Latin America and the Caribbean face a scenario of moderate and uneven growth in 2025, amid a global context marked by the resurgence of protectionism, political uncertainty, and trade tensions with the United States. According to the World Bank, regional growth is expected to remain at 2.3% and increase slightly to 2.5% in 2026-2027, though still far below its potential. Mexico, the economy most integrated with the U.S., will be particularly affected by new trade barriers imposed by Washington, with 25% tariffs on products not compliant with the USMCA. This situation has increased uncertainty around the bilateral relationship, especially since about 80% of Mexican exports are destined for the U.S. market. The strong exposure of Mexico to North American supply chains makes it the most vulnerable country in the region. The World Bank’s Global Economic Prospects report anticipates a reduction in Mexican growth to 0.8% in 2025 and an average of 1% in 2026-2027. Manufacturing exports will decline, and although interest rates are decreasing, they are expected to remain high. This monetary policy, along with a declining fiscal deficit, will limit the expansion of domestic demand. Central America and the Caribbean are also highly exposed. Central America’s economy is projected to grow by 3.3% in 2025 and an average of 3.2% in 2026-2027, driven by services and private consumption. Costa Rica leads with a forecasted growth of 3.5% in 2025 and 3.8% in 2026-2027, thanks to robust domestic consumption. Panama, on the other hand, is expected to reach 3.5% in 2025 and an average of 4.1% in the following two years, due to a rebound in service trade linked to the Canal. In the Caribbean, Guyana stands out, with its GDP expanding by 3.9% in 2025 and an average of 6.2% in 2026-2027, driven by oil investments. The Dominican Republic also shows strength, with 6% growth in 2025 and 4.3% in the following two years, while Jamaica will experience moderate growth of 3.2% in 2025 and 3% thereafter. In contrast, Haiti remains trapped in a structural crisis, with no clear economic prospects. Argentina, Colombia, and Peru show disparate dynamics. The World Bank projects that Argentina will resume growth this year with a rate of 5.5%, after two years of recession. The recovery will be supported by agriculture, energy, and mining, accompanied by macroeconomic stabilization policies, the elimination of exchange controls, and pro-market reforms. For 2026-2027, average growth of 4.3% is expected. The Argentine government plans to maintain sustained fiscal surpluses in line with its IMF program. Colombia is also on track for moderate recovery, with growth of 2.5% in 2025 and an average of 2.8% in 2026-2027. This improvement is based on a rebound in private consumption and a slight recovery in investment, favored by more relaxed monetary conditions and declining inflation. However, political and economic uncertainty could hinder a stronger recovery. In Peru, an expansion of 2.9% is anticipated in 2025 and an average of 2.5% in the following years. Weak domestic demand, uncertainty about national policies, and fiscal consolidation explain this moderation. Nonetheless, mining investments—especially in copper—and infrastructure projects will provide an anchor for growth. Brazil and Chile face internal and external challenges. Brazil, the largest Latin American economy, will face significant slowdown—from 3.4% in 2024 to 2.4% in 2025, and an average of 2.2% in 2026-2027. Lower investment and weaker consumption weigh on growth, although a reduction in interest rates (from 13.75% to 10.5%) should ease some inflationary pressures. Fiscal sustainability will be key to stabilizing the Brazilian economy, which still faces market doubts. In Chile, growth of 2.1% is expected in 2025 and an average of 2.2% in 2026-2027. The report highlights an expected recovery in domestic demand and mining investments, especially in copper and aluminum. However, institutional uncertainty persists, which could hinder investment, particularly in mining and technology. Structural factors hinder regional growth. The World Bank report warns that despite an incipient recovery, Latin America and the Caribbean will remain the region with the lowest growth among emerging markets and developing economies (EMDE). Factors such as low productivity, a less educated workforce, and population aging weigh on long-term prospects. The region also faces macroeconomic risks. More than half of LAC economies have seen downward revisions in their growth projections. Inflation, although declining, remains above central bank targets, and interest rates will remain high to consolidate fiscal stability. This environment will limit the scope for expansionary policies in the short term. Additionally, the deterioration of fiscal accounts after the pandemic and higher borrowing costs could force more severe adjustments than anticipated. The report warns that these cuts could have contractionary effects on regional growth. Dependence on China and the U.S. is key to the economic future. Economic relations with China also strongly influence projections. A slowdown in Chinese demand—especially for metals—would affect commodity prices like copper, with direct impacts on Chile and Peru. Any contraction in U.S. growth would also have significant repercussions.
— new from Hoy Digital