Analysts expect continued slow growth this year, balancing inflation. But the regional economy paints a mixed picture.
The US campaign to kidnap and overthrow Venezuelan President Nicolás Maduro from power in January has put Latin America back on track. But the surprise intervention has yet to translate into major political or economic change in the region.
Instead, a general, business-as-usual view seems to be trending: limited growth; an economy linked to external demand for goods; and ongoing structural vulnerability related to public debt, infrastructure, and a steady but steady decline in legal and political risk. The silver linings: stabilization of major indicators and a broader trend towards easing inflationary pressures. The important question is: Which way will the region go?
Sustainable growth and development remain elusive. Upcoming electoral contests in Brazil, Colombia, and Peru come on the back of country restructuring, as well as US tariffs and the evolving roles of the US, China, and Europe in the region. Smart optimism related to economic indicators and innovation remains overshadowed by structural weakness.
The underlying expectation is a continuation rather than an acceleration, with growth projections from the International Monetary Fund and the World Bank shifting to a 2.2%-2.3% range respectively—good, but not consistent.
Patricia Krause, chief economist for Latin America at Coface, a French trade-credit insurance company, expects the region’s GDP to grow by 2.3% this year. The figure is similar to the forecasts of the UN Economic Commission for Latin America and the Caribbean and is more optimistic than that announced by Goldman Sachs (1.9%) and Fitch Solutions’ BMI (1.7%).
“We see a very challenging economic situation in the region,” said Ash Khayami, senior analyst of Latin American Country Risk at BMI, “although growth is very consistent with the levels of the pandemic, from 2.1% in 2025 to 1.7% in 2026, driven mainly by weak growth in Brazil and Mexico.”
Political instability remains a central theme in Latin America, and BMI expects a shift to right-wing or centrist governments across the region. “We see a broad shift in right-wing governments in most of the elections we cover,” said Khayami. “Highly involved governments with strong financial regulation should boost investor sentiment from within.”
According to a recent study by the Eurasia Group of political experts, although political volatility has long been considered the defining risk of Latin America, the character of that volatility is now increasingly episodic rather than ideologically linked. In financial markets, this is good, as periodic risk can be priced more easily than structural regime changes.
Perhaps the most overlooked regional trend—and success story—is that inflation is normalizing as major Latin economies return to or remain within target ranges.
Regional uniformity is only part of the story. The economic outlook for major Latin American economies is diverse.
In Argentina
“Argentina is entering an investment-driven cycle supported by exports and low tariffs, which supports our positive outlook,” Khayami said. “The country’s risk is 500 basis points lower, the lowest since 2018. However, the growth rate is falling from 4.3% to the consensus level of around 3.2% this year.”
The Central Bank of the Republic of Argentina’s strong capital accumulation and the narrowing of the country’s risk spread are positive factors, he adds: “A central bank accumulating more than 1 billion dollars in January is a strong sign from the perspective of external accounts.”
Brazil
Brazil’s growth should slow this year compared to last, Krause said, mainly because interest rates are still high. The market expects the central bank’s Selic interest rate to start falling: It is still expected to end the year at 12.25%, down from its current 15%. Household consumption is expected to support growth, helped by a stable labor market, inflation, and tax cuts. “Trade tensions with the US have had some impact on exports to Brazil after the tariff measures,” Krause noted, “but the effect has been mitigated by the liberalization and diversification of other export markets, including Argentina, Canada, and India.”
The country remains a slow-growing economy, according to Khayami’s research, plagued by fiscal austerity and a heavy tax burden. But the opposite trend is likely to persist, with public consumption gradually decreasing as a share of GDP until 2028.
Colombia
Colombia is currently an outlier among the major Latin economies, according to BMI, with financial concerns and inflation being particular issues.
“As we look towards conservative presidents, we expect strong fiscal guidance and business policy objectives to boost investor sentiment,” Khayami said. “Political risk—including relations with the US and electoral dynamics—is a major factor.”
Colombia’s inflation risk is currently driven by domestic policy decisions rather than external factors, Krause said. “Inflation was above the 3% target of 5.1% in 2025,” he noted. “Expectations worsened following the 23% increase in wages in December. [the inflation forecast] it is revised up to 6.4% this year, and the country has looked at the other side of the regions by raising interest rates.”
Mexico
Mexico’s economy barely grew in 2025 – estimated between 0.2% and 0.6% – but is expected to grow by around 1.5% this year. That affects the perception of the entire region, Khayami noted.
“Mexico, because of its relationship with the US, is a pillar of direct investment in the region [FDI],” he said, “and there’s a lot of uncertainty about that relationship right now. FDI inflows to Latin America last year were estimated at $160 billion. Mexico took 25% of that. If Mexico does not do well, the regional outlook weakens. “
Khayami describes the local business environment as “uncertain due to intensifying risk factors, including the uncertainty of the trade framework, potential security increases related to cartel violence, and potential US intervention scenarios.”
Peru
The outlook for Peru shows relative stability and continued structural weakness, according to independent strategic consultant Andrés Castillo. GDP is expected to grow by around 2.8% in 2026 and inflation close to 2% according to a report by the BCP banking group, in line with the goals of Peru’s central bank. Fiscal metrics remain relatively strong, with the deficit estimated at 1.8% of GDP and public debt at 36%, according to Trading Economics, which is low by regional standards.
But greater stability masks deeper structural risks, Castillo warns. He says: “Peru’s economy is supported by mining, agriculture and fishing, but the production of coca and illegal mining has become a major cause of the economy,” he says. “Mining alone accounts for about 8.5% of GDP and about 64% of exports, underscoring resource dependence.”
in Venezuela
Venezuela remains Latin America’s elephant in the room.
Maduro’s ouster raised hopes of regime change and a new economic model for Venezuelans. Many analysts at the time expected Washington to quickly begin a transition phase, opening the door to massive oil and energy investment. But so far, only a fraction of those expectations have come true. Oil production is expected to increase in the short term only if sanctions are eased and investment resumes. Khayami says the road to a strong energy sector will be long.
Jorge Jraissati, a Venezuelan expatriate and president of the Economy Inclusion Group, points to two possible situations in the country. In the worst case, reforms are on paper but political uncertainty persists. In this case, oil is recovering modestly but non-oil investment remains low, locking the economy into imbalances, which could further damage after the next US presidential cycle.
“In a ‘good’ scenario,” says Jraissati, “US policy supports pressure for institutional democratic moderation, market opening, and strong security guarantees that reduce prices. If these conditions are met, foreign capital—especially energy and infrastructure—will begin to commit instead of speculating.”
