Discouraging Growth Outlook for Latin America in 2025
Latin America is projected to be the region with the lowest global growth this year, registering a 2.1% growth rate, according to a notice from the World Bank released this Wednesday. The organization emphasizes that low investment, high debt levels, and global economic instability are the main obstacles facing the region. In a preview of its report on Latin America and the Caribbean, the institution expresses concern over the trade tensions caused by tariffs imposed by U.S. President Donald Trump.
In this context, the World Bank forecasts a regional economic growth of 2.1% for this year and 2.4% by 2026. However, unlike the International Monetary Fund (IMF), it does not predict an economic contraction in Mexico, but rather stagnation. Growth projections for 2025 in the two largest economies in the region, Brazil and Mexico, have been downgraded from the World Bank's January updates. For Mexico, a growth rate of zero is expected this year, compared to a previous forecast of 1.5% expansion, while Brazil is expected to grow by 1.8%, down from 2.2%. Argentina is projected to grow by 5.5%; Colombia by 2.4%; Chile by 2.1%; Peru by 2.9%; Ecuador by 1.9%; Bolivia by 1.2%; the Dominican Republic by 4%; El Salvador by 2.2%; Costa Rica and Panama both by 3.5%; Paraguay by 3.5%; Nicaragua by 3.4%; and Uruguay by 2.3%. Meanwhile, Haiti anticipates an economic contraction of 2.2%. “The rise in tariffs and the highest levels of trade uncertainty in a decade have limited the region's integration into U.S. supply chains, putting jobs in export-related industries at risk,” warns the World Bank. Recent agreements between Mexico and Mercosur with the European Union are viewed as “a step toward market diversification,” although it is stressed that “a long-standing agenda concerning infrastructure, education, regulation, competition, and fiscal policy needs to be addressed,” the report highlights. Furthermore, it mentions that the reduction in external development aid, following the scaling back of USAID by Trump, will impact Haiti, the preservation of the Amazon in South America, and support for “Venezuelan migrants in various host countries.” Regarding fiscal conditions, the WB indicates that public spending “remains high” and deficits are “considerable.” Overall, the reduction in debt continues at a slow pace: the debt-to-GDP ratio rose to 63.3% in 2024 (up from 59.4% in 2019). The decline in poverty continues, albeit at a slower rate, with estimates for 2024 predicting that monetary poverty will drop to 24.4% of the population in Latin America and the Caribbean, down from 25% in 2023. However, the World Bank expects that inequality will remain high. “The global economic landscape has changed dramatically, marked by higher levels of uncertainty,” states Carlos Felipe Jaramillo, Vice President for Latin America and the Caribbean at the World Bank, in a statement. “Countries need to adjust their strategies and promote bold reforms that enhance productivity and competitiveness,” he adds.
In terms of artificial intelligence development, which raises concerns in some sectors of advanced economies, “its adoption is progressing more slowly” in the region, where between 26% and 38% of jobs could be affected by this technology, the WB notes. Additionally, it indicates that between 7% and 14% of jobs in Latin America could become more productive due to artificial intelligence, especially in areas such as education, health, and personal services. The shift toward cleaner energy also impacts labor demand. “Employment in sectors with low greenhouse gas emissions is still limited, around 10%, while high-emission sectors, like agriculture, are more prevalent.” Trump's policies could have broader effects if he follows through on his promise to carry out massive deportations of migrants without legal status in the U.S. For now, new immigration regulations have been able to redirect migratory flows. “About 20% of new migrants are heading to the United States,” which remains the primary destination, “while 61% are going to other countries in Latin America and the Caribbean, with the remainder dispersed across various parts of Europe,” according to estimates from the report. Remittances continue to be significant in several countries, accounting for more than 15% of GDP in nations like Nicaragua, Honduras, El Salvador, Guatemala, Haiti, and Jamaica.
The growth situation in Latin America highlights the importance of diversifying its economies and seeking new sources of investment. It is essential for countries in the region to seize the opportunities presented by the energy transition and digitalization, as this could not only create more sustainable jobs but also improve their competitiveness in the global market. The implementation of appropriate public policies that encourage innovation and reduce inequality will be crucial for the region's economic future.
