Inflation in LatAm: How CIOs should respond?

Lingering disruptions by globally strained supply chains and geopolitical situation are some of the causes of Inflation that has brought new challenges for Latin America. CIOs must begin planning for IT impacts.

The world is facing a never experienced crises that is bringing uncertainty. Just when the situation was returning to its pre-pandemic GDP growth trend rate of around 2.5% for 2022, according to FMI, the conflict in Russia and Ukraine brought further inflation shockwaves.

This conflict is contributing significantly to the sharp rise in energy and commodity prices worldwide, which has impacted the economic performance of nearly all countries in Latin America. The region was leaving behind the disruptions caused by the pandemic when the conflict in Eastern Europe started. The rise in food and energy prices, by impacting consumption and production costs, has accentuated inflationary pressures.

In the article of Deloitte Insights about Latin America economic outlook, 2022, it is stated that now the region has to deal with stronger inflationary pressures, weakening global economic growth, and higher interest rates.

The Latin American IT markets are facing challenges such as enterprise hardware scarcity that leads to further cloud adoption. Although, there is some growth in countries where executives are usually resilient to crises and inflation issues, most of the countries in this region are expected to continue struggling for at least one more year, according to IDC.

Robert Naegle, VP Analyst at Gartner, discussed the impact of inflation for CIOs and the actions they should take to respond. He said CIOs must first look at inflation through a business lens and begin planning for IT impacts.

According to him, “CIOs have three choices: spend the same and do less; spend more and do the same; or try and optimize in order to spend the same and do the same. If optimization is the goal, current resources will need to stretch – existing infrastructure will have to do more for longer, and existing talent will have to be more productive”

Finally, He highlighted that CIOs must align with the CEO to understand the corporate plan to address inflation. Cost reduction should not be reactionary, but strategic and aligned with efforts being undertaken by the business as a whole. And for organizations where cost reduction or optimization is required, CIOs must take strategic action to reduce or reprioritize spend.