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Latin America and the Caribbean: Economic Resilience, but Growth Still Too Fragile
Latin America and the Caribbean are entering 2026 with a paradoxical economic situation. The region is demonstrating genuine macroeconomic resilience, despite geopolitical tensions, high interest rates, and rapid shifts in the global economy. Yet growth remains too weak to close the income gap with advanced economies.
This is the central finding of the report Resilience and Growth Prospects in a Shifting Global Economy, published by the Inter-American Development Bank (IDB). The document analyses the region’s economic outlook in an international environment shaped by uncertainty, the energy transition, and the rise of digital technologies.
The report makes one thing clear: the region is more resilient than before — but that resilience alone is not enough to generate strong, sustained growth.
Moderate Growth in an Uncertain Global Environment
Global growth is expected to remain relatively subdued in the years ahead. According to the report, it reached 2.9% in 2025 and is projected at 2.8% in 2026.
Against this backdrop, Latin America and the Caribbean recorded growth of 2.2% in 2025, with 2.1% projected for 2026.
This pace is in line with the region’s historical average — but remains insufficient to accelerate economic convergence with developed economies.
Sharply Contrasting National Trajectories
The economic picture varies considerably from one country to the next. Some economies are showing signs of recovery. Argentina, emerging from a period of recession, is expected to post growth of around 4.3% in 2025.
Brazil is projected to grow more modestly, at around 2.3%, following several years of relatively solid performance. Mexico, by contrast, is seeing its outlook deteriorate, with growth revised down to just 0.5% in 2025.
Some countries are experiencing exceptional dynamics. Guyana, propelled by new oilfield development, is projected to record spectacular growth of around 23% in 2026 — one of the highest rates in the world.
These disparities illustrate the diversity of economic trajectories across the region.
Strengthened Financial Resilience
Despite global uncertainty, financial markets continue to show relative confidence in Latin American and Caribbean economies.
Sovereign spreads — which measure the risk premium demanded by investors — have narrowed in recent years. The regional median stood at 209 basis points at the end of 2025, down from 268 basis points in 2019. In several countries, these levels are approaching multi-decade lows.
This stands in contrast to previous crises, during which periods of international uncertainty frequently triggered massive capital outflows and sharp currency depreciations.
Public Finances Under Pressure
The fiscal situation nonetheless remains fragile.
Global public debt continues to rise, particularly in advanced economies, and could reach around 120% of GDP by 2030 in those countries.
This dynamic is contributing to persistently high long-term interest rates, which raises borrowing costs for Latin American and Caribbean economies.
In this context, interest payments are consuming a growing share of public budgets, leaving less room for investment and social spending.
Relatively Solid Labour Markets
Labour markets represent one of the brighter spots in the region’s economic picture.
In many countries, unemployment rates are now close to historical lows. Between June 2024 and June 2025, unemployment fell in the majority of economies studied.
This reflects both the post-pandemic economic recovery and the relative strength of labour demand across several sectors.
The Main Obstacle: Weak Productivity
The report places strong emphasis on a major structural problem: sluggish productivity growth.
Over the long term, average annual growth has been:
- 4.6% in emerging Asia
- 2.6% in advanced economies
- 1.8% in Latin America and the Caribbean
The contribution of productivity to that growth has been particularly low — just 0.1%.
In other words, regional growth has relied primarily on expanding the workforce rather than on gains in economic efficiency. This model is reaching its limits, particularly given slowing demographics and a stagnating working-age population.
Critical Minerals: A Strategic Opportunity
The global energy transition could, however, open up new prospects.
Demand for critical minerals — essential for batteries, electric vehicles, and digital technologies — is expected to rise sharply in the coming decades. According to the report’s projections, global lithium demand could increase by between 470% and 800% by 2050, depending on the energy scenario.
The region holds significant reserves:
- around 35% of global copper reserves
- nearly 50% of global lithium resources
- 16% of nickel reserves
- 23% of rare earth reserves
The lithium triangle — Argentina, Bolivia, and Chile — alone concentrates a large share of global resources.
An Opportunity, Contingent on Stronger Institutions
Exploiting these resources could attract investment, boost exports, and help integrate the region into new industrial value chains.
Past experience shows, however, that natural resource wealth does not guarantee economic development. Without strong institutions, coherent industrial policies, and stable fiscal frameworks, commodity cycles can also amplify economic instability.
Turning Resilience Into Growth
The report’s core message is clear: Latin America and the Caribbean are entering this period of global uncertainty in a stronger position than during previous crises. This resilience is built on more credible macroeconomic policies, more independent central banks, and improved public financial management.
The real challenge now is to transform this stability into sustainable, inclusive growth — by strengthening productivity, innovation, skills, and regional economic integration.
In a world defined by the energy transition and the technological revolution, the region holds considerable assets. The question is whether it will be able to turn them into a genuine engine of development.
