Overall growth in Latin America (LatAm) is expected to be relatively sluggish in 2025, with headwinds for the region including a fiscal drag and potential disruptions to global trade under Trump 2.0. While Mexico and Brazil are facing a tougher year, Argentina is a positive outlier, with strong growth expected after two years of contraction, based on regulatory reforms and fiscal consolidation.

While inflation has broadly decreased across the region, further disinflation will largely depend on addressing persistent price rises in the services sector. LatAm central banks are expected to implement moderate rate cuts throughout 2025, with the exception of Brazil.

The new Trump administration has already introduced volatility into LatAm markets and this is likely to continue through financial channels, as well as trade and migration. A significant increase in US tariffs would hurt most LatAm countries and damage global supply chains, making exposure to global trade flows just as important as exposure to the US.

With the exception of Mexico, the US generally runs bilateral trade surpluses with the larger economies in the region and so tariffs are likely to be used more as a negotiating tactic than a means to bring down the US trade deficit. Changes in US immigration policy could lead to weaker remittance flows from a number of LatAm countries, although there is some upside about prospects of US companies moving manufacturing and other production facilities closer to home.

Overall, global factors are mixed, but risks are tilted to the downside. Heightened trade, financial and migration risks, fluctuating commodity prices and persistent geopolitical tensions (although LatAm is geographically removed) are all a threat to the region. Meanwhile, the normalisation of monetary policies in developed countries, economic stimulus in China, and potential boosts to the US economy from fiscal easing and deregulation are likely to create more favourable conditions.