Latin America Is Predicted to Post Modest Growth amid Upheaval in Venezuela

After navigating last year’s challenges from US tariffs, Latin America is poised to have steady though not exuberant economic growth in 2026, says Alberto Ramos, the head of the Latin America economic research team at Goldman Sachs Research.

What’s the outlook for Latin America’s economy in 2026?

The region’s top seven economies—Brazil, Mexico, Argentina, Chile, Colombia, Peru, and Ecuador, the LA7—are projected to record GDP growth of 1.9% in 2026, down from an estimated 2.1% the previous year. Inflation is forecast to rise to 4.3% from 4% (all forecasts as of January 22).

While events in Venezuela have put a spotlight on Latin America, Ramos says trends elsewhere are more likely to have a bigger macroeconomic impact given the region’s limited trade and financial linkages with the oil-rich nation. Peru is forecasted to be the fastest growing major economy as commodities such as gold and copper hit record highs.

We spoke with Ramos about the developments that will be important for investors in 2026, including Brazil’s expected rate cuts, Argentina’s return to the bond market, and Peru’s pacesetting growth.

Why is it so hard for Latin America to break the 3% GDP growth barrier?

Lately, it’s been hard to break the 2% barrier let alone the 3% one. The engine of growth seems to be damaged. There are numerous explanations, from low savings and investment rates to political and social instability, that ultimately lead to low productivity. There are also notorious frictions and inefficiencies in the credit markets and in the labor markets. And contrary to the common wisdom, those frictions tend to impact the larger companies the most. Many big companies are undersized compared to their potential.

Is the trend on inflation a bright spot in the region?

Rather than a bright spot, it is a stable spot. You’re going to see more progress on inflation in Argentina, with the rate expected to moderate to 23% from 32%. If we focus on the five economies targeting inflation—Chile, Colombia, Brazil, Mexico, and Peru—we are unlikely to see any progress, in fact it is forecasted to accelerate slightly from 2025. Inflation will remain high in Brazil, rise in Mexico, and accelerate visibly in Colombia due to a large increase in the minimum wage.

Will recent events in Venezuela impact Latin American growth this year?

We aren’t factoring in any spillover from the events in Venezuela at this stage. But they could happen if the situation on the ground were to worsen significantly and trigger economic, security, and humanitarian crises.

When you look at trade and financial linkages between Venezuela and other LatAm economies, they’re not that significant. Venezuela has been trapped in an extended economic depression and hyper-inflationary period. Since 2012, Venezuela’s GDP has shrunk around 80% in dollar terms, to an estimated $83 billion in 2025. Its economy is roughly the size of Uruguay’s, and less than a quarter the size of Chile’s.

Why is Peru, which you project to grow 3.1%, the pacesetter in Latin America?

Peru exports gold and copper, and the price of these commodities have been doing very well. It’s not dizzying growth but compared with the low average in Latin America, it stands out.

Interestingly, Peru’s unsettled political environment doesn’t seem to be contaminating in a major way the performance of the economy. Presidents come and go, political bickering has been a constant, and yet when you look at key macroeconomic variables, everything seems to be balanced.

Monetary policy is very credible, and we expect interest rates to stay neutral at 4.25% this year. Peru is running a current account surplus, and consumer prices are forecast to increase just 2.2% compared to 6.6% for the LA7. When you run macro policy sensibly and within prudent bounds, it ends up insulating the economy from political noise.

You expect Brazil to cut interest rates by 2.5 percentage points, to 12.5%. What impact would this move have on growth?

It would be limited because 15% is a very high and restrictive nominal rate. Even if you cut 250 basis points, which is our expectation, the policy rate will still be biting and restrictive, so don’t look to monetary policy as a catalyst for growth.

Inflation, which we expect to remain at 4.3% this year, isn’t helping, and neither is the fiscal situation. We expect the primary fiscal balance to deteriorate slightly in Brazil in 2026 given the authorities’ weak commitment to fiscal discipline and spending control. Plus, it’s an election year, so the risk is higher that the government could end up spending more.

President Javier Milei of Argentina is trying to stabilize the government’s fiscal situation. What has to happen for Argentina to return to international bond markets?

The conditions are to a significant extent already there. I’d say Argentina can go to the market if it wants to. It would help if credit spreads were a little tighter, but I think they’re on the right track.

The policy direction is right and the commitment is strong. Now we need to see the results—real activity and wage growth and capital inflows. As those things start to happen, the door that is already open will open even wider. Argentina will be able to borrow on more favorable terms.

Do you think Milei’s policies will inspire the next Brazilian government to do more?

Possibly. Milei’s policies have inspired other political actors in the region, including President-elect José Antonio Kast of Chile. In Brazil, we haven’t seen anyone running under that banner. But if things work out in Argentina and we see stronger economic performance, people might come to realize that fiscal consolidation, after a few quarters, will improve the macro and social outlook.

This year, the US, Mexico, and Canada are expected to negotiate a new version of their trade agreement, known as the USMCA. If the talks stall, will Mexican exports to the US soften?

Potentially, yes. If negotiations stall or unravel it could impact exports, and this would be significant because more than 80% of Mexican exports go to the US and they account for more than a quarter of Mexico’s GDP.

Despite a number of US tariff increases, both nations continue to trade broadly under the USMCA trade-preferences framework and the expectation is that the spirit of the USMCA and many of the existing covenants will be preserved after the review.

The US may show more goodwill and flexibility during the negotiation if it sees Mexico making progress on issues such as immigration, fentanyl, transhipment of Chinese goods, and the fight against the drug cartels. Since Mexico is a friendly country and a competitive supplier of manufacturing goods, that close trade relationship and integration will probably be preserved.

This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.