvest for their own consumption, which could compromise food security,” Cabrera added.

Climate represents risk for prices

In the recent review of the leading monetary policy interest rate for April, the relationship between the impact of the El Niño phenomenon on prices for this year was explained.

Johny Gramajo Marroquín, economic manager of the Bank of Guatemala (Banguat), when asked about the economic scenarios with this variable, indicated that The possibility of a strong El Niño occurring in climatic terms has been observedwhich would lead to periods of drought in the country’s crops and, therefore, an increase in the prices of various agricultural products.

However, he clarified that the analyzes indicate the presence of a normal Niño, which means that there would be a period of heat without generating a drought.

In any case, It is seen as a risk in the projection.

“It is a risk in the trajectory of inflation, not necessarily in inflation at the end of the year, because when any supply shock is observed, when a climatic effect occurs that ends up damaging crops, once the production and distribution of the affected good is normalized, prices return to the levels they had. This is a characteristic of agricultural products and does not happen in other prices that, when they increase, do not usually go down,” he noted.

He stressed that, once the shock happens, as happens with fuel, prices go down again and become normal.

Inflation remains low, but with risks

In the official bulletin of the Monetary Board, which maintained the leading interest rate at 3.5%, it is indicated that low inflation conditions continue to prevail and that forecasts and expectations continue to point to it being at the target in both 2026 and 2027.

However, it is mentioned that These projections continue to be conditioned to upside risksparticularly due to the possible intensification and prolongation of the geopolitical conflict in the Middle East, which could cause imported inflationary pressures, which must be evaluated in a timely manner as the global energy market evolves.