Latin America 2025 Outlook: The Good, the Bad, and the Ugly

In the era of?Trump 2.0, politics is both ascendent and divisive. But for the intended audience of this article, what matters most and what separates markets is the forecasted growth of each, both in the short and medium term.???

The shock and awe tactics of Washington’s new cadre of leaders is newsworthy to the point of distraction.?But the pillars of growth in most Latin American markets remain unchanged:

1. Domestic interest rates vis-à-vis the Fed
2. Investor sentiment
3. Terms of trade (including services)

With that in mind, we are pleased to publish our?2025 economic forecast for leading LAC markets, divided, unconventionally, into four buckets: the great, the good, the bad and the ugly.

For more in-depth information on specific sectors, don’t hesitate to check out our “Good-Bad-Ugly” stories on payments and?logistics.

The Great

Guyana

Once again, we had to create a “great” designation to acknowledge the astronomical growth of Guyana. In January (2025), the IMF designated Guyana a high-income country (GDP per capita will exceed US$30k this year), on par with the likes of Kuwait, Portugal, and Slovakia, a dramatic transformation from its status as a low-income country just six years ago. The Asian tigers required a generation to make such a leap, yet Guyana achieved it in less than a decade. The obvious reason is oil, found in high quality and abundance. Guyanese politics may still prove to be wealth-destroying as many pessimists predicted, but until now, whatever graft and mismanagement befalls the Ali government, it has not been enough to derail economic development. A narrow majority in parliament—coupled with a slow but functional rule of law and a fiercely independent local media—help bring a functional level of transparency to the government’s dealings with lead investor Exxon and other oil investors.

GDP growth in 2025 will cool down to 15% as economic development diversifies into broad categories of infrastructure and consumption growth. An important election awaits Guyana in December 2025, normally a moment that exacerbates racial divisions. The economic stakes of the 2025 elections will be historic, worrying many that political violence may revisit Guyana. Should that not transpire, Guyana will prove to the world that its politics has matured along with its economic stature.

Argentina

2025 should be?Argentina’s?breakout year. Real growth is expected to reach 6%, among the highest in the region. But what will boost Argentina’s economic might is the anticipated appreciation of its currency (in real terms), prompted by the lifting of currency controls and the flood of institutional investor monies whose governance rules kept them out of Argentina while the currency was managed. Over the next two years, when measured in USD, Argentina’s economy will grow by almost 20% per year, the bulk of that driven by currency appreciation. The economic windfall will boost imports by over 10% per year, suddenly making Argentina a viable and exciting market for global exporters. Dismissed two years ago as a crackpot by many,?President Milei?has proven to be both aggressive and thoughtful with his “chainsaw” demolishing of layers and layers of Peronist bureaucracy and regulation. Most importantly, the economic hardship experienced by most Argentines since his election has done little to erode his popularity. On a macro basis, Argentina turned the corner mid-2024 when inflation plummeted, budget surpluses were realized, and economic growth bottomed. In 2025, the middle class will begin to feel relief as investment and employment grows, and consumers feel empowered by a stronger currency. Milei’s success will resonate across a region where bloated governments, bureaucracy and regulations are the norm (to those who choose to comply). Despite its potential,?Latin America?has experienced disappointing growth rates since 2013—mostly due to poor governance. The Argentina-born libertarian revolution may spread across Latin America, as the Menem-Cavallo economic liberalization movement did in the 1990s.

The Good

Dominican Republic

The re-election of President Abinader, with super-majorities in congress, ensures a strong mandate for one of Latin America’s most competent, pro-business national leaders. Abinader was unable to pass a reform package legislative effort in October 2024 and thus must pursue reform, one issue at a time. His plans are ambitious, and not all reform efforts will succeed but the DR is poised to grow at close to 8% per year for the next two years, when measured in USD. All the DR’s leading industries generate dollars: gold mining, real estate development, tourism, export manufacturing (maquiladoras), and food/beverage exports—and all are growing, helping to strengthen the currency.

The DR is exposed to US protectionist leanings under Trump, but if allies matter in Washington, the Dominican Republic may be spared given the meeting of minds between Abinader and Trump. The DR’s impressive external economy is not matched by its domestic one. A lack of investment in infrastructure by two Danilo administrations (2012-2020) has left Santo Domingo with clogged traffic, limiting the domestic growth potential of the nation’s economic engine. A poor education system also limits the ability of the DR to move up the value chain. But for now, economic dynamism will continue to shine a flattering light on the Caribbean’s largest economy.

English Caribbean

The world’s tropical playground is back in growth mode. After dramatically locking its doors during COVID, the English-speaking Caribbean island nations are finally back to pre-COVID visitor levels. Their lengthy quarantines cost them market share to the DR, Puerto Rico and the Yucatan, all three of which lifted restrictions much sooner. But for the entire Caribbean, tourism has reached new heights of visitors, drawing new customers from Europe and South America.

A lesser obvious reason for the rising dollar measured growth of English Caribbean is the sound governance of many of the region’s economies, led by Jamaica and the Bahamas. Jamaica has done a remarkable job of lowering government debt levels, which now hover over 60% of GDP, the lowest in 30 years. The English Caribbean is not very exposed to US trade risk, given that very little of their economy relies on the export of products to any market. A strong US dollar seems probable for the foreseeable future, helping ensure a steady flow of tourists and offshore banking clients. Where the region may suffer is from the expected drop in DC financial support of economic development and post-hurricane aid that is a vital lifeline to the region in times of crisis.

Peru

In 2024, Peruvian exports reached an historic high of $74bn USD. Copper and gold prices remain above historic averages, helping strengthen?Peru’s?terms of trade. The Peruvian sol will appreciate against the greenback in 2025, helping to create 6% annual GDP growth over the next two years, when measured in USD versus 3% real growth.

Peruvian national politics remains a mess. Boluarte is deeply unpopular but the loose alliance of centrist and right-wing congressional politicians who back her are unlikely to end her term ahead of 2026 elections because only by then will a new law commence that facilitates their re-election. In the meantime, organized criminal groups continue to expand, extorting small businesses and allegedly infiltrating government at both the national and regional levels.

A generation of fiscal discipline and low public debt affords Boluarte the opportunity to spend lavishly ahead of 2026 elections. That is likely to create more graft but will also temporarily supercharge the economy.

Peru has thus far avoided the wrath of Trump’s trade wars but given the strong presence of Chinese investment and heavy trade with the PRC, Peru may soon find itself facing a difficult ultimatum from the Trump administration.

Paraguay

Santiago Pe?a is lauded outside of Paraguay as a sensible, pro-business president who emblemizes a resurgent right wing political movement across Latin America. But inside Paraguay, President Pe?a’s well-crafted image is not immune to defect nor criticism. His Partido Colorado is divided into factions, whose differences will likely grow ahead of 2026 municipal elections. If the executive branch cannot pass its reform initiatives in 2025, it will be close to impossible to do so in 2026. President Pe?a is not above clientelism, as evidenced by the ease with which former president Horacio Cartes, an influential billionaire, continues to get his own way thanks to support he has built in congress.

A big test awaits President Pe?a in 2025 when Paraguay renegotiates of Annex?C of the Itaipú Treaty—the legal instrument for the hydroelectric exploitation of the Paraná River by Paraguay and Brazil, which expired in 2023. Under the expired rules, Paraguay had to sell its energy to Brazil at price-controlled rates and could not trade it with other countries without Brazil’s permission. Brazil is open to renegotiation but how much of a bump in pricing they will accept remains to be seen. The public has punished in the past Paraguayan leaders who failed to negotiate fair terms with the Brazilians. President Pe?a seems vulnerable to following a similar fate.

Santiago Pe?a’s government has been more successful at attracting foreign direct investment through PPPs and by controlling spending. Investor confidence in his government has grown, paving the way for multi-billion-dollar projects in pulp production and green hydrogen. Continued strong soybean exports will help Paraguay achieve 5% annual growth over the next two years (in USD).

Guatemala

Against all odds, President Arevalo continues to govern Guatemala, whose political system is mired by corruption and cronyism. The challenging process of winning recognition for Arevalo’s 2023 Presidential election victory against the wishes and interference of the political elite in Guatemala was one of President Biden’s foreign policy victories. With Trump in power, US support is not as unconditional. Nonetheless, Arevalo won the support of Secretary of State Marco Rubio when he visited Guatemala early in 2025.

Despite its left-of-center politics, the Arevalo administration has maintained Guatemala’s proud history of fiscal and monetary discipline. Where he would like to make changes, namely bringing more transparency to government and investigating links with organized crime, his actions are countered by political opponents. Without more active support from Washington, Arevalo’s efforts to clean up Guatemalan politics is handicapped. His term in office may end up being only four years with little progress on serious reform but his efforts will help stem the growing influence of organized crime, and that counts as a victory of sorts.

Guatemala will realize over 6% average annual growth over the next two years thanks to a surprising combination of monetary policy easing and currency stability, a testament to its fiscal discipline.

The Bad

Colombia

President Gustavo Petro seems to be losing supporters by the day. His four-year term will be remembered as the longest lame duck presidency in modern history. Almost all his reform initiatives have been rejected by congress, the courts, and/or the public. His international allies are a shrinking roster of inconsequential or pariah nations. Even when threatened with heavy handed tariffs by the new bully on the block, Colombians chose not to rally around their feckless president.

What gives?Colombia?hope, including its economy, is the institutional strength that has been built through decades of democracy and technocratic initiative. Contracts can still be defended in Colombia, albeit at considerable cost. The monetary policy is dictated by an independent central bank with a transparent mandate. Multi-party politics is messy, and congress can be transactional, but opposition voting is effective.

In 2025, national interest rates will drop by half, versus 2024. That will spur investment and aid exports as the currency depreciates moderately. With a young populace, Colombia’s normal growth rate exceeds that of Mexico, Brazil and Argentina, where labor pool growth is approaching zero. Colombia’s economy will plod along—unenticing to most investors—until Petro is gone. Assuming his replacement is better, Colombia will shine bright again.

Ecuador

After winning a snap election in 2023, Daniel Noboa burst upon the global stage as a fresh, intelligent, young leader from a business-savvy family. Many were excited by his political victory. When Ecuadorians went to polls in early February 2025, Noboa won 45% of the votes, a hair ahead of Luisa González, from Citizen Revolution, a party tied to former president Rafael Correa.

The faltering prospects of Noboa reflect the waves of bad news that have struck Ecuador in recent years. It is alleged that Ecuador’s dollar economy has quietly served the money laundering interests of several regional organized criminal groups for over a decade. The business injected untold billions into Ecuador’s economy, especially its coastal region. That thinly veiled reality was exposed to all when violence broke out, weeks into Noboa’s Presidency. Within a month, the world was enlightened to how deep the roots of organized crime had grown in Ecuadorian business and political networks. The country’s respectable image suffered horribly, impacting tourism and foreign direct investment.

In 2024, Ecuador contracted by 2.4% and expects to grow only 1.4% in 2025. Trump has yet to pick a fight with Ecuador but, if it happens, Ecuador will be vulnerable, to both tariffs from its largest export customer as well as a recipient of potentially hundreds of thousands of US deportees. Ecuador is over-indebted, a proven debt defaulter and struggling to achieve a level of fiscal consolidation that might placate lenders. Its once-lauded infrastructure, Correa’s greatest legacy, is now aging and will soon turn from asset to liability. With few value-added exports, Ecuador’s trade balance is vulnerable to external shocks, a structural liability for a dollarized economy. Whoever wins the April runoff, Ecuador will not be an easy country to govern.

Chile

As Latin America’s most open economy, Chile is highly exposed to external risk. The posterchild of globalization,?Chile?will suffer in any kind of protracted trade war initiated by and centered around the US. After Australia, Chile is the world’s second largest lithium producer, as well as the largest miner of copper, two critical minerals. The Trump administration has voiced its concern over the number of Chilean lithium mines presently in Chinese hands. Given the low approval ratings of a lame duck President Gabriel Boric (elections are in November 2025), Trump will likely try to insert a wedge in Chilean politics and oblige the Chilean right-wing parties to declare their willingness to distance Chile from Chinese influence.

Gabriel Boric has been an effective statesman internationally, a voice of reason among leftist leaders and a staunch advocate of democracy across Latin America. He is far less respected at home, with approval ratings last measured at 26% (Nov 2024). His staunchest critics are the business sector of Chile, many of which moved money offshore to “sit on the sidelines” for the four years of his presidency. Those same critics are openly excited over the prospect of a center right presidency taking office in early 2026.

After stumbling in 2025, Chile should realize a rebound in 2026 under new political leadership and much-improved investor sentiment. It is hoped that, by then, the Trump political risk factor may have settled down and Chile can get back to work supplying the world (including the US) with dozens of essential minerals, food items and other products.

Brazil

In December 2024,?Brazil’s?central bank spent over $30 billion USD defending the real, after months of currency decline. In all, Brazil’s currency suffered a 20% decline vis-à-vis the USD in less than one year. Lenders are fed up with the Lula administration that governs as though interest rates were low and commodity prices were high, as was the reality during his first term. Public sector debt now exceeds 90% of GDP, a level unacceptable to most bond buyers, as well as most lenders. The currency crisis is symbolic of much of the political misalignment today in Brazil. President Lula was elected with a weak mandate, struggling to assemble congressional majority votes on any of his initiatives. Lula is effectively penned in at home, leaving only the international arena to flex his political muscles.

Lula’s commitment to a multi-polar world and his global south support of Palestine puts him squarely at odds with US President Trump. Brazil, more than any economy in Latin America, competes directly with the US, a fact that has provoked consternation from President Trump and could plausibly escalate into a far-reaching trade war. Brazilian exports of ethanol, sugar, airplanes, automobiles, and industrial machinery to the US are all at risk.

The Ugly

Bolivia

Whomever wins Bolivia’s contentious general election in August 2025 will inherit an economic mess. Bolivia’s once-plentiful natural gas exports facilitated a long-standing currency peg. But the 2006 nationalization of the gas industry by then-president Evo Morales led to the mismanagement and steady decline of Bolivia’s golden egg. Today, the boliviano currency is pegged about 30% above market reality, jeopardizing export competitiveness and incenting excessive imports. In 2009 Bolivia effectively nationalized its second most promising industry, lithium mining, when it was designated a strategic industry. In 2017, state-owned Yacimientos de Litio Boliviano (YLB) was given monopoly rights over the development of Bolivia’s lithium deposits, the largest in the world. Only Russian and Chinese mining interests have stomached the political risks involved in planning joint ventures with YLB. As of today, lithium mine development remains nascent whilst Australia, Chile, and now, Argentina, are moving full steam ahead with their private sector-driven lithium mining sectors.

Optimists point to election polls favoring the non-MAS candidate, Cochabamba mayor Manfred Reyes, who is leading in the polls. But undecided voters poll close to 40% and Bolivia is a MAS party-run country ranging from the presidency to municipalities covering three-quarters of the Bolivia’s territory. It remains to be seen if a right-center opposition candidate can win an election where political—and possibly judicial tampering—are genuine risks. What is at stake is huge. Bolivia is commercially aligned with China and Russia, eschewing western investors. Electoral change could flip Bolivia’s international relations alignment. A rejection of the MAS in August 2025 would be welcomed by western investors and the Bolivian investor class, but the economic rebuild of Bolivia’s underinvested gas and lithium industries will take time.

Mexico

Caught between a rock and a hard place, squeezed by the disruptive policies of two populists, an entering Trump and an exited AMLO, Mexico faces at least two years of economic struggle. AMLO’s political interference in multiple sectors, most especially energy, managed to scare more than $100bn USD of Mexican wealth into foreign shores, as well as set up Mexico for future litigation from the US energy sector. Now, Donald Trump’s tariff threats bring additional uncertainty to investors, especially those who are focused on Mexico’s consistently reliable and successful export manufacturing sector. Moreover, the 2026 renewal of the USMCA appears in doubt. Either the world’s most successful trade agreement will be renegotiated, extracting new concessions from?Mexico?and Canada, or it will fail to be renewed, forcing it to be renewed each year for the next decade, further deflating investor confidence in Mexico.

An even greater injury to Mexico by the Trump administration could come with the designation of Mexican cartels as terrorist groups, triggering a landslide of additional regulations and compliance barriers to Mexico’s banking sector, which could pinch liquidity and domestic lending.

The dire external pressure on Mexico has a silver lining. It obliges left-leaning President Claudia Sheinbaum to align with Mexican business interests and put forth more pragmatic policies than her predecessor, AMLO. The decision to eschew Chinese investment, to placate Washington, will pave the way for billions of dollars of domestic company investment in new manufacturing to replace Chinese industrial goods. A loose assembly of Mexican companies announced over $8bn in new such investments in early February 2025.

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