Week 14, 2025 - Latin America

Newsletter
Navigating Change: Regional Opportunities in an Uncertain World. After years of turbulence, Latin America entered 2025 with a rare macroeconomic opportunity: growth has stabilized, inflation is down, and public debt is leveling off. But with global risks rising and productivity still weak, the question is whether this calm can be turned into something more lasting.
Published on
April 4, 2025

"I don't think limits." - Usain Bolt (Jamaican runner)

MARKETS

April 3, End Of Day

BUSINESS

Navigating Change: Regional Opportunities in an Uncertain World

After years of turbulence, Latin America entered 2025 with a rare macroeconomic opportunity: growth has stabilized, inflation is down, and public debt is leveling off. But with global risks rising and productivity still weak, the question is whether this calm can be turned into something more lasting.

  • Regional GDP growth forecast: 2.4% in 2025, driven in part by Argentina’s rebound.
  • Public debt stabilizing around 60% of GDP, but still vulnerable to interest rate pressures.
  • Employment up by 4 million in 2024, yet most new jobs are informal.
  • Unemployment at decade lows, but working poverty remains above pre-pandemic levels.

The Risks: Global Shocks Could Derail Modest Gains

The IDB models several global shock scenarios for 2025–2027. The worst-case “combined shocks” scenario could cut regional growth by more than half, down to just 1.1%.

  • Mexico’s growth could fall to just 0.1% under a U.S. recession scenario.
  • A China slowdown has less impact but still poses risks for commodity exporters.
  • AI job displacement is real: by 2035, 132 million jobs in the region could be exposed to automation.

The Opportunities: Build the House While the Sun Shines

Despite the risks, there’s room to grow, if policymakers act now.

  • Boosting intraregional trade: currently just 15% of total trade, vs. 68% in Europe and 55% in Asia.
  • Formalizing labor markets: informality reduces tax revenue and limits productivity, full formalization could boost GDP by 19%.
  • Cutting inefficiencies in public spending (e.g., overpriced procurement and wage premiums) could free up 4.6% of GDP.
  • Green growth and AI: Net-zero transition could generate benefits equal to 20% of regional GDP, while AI could add 0.9 pp to annual labor productivity, if managed well.

CURRENT AFFAIRS

Mexico: President Claudia Sheinbaum said Mexico will not retaliate with tariffs against the U.S., ahead of President Trump’s expected announcement of broad new trade duties. Instead, Sheinbaum pledged to unveil a comprehensive economic support plan. While calling for calm, she acknowledged potential risks, as Mexico’s economy, heavily reliant on U.S. trade, could tip into recession if tariffs persist.

Argentina: The poverty rate fell to 38% in the second half of 2024, down from 53% in the first half, offering a boost to President Javier Milei’s austerity-driven economic reforms. The drop follows a sharp devaluation, spending cuts, and removal of price controls aimed at curbing inflation, which has dropped from 289% to 66% annually. While the government credits economic freedom for the improvement, critics warn millions still struggle.

Panama: Denmark’s Maersk has acquired the Panama Canal Railway Company from Canadian Pacific Kansas City and the U.S.-based Lanco Group. The rail firm, which earned $77 million in revenue last year, provides freight and passenger services along the canal. Maersk said the deal strengthens its container logistics operations in the region. The sale comes amid rising geopolitical tensions, with the U.S. raising concerns over foreign, especially Chinese, influence near the canal.

FURTHER READING

Check our recently published insights here.

📱 The Gig Economy in Latin America: Flexibility, Inclusion, and the Road Ahead

  • Rapid Growth – LatAm’s gig economy doubled in value between 2019–2023, now worth over $450B and growing 15% annually.
  • Key Sectors – Delivery, transport, and tech freelancing dominate, with platforms like Rappi, Uber, and Freelancer.com leading the way.
  • Worker Challenges – Job insecurity, lack of benefits, and extreme hours remain widespread; policy reforms are underway but uneven.
  • Financial Inclusion – Gig-based lending solutions are emerging to support workers without traditional banking access.
  • Gender Gaps – Women gain flexibility but face lower pay and less access to financial tools; targeted support is crucial.

📖 Read more here.

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