Latam | Region sailing on choppy waters

Summary

Global uncertainty, especially on geopolitical and commercial issues, has been creating a complex and atypical environment for Latin America in 2025. This has led to high market volatility, caution from monetary policy, and broader than normal ranges when forecasting economic variables.

Key points

• Key points:
• The region will show modest growth of just 1.9% in 2025 and 2026, lower than what has been observed historically (2.1%) and, notably, falling short of global growth (3.3%).
• Argentina stands out with the highest figure (5.5% and 4.0%, respectively), as it continues to recover following years of underperformance.
• On the flip side, Mexico will dip slightly in 2025 (-0.4%) and is expected to post moderate growth of 1.2% in 2026. This is due, among other reasons, to the effects of U.S. trade policies and milder levels of investment, in addition to a domestic fiscal adjustment.
• Meanwhile, inflation has been falling at a slower pace than hoped, with some countries having to contend with inflation shocks following the recent fx depreciation or adjustments in regulated prices or taxes. However, inflation has been very gradually converging toward the targets set for 2026, or 2027 in some cases.
• This current environment has also elicited a cautious response in setting monetary policy, especially in Colombia and Mexico, which still have high real interest rates. Meanwhile, Brazil—heading in the opposite direction to the rest of the region—has been sharply hiking its interest rate in a bid to curb recent inflationary pressures.

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