Economic growth in Latin America: Peru and Colombia lead World Bank projections for 2026

The financial landscape of the continent is undergoing a moment of profound reconfiguration. The consequences of global instability, coupled with the structural challenges of the region, have drawn up an extremely uneven recovery map. According to the most recent report entitled “Economic perspectives for Latin America and the Caribbean,” prepared by the World Bank, the region is moving towards a moderate expansion. Economic growth in Latin America is projected to reach 2.2 per cent by the year 2026, a figure which, while showing some absorption capacity in the face of external shocks, is evidence that the continent remains trapped in a cycle of low dynamism that does not result in palpable well-being for the population.

This 2.2% advance is maintained in the same line of resilience as the 2.4% expected by 2025. However, when the numbers are broken down by country, the asymmetries are exposed. Among the major Latin American economies, Peru and Colombia are characterized as the major engines of the year, projecting growth rates of 3.2% and 2.3% respectively. On the opposite side, Chile will experience the least dynamism of the main block, with a modest advance of 0.8%, reflecting the difficulties of its domestic market in reactivating consumption and investment in an environment of high interest rates. For their part, the two South American powers, Brazil and Argentina, will tie their forecasts with an increase of 2.1%, while Mexico, strongly tied to the industrial situation in North America, will achieve an increase of just 1.4%.

The regional macroeconomic scenario against global pressures

If the look is extended beyond the larger economies, the Caribbean and Central America show much more robust figures. The World Bank points out that the Dominican Republic and Paraguay will lead the advance in Ibero-America with a remarkable 4.7%. These are followed by Panama with 4.2% and Guatemala with 3.7%. The Central American bloc shows a particular vitality, with Nicaragua growing to 3.6%, Honduras to 3.4% and Costa Rica reaching 3.3%. Ecuador, by navigating its own socio-political tensions, would achieve an expansion of 2.8 per cent.

Uruguay, Argentina and the Southern Cone

The stage for Uruguay requires careful reading. Projections indicate that the country will grow by 1.2% in 2026, below the Latin American average. This cooling of national economic activity responds to a set of factors that combine the caution of global markets, the stabilization of the prices of our export raw materials and strong foreign exchange competition in the region. Despite maintaining enviable institutional stability and a strong investment degree, Uruguay faces the historic challenge of breaking its roof of productive growth. At the most worrying end of the regional spectrum is Bolivia, which will be the only South American nation to fall into recession this year, projecting a decline in its economic activity of -2.8%.

Latent risks: public debt and the threat of climate change

The commercial fabric of the region reflects contrasting realities. The commodity-exporting countries have found temporary relief at high international prices, allowing them to oxygenate their trade balances. In addition, the industrial sector has been able to maintain a surprising tone of resilience in the face of increasing global tariff tensions. However, the other side of the currency severely punishes the energy and food importing nations, which must face much higher operating costs, together with a fall in international tourism demand that directly hits Caribbean economies.

The macroeconomic risks for the coming years are dangerously downward. The volatility in energy markets threatens to dynamite the incipient process of deinflation that so many sacrifices have cost. This scenario requires central banks to maintain a conservative position, prolonging a high interest rate policy that restricts credit and disincentives private investment.

To this is added the heavy burden of public debt. The high levels of debt and the cost of their interests consume much of the fiscal space of governments, displacing structural public investment. The climate factor plays a crucial destabilizing role, if it were little. The El Niño phenomenon represents a direct threat to the agricultural sector and hydropower generation. Extreme droughts or floods not only reduce crops, but dramatically increase energy and food production.

As a warning, the World Bank stresses that GDP per capita in Latin America will only vary in 2026. This metric is fundamental, as it confirms a persistent pattern: the slight macroeconomic growth does not spill to society, leaving the average resident’s income stalled.

Long-term projections and the impact of structural reforms

Looking towards the 2027 horizon, the multilateral body anticipates that the growth baton will pass to Peru, Argentina and Chile, estimating for the three an increase of 3%. Colombia would maintain a good pace at 2.6 per cent, while Mexico (1.8 per cent) and Brazil (1.7 per cent) would continue to show a more lethargy dynamism.

By 2028, the institution forecasts that Peru will consolidate its leadership position by accelerating its economy to 3.6%. The case of Argentina is of particular interest. After years of volatility, the neighbouring country, under the administration of Javier Milei, plans an expansion of 3.5% for that year. The report highlights that Argentina is undergoing substantial reforms, hoping to grow for three consecutive years (2025-2027) driven by fiscal adjustment, labour reforms, a more open economy and the implementation of its Large Investment Incentives Regime (RIGI). Meanwhile, Colombia (2.5%), Brazil and Chile (2.3%), and Mexico (2.2%) would be a step back.

Artificial intelligence as an engine of labour productivity

Beyond financial constraints, the report puts on the table an inescapable debate: the role of technology. The adoption of artificial intelligence could boost productivity and radically transform the labour market in Latin America.

However, although companies are adopting these tools widely, they rarely manage to integrate them into key activities of their business processes. Carlos Rodriez- Castelán, the World Bank’s chief economist for the region, was strong: a powerful tool loses relevance if workers and companies lack the capacity to act on the information it generates. Governments and the private sector that now decide to invest in business skills and skills will be the ones that have real benefits from this technological transition.