John Price
Managing Director
AMI
Despite:
- Tensions between the US and Venezuela—with speculation about military intervention to force regime change
- Tensions between the US and Brazil
- Tensions between the US and Mexico
- Tensions between the US and Colombia
- Tariff challenges
- Supply chain disruptions
…among other challenges, Latin America is actually set to grow in 2026.
That’s one of the projections we made — albeit counter-intuitive for some — at our 2026 Latin America Forecast, which you can access here and watch here.
Good —But Not Great — Growth Is Expected
With 2025 starting off with tariff announcements and other kinds of ongoing disruption from technology and other developments, Latin America didn’t start off 2025 with powerful growth.
But 2026 looks to be much more encouraging:
With these numbers, we see a pattern emerging next year that has repeated over the last half decade: Latin America will outgrow the United States and Europe next year but will fall short of other emerging markets.
And there are several reasons for that. Some of them are perennial problems: poor governance and a weak rule of law that lead to security issues, subpar infrastructure, and an education system that is either inadequately funded or is not focusing on the skills that modernizing economies need. Beyond these ongoing challenges, this year the region had to adjust to often abrupt U.S. trade policy changes.
That said, there are also some promising growth drivers. The most important one is the rising productivity from digitalization. Latin America lagged in technology adoption for years, but now, thanks to smartphone usage, there are all kinds of disruptive apps in the hands of consumers and small businesses across Latin America that are impacting the region’s service economy. In addition, rising metals prices, FDI inflows, repatriated savings thanks to a more pro-business political turn are all helping drive growth. As such, Latin America is expanding at twice the pace of last decade.
LatAm Countries with the Highest Projected Growth in 2026
Below we break down how the region’s projected growth is divided by major markets. This is a way of looking at the region that very few employ. We forecast the delta change in GDP per country, measured in dollars, between 2025 and 2026. We take this approach because so many of our customers are either exporting to the region or they are measuring their performance in dollars. Even multilatinas tend to have a significant portion of their costs based in dollars.
2026 growth in the region will be dominated by Brazil and, to a lesser degree, Argentina, Peru, Colombia, and Chile. Mexico is absent from this graph because its economy will shrink in dollar terms next year. At the start of each 6-year political cycle, domestic industry investment is held back awaiting the direction of the new President. This year, Mexico’s external economy, which relies on seamless connectivity to the US, was hugely disrupted by political and trade tensions with Washington. Those tensions will continue through much of 2026 as Washington decides whether to renew, revise, or scrap the USMCA. Such friction will weigh negatively on the strength of the Peso.
Why Economics Is Driving Politics Rightward in Latin America
In the past, AMI has often remarked that politics doesn’t matter in Latin America in terms of predicting economic growth. And that might’ve been the case when we had high commodity prices and capital was cheap. But those conditions don’t hold now.
In a period, like today, of capital scarcity, politics does matter. After frustrated middle and working class voters elected out of office technocrats during COVID, those same voters are now evicting the incompetent leftist populists who came to power in the pandemic. Here’s a breakdown of how politics matter in terms of the economies of specific countries:
Argentina
Milei has radically pivoted Argentine politics to the right, igniting a regional curiosity in libertarianism. His party’s recent electoral win gives Milei a stronger band to convert this momentum into governance. If Argentina’s remarkable turnaround continues, then the new leaders to be elected in Chile, Colombia and Brazil over the next year may also find themselves compelled to experiment with deregulation and libertarian policies.
Brazil
Lula’s popularity was falling until Trump imposed tariffs. Lula’s approval has lifted and leveled, inspiring him to run again in 2026, though analysts still predict a center-right candidate to win, despite Bolsonaro’s demise.
Chile
The first round of November voting showed Kast leading and the probability of him gaining the Presidency in the 2nd round on December 14th is close to a fait accompli.
Colombia
Petro’s policies frighten investors but congress and the courts have reined him in. The 2026 elections should yield a center-right candidate, but fragmentation keeps the door open for Petro’s successor.
Dominican Republic
Abinader has delivered pro-business policy and far less egregious corruption than past presidents.
Ecuador
Investors like Noboa’s economic policies but worry about the disruptive power of organized crime. Voters themselves have limited his ability to resort to strongman policies.
Mexico
Sheinbaum promised to keep moving Mexico to the left, in homage to AMLO. But the over-reach, corruption and nepotism of the AMLO years is coming to light while Sheinbaum also faces strong pressure from Washington to cleanse her party of purported links to organized crime and unravel some of AMLO’s most controversial initiatives.
Peru
Political tumult continues in Peru. The powerful congress ousted President Boluarte, installing interim right-wing President Jose Jerí who most expect to remain in office till July 2026 when he is replaced by the next elected President after the the April 2026 elections.
Venezuela
Maduro’s brazen election fraud further isolated Venezuela. Marco Rubio has led the US into a strategy of regime change in Caracas.
Overall, the shift rightward appears to be a net positive for the region. A lot of the money that left the region is coming back, aided also by low US real interest rates. Returning capital will be an important underpinning of growth over the next couple of years.
The Disruptive Effect of US Policies on Latin America
Beyond the internal politics and pressures, in forecasting 2026 for Latin America, we obviously have to factor in American policy changes. Here’s a look at how these policies will impact key markets in the region:
Mexico
It’s not a foregone conclusion that USMCA will be renewed. In fact, I would say the odds are more against it than for it, which would mean it would have to be renewed on an annual basis, or renegotiated, both of which will add new political risk to Mexico. Policy uncertainty has slowed the flow of nearshoring FDI, despite the compelling motivations for companies to shift factories from China to Mexico.
Brazil
US now applies tariffs of 50% on most Brazilian exports, albeit with carve-outs in aircraft, some energy products, and certain agricultural goods. Most products have found alternative markets but at a lower price point. Brazil is being drawn even closer into China’s orbit by the conflictive relationship with the United States. Due to its impressive endowment of critical minerals, Brazil will continue to be a focus of interest by Washington in 2026.
Venezuela
We currently have gunboat diplomacy in place, with 4,500 armed servicemen just off the coast of Venezuela. These efforts appear to be forcing some sort of regime change to unseat an illegitimate leadership in Venezuela that lost the last election and hopefully transition that country to democracy. That is the plan but the weak appetite among US voters for invading Venezuela along with an entrenched leadership in Caracas lowers the likelihood of successful regime change.
Central America
Initially, Panama was the country of focus for the Trump administration. While Panama has pivoted back towards the States a little bit more than from China, recently there has been a greater sense of self-sovereignty, with leadership saying, hey, we need to take care of ourselves. We need to fund our own projects. And so that is a sentiment that we may see repeated in other markets as well, as countries feel pressure from outside. One of those pressures is that the US’s migration crackdown has hurt remittances, which can represent up to 25% of GDP for some countries. In addition, the lowering of de minimis rules is hurting a burgeoning export e-commerce industry in Central America.
Colombia
Despite the public animosity between Petro and Trump, only 10% reciprocal tariffs have been applied against Colombian exports. However, any US military campaign against Venezuela would increase tensions between Colombia and the US and might influence next year’s elections in Colombia.
Focusing on Your Future
The general forecast that you just read will only take you so far. AMI offers tailored forecasts combining politics, economics, your industry dynamic and the risks that your business faces in certain countries, and from certain competitors.
We prepare these custom forecasts for a range of companies operating in the region.
Contact us to find out how we can develop a custom LatAm 2026/7 forecast that’s built to help you minimize risk while maximizing reward.
