By FocusEconomics
The regional economy has been weak as of late
Latin America’s economy grew an average of just 1.4 percent in the decade to 2024—the weakest performance among all world regions. For comparison, the far-wealthier euro area expanded 1.5 percent, while the corresponding figure for Eastern Europe—the next-slowest-growing emerging market—was 2.7 percent. Latin America’s chronic political instability, high levels of crime and corruption, subpar education system, reliance on the volatile commodity sector and lack of presence in fast-growing industries such as electronics and IT are all factors that have held back regional GDP growth over the past decade.
US tariff impact to be manageable
The US rolled out fresh tariffs this year that hit Latin America with a 10 percent baseline on most imports, extra charges on aluminum, cars, copper, and steel, plus “reciprocal” duties on a handful of countries, including Brazil, Mexico, and Bolivia. But compared with other regions, Latin America gets off relatively lightly—many nations dodged the reciprocal tariffs thanks to their US trade deficits, and plenty of carve-outs soften the blow where tariffs do apply. Brazil’s 50 percent levy only bites on a fraction of imports, Chile and Peru’s copper exports stay safe as long as they’re unprocessed, and Mexican firms can sidestep penalties by sticking to USMCA rules. Still, the bigger worry isn’t today’s tariffs but tomorrow’s: the cloud of uncertainty is already cooling investment, with Tesla and BYD pulling the plug on planned Mexican factories.
Our GDP growth consensus forecasts
Our Consensus is for Latin America to remain the slowest-growing emerging market over our forecast horizon to 2029, with average annual GDP growth of slightly above 2 percent. Unlike in the past decade, the inter-country forecast range is expected to be fairly narrow, with the region’s economies growing between 1 and 3 percent on average. However, our panelists expect individual years to still see considerable variability. For instance, next year, Venezuela’s economy is forecast to contract, Bolivia’s to roughly flatline, and Paraguay’s to record an over 3 percent expansion.
Insight from our panelists: On the outlook for the Latin American economy, EIU analysts said:
“Regional economic growth will slow to 2 percent in 2025-26, as the fallout from US protectionism—including the uncertainty this is creating—will dampen trade and investment in Latin America. Mexico’s economy will be hit the hardest, given its close ties with the US, whereas the impact on Brazil and other South American commodity exporters will be partially offset by their greater trade relationships with China. A rebound in Argentina’s economy from a two-year slump has run into headwinds recently, but should resume following pledges of US financial assistance and assuming that the ruling party of the president, Javier Milei, strengthens its legislative position at mid-term elections in October. Opportunities in Latin America in critical minerals, energy and infrastructure will remain attractive for investors.“
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