Economic growth in Latin America and the Caribbean (LAC) is projected to slow to 2.1 percent in 2026, down from 2.4 percent in 2025, according to the latest Latin America and the Caribbean Economic Update published by the World Bank. Growth is expected to recover modestly to 2.4 percent in 2027.
The report cites a challenging macroeconomic environment as the key factor behind the subdued outlook. High borrowing costs, weak external demand, and inflationary pressures linked to geopolitical uncertainty are dampening private investment and job creation across the region.
“Latin America and the Caribbean have the assets — and the reform capacity — to achieve far more,” said Susana Cordeiro Guerra, World Bank Vice President for Latin America and the Caribbean. “The central ambition should be clear: create quality jobs that power growth and lift productivity.”
Consumer Spending and Investment
Consumer spending continues to provide some support for growth, but investment remains weak. Firms are holding back amid a difficult external environment in which global interest rates are expected to remain high, growth in advanced economies and China is slowing, and trade policy uncertainty persists. Geopolitical tensions, including the conflict in the Middle East, have pushed energy prices higher and introduced additional inflationary risks, which could delay monetary easing.
Governments are also facing fiscal pressures. Public debt ratios, though stabilized, remain high by historical standards, and elevated interest payments limit spending on infrastructure and social investment — critical areas for long-term growth.
Unlocking Regional Strengths
Despite these challenges, the report highlights the region’s strategic advantages. LAC holds about half of the world’s lithium reserves, one-third of its copper, a relatively clean energy mix, and in several countries, a reform momentum that is gaining traction. The World Bank says harnessing these assets could boost productivity, create quality jobs, and support more inclusive growth.
“Restoring business confidence, unlocking private investment, and raising productivity are essential,” said William Maloney, World Bank Group Chief Economist for Latin America and the Caribbean.
Policy Recommendations
The report outlines four key recommendations for building the foundations needed to sustain growth:
- Closing skills gaps through education, technical training, and management development.
- Expanding access to finance and strengthening insolvency frameworks so firms can take risks and grow.
- Deepening trade integration to boost competitiveness and accelerate technology adoption.
- Building institutional capacity to design policies that can identify market failures, adjust course, and sustain results.
The World Bank emphasizes that industrial and productivity policies will only succeed if these foundational conditions are in place — skills, openness, and strong institutions — enabling firms to innovate, compete, and grow.
Country Highlights
The report also includes updated forecasts for individual countries:
- Guyana is projected to grow 16.3 percent in 2026 and 23.5 percent in 2027.
- Jamaica faces a contraction of 1.0 percent in 2026 before a rebound to 3.2 percent in 2027.
- Mexico is expected to grow 1.3 percent in 2026 and 1.7 percent in 2027.
- Brazil is forecast to expand 1.6 percent in 2026 and 1.8 percent in 2027.
The World Bank cautions that the outlook remains highly sensitive to global economic trends, commodity prices, and domestic policy decisions.
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