Arxius de Research - Page 9 of 22

If there is one thing we know to be true of Latin American economies, it is how sensitive they are to domestic political events on the one hand, and the shape of the US economy on the other. During the early months of 2025, both of these factors have affected, positively or negatively, the growth expectations of the key economies in the region. In this regard, the OECD has updated its growth forecasts for the remainder of 2025 and for 2026. Overall, the Organisation expects Latin America to grow by 2.3% this year and 2.5% next year, which would make it the region with the lowest growth among the emerging economies. But not all countries within the bloc are expected to perform in a similar manner. Let's look at the outlook for the key economies. First, we have Brazil, which will slow down to 2.1% in 2025 and 1.6% in 2026 after growing at a rate of 3.4% in 2024. The fiscal deficit and political instability are taking their toll on public finances and domestic consumption is starting to suffer, impacted among other things by a Bank of Brazil rate of 15%. Mexico, for its part, is beginning to feel the impact of trade tensions with its neighbour to the north. The outcome of the negotiations with the United States will largely determine the performance of the Mexican economy over the next 18 months, in which the OECD forecasts a slowdown to 0.4% from the 2.1% recorded in 2024. The flip side of the coin is found to the south. Chile is benefiting from increased activity in the mining and energy sectors, which are essential to its economy. Although only slightly, it is expected to improve by four tenths of a percentage point on previous estimates to 2.4% growth by 2025. But without a doubt the biggest positive surprise seems to come from Argentina, which is estimated to grow by 5.2% this year and 4.3% in 2026, after observing a GDP fall of 1.7% in 2024. A fiscal surplus has been recorded since mid-2024, which has helped to reduce the country's risk premium significantly. After flirting with hyperinflation in 2023, Argentina has managed to bring month-on-month inflation to 1.5%, still high by the standards of developed economies, but certainly improving month by month in this area. Moreover, the currency controls have finally been lifted, and activity figures in the agricultural and energy sectors are grounds for being at least as optimistic as the OECD. Date of report: June 23rd 2025

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