Latin America in a “Low-growth Trap”

Latin America is headed into 2026 without a clear path to robust growth. The Economic Commission for Latin America and the Caribbean (ECLAC) projects a tepid 2.3% regional expansion for 2026, confirming four straight years of growth around 2%. This outlook is shared by the World Bank and the International Monetary Fund (IMF), with the latter’s latest projections offering a 2.1% estimate for Latin America in 2026 with very slight differences among its country forecasts. This challenging environment sets the stage for a fragmented picture of Latin American economic growth in 2026, where growth will be increasingly concentrated in a handful of strongly performing economies.

Divided Among Winners and Laggards

The simple average masks a growing chasm between laggards and winners. Large economies Brazil and Mexico will likely continue to grow well below their historical rates, but will lead relative expansion among Latin American countries at close to 4%. At the other end, a cluster of medium-sized and smaller economies, many of them in Central America, will outperform their larger neighbors, with Panama, Costa Rica, the Dominican Republic, Paraguay, Guatemala and Honduras near or above 4% growth, alongside the atypical cases of Guyana (a one-off driven by a temporary bonanza in its nascent oil sector) and Argentina (a cyclical recovery). Together, these countries will contribute disproportionately to regional expansion and power a turning point in Latin American economic growth in 2026.

Structural Weaknesses to the Fore

ECLAC warns that, if current projections hold, Latin America will have registered just 1.6% average annual growth between 2017 and 2026. In a recent interview, the body’s executive secretary José Manuel Salazar-Xirinachs also drew attention to the expected weakening of private consumption in 2026 as external demand softens and job creation and business investment lose steam after several years of extraordinary energy and commodity prices. Meanwhile, the World Bank’s regional GDP growth forecast for 2026-2027 is a modest 2.5%, the weakest among the Bank’s emerging regions, while the IMF also projects a deceleration to 2.3% growth in 2026 after a 2.4% increase in 2025. As ECLAC’s Salazar-Xirinachs has noted, “structural factors are showing their limitations, and the region is sinking into a low-growth path characterized by weak investment, low productivity and high inequality”. This will set a decidedly lackluster tone for Latin American economic growth in 2026 overall.

Guyana and Paraguay to Shine

Against this general backdrop, several countries stand out on the upside. Guyana is the obvious case. ECLAC projects an eye-popping GDP increase of 24% in 2026 for Guyana, though this is largely the result of a non-recurring fast-tracking of oil production which will taper off over time, as corroborated by IMF forecasts pointing to average growth of around 14% a year over the medium term, of which non-oil would represent the lion’s share. Guyana is a special case of a very small and oil-dependent economy that is set to benefit from massive but one-off investment in a single export product with minimal direct impact on regional and Latin American economic growth in 2026. A different story is being written in Paraguay, where ECLAC sees growth of around 4% in 2026, with some forecasts nudging that up to 4.5%. The country is experiencing a gradual transformation of its productive matrix, based on a competitive agro-industrial foundation, light manufacturing, logistics, and low-cost energy exports. Fiscal and monetary discipline add predictability and macroeconomic credibility to the mix. Should it sustain this performance, Paraguay is destined to be South America’s fastest-growing economy outside of Guyana and one of the more interesting sources of Latin American economic growth in 2026.

Central America and the Caribbean Gain Relative Ground

Elsewhere, 2026 will see Central America and the Caribbean, with the obvious exception of Guyana, outpacing the regional average. Panama is expected to grow at around 4-4.2% as Canal activity, logistics, and financial services help it weather the effects of the winding down of the giant Cobre Panamá copper mine. The Dominican Republic’s growth in 2026 will be about 4.3%, with ECLAC already pointing to a record year in 2025, mainly in the tourism sector, which will support domestic demand. Other factors such as export-oriented free zones and an investment-friendly fiscal and monetary policy will also contribute to a growth trajectory that will converge again toward its long-term average of about 5%. Guatemala and Honduras should also see growth rates near 4% as their economies continue to benefit from strong remittances and resilient domestic consumption. Costa Rica is set to grow around 3.3-3.6% in 2025-2026, clearly above the regional average and also well above its long-term trend. This acceleration is expected to be concentrated on high-tech exports of knowledge-intensive services, as well as free trade zone-oriented manufacturing and a tourism sector that has fully recovered after the pandemic shock.

Argentina’s Risky Recovery

Arguably, the most interesting case is Argentina. The country is projected to register relatively high growth of 4-4.5% in 2025-2026, but this will mainly reflect a cyclical bounce-back from low base effects following two years of recession and output contraction. Argentina has been singled out by the World Bank as one of the key engines of a regional upturn in 2026. However, the IMF has significantly downgraded its own projections, and the Fund’s analysis still flags elevated, albeit falling, inflation and major political and social uncertainty as key downside risks. In terms of Latin American economic growth in 2026, Argentina remains a very high-risk, high-reward bet for investors.

Brazil and Mexico Set to Drag the Region Down

Brazil and Mexico, on the other hand, look set to underperform. ECLAC projects just about 2% growth for Brazil and a mere 1.3% for Mexico in 2026. Mexico’s subpar performance will partly reflect the impact of new U.S. trade barriers that could further reduce its main export engine and slow a long-delayed modernization of its infrastructure and energy generation and transmission networks. In the case of Brazil, persistently high real interest rates, a restrictive fiscal space, and weaker demand for its commodity exports are likely to remain significant headwinds to higher and more dynamic growth. In short, the epicenter of Latin American economic growth in 2026 will migrate from the region’s traditional engines to smaller and mid-sized economies with more robust macroeconomic fundamentals.

Conclusion: Consolidating the Winners and Laggards Divide

In sum, while the outlook for Latin American economic growth in 2026 remains challenging, it is also set to become less homogeneous. Put simply, 2026 is unlikely to bring a broad-based growth boom to Latin America, but it will see the contours of such a boom become much clearer. Growth will be increasingly concentrated in those economies that have a combination of factors on their side, including macroeconomic stability, sectoral specialization, and institutional credibility, instead of just large economic size. On the one hand, this will call on policymakers to deepen reforms aimed at boosting productivity, investment and competitiveness if they wish to convert near-term momentum into a virtuous circle of sustainable expansion. On the other hand, investors will find that Latin American economic growth in 2026 is likely to become a more selective, idiosyncratic and opportunity-rich landscape, with a greater role for economies that have found or created resilient niches and offer predictable and reliable business climates. In that sense, 2026 may be less of a year of rapid growth acceleration than a watershed for how and where growth is being generated across Latin America.

Tariff reductions would be gradual, beginning with a quota. Argentina’s local automotive industry, unlike Brazil’s, saw declines in production and exports in 2025 and would also need to export vehicles to Europe.

The free trade agreement between Mercosur and the European Union could become the final link in the chain that definitively connects Argentina’s automotive market with the rest of the world.

Although the details have not yet been disclosed, there are two different ideas regarding how the tariff benefit for importing cars from Europe into Argentina would be applied.

Because the origins of the trade agreement between Mercosur and the European Union date back nearly 25 years, some argue that there would be an initial seven-year phase during which a limited quota of units could be imported (50,000 vehicles per year), to be shared between Argentina and Brazil. In the second phase, a progressive reduction of the 35% tariff would begin, eventually bringing it down to zero.

However, updating the original project to reflect modern times and the automotive industry of the 21st century, a gradual tariff-reduction scheme could be implemented. This would start with a reduction of the 35% tariff to 25% exclusively for electrified vehicles (hybrids and fully electric vehicles), while for vehicles with internal combustion engines, a quota of around 15,000 units would be established, importable at a rate of 17.5%.

The current scenario

At present, the Economic Complementation Agreement with Brazil (ACE 14) allows all vehicles manufactured in both countries to be imported and exported between them without any import tariffs. Three other similar agreements also allow vehicles to be traded tariff-free with Uruguay, Colombia, and Mexico.

Since last year, a quota of 50,000 hybrid and electric vehicles per year authorized by the Argentine government has made it possible to import vehicles using this technology that are manufactured outside the region and have a tax-free price of USD 16,000, without applying the Mercosur common external tariff of 35% that is normally charged in Argentina and Brazil. Although it is not specifically aimed at that market, the clear beneficiary of this program is China, which accounts for 80% of these vehicles.

A potential trade agreement with the United States would also enable a still-unconfirmed quota of 10,000 units, under which vehicles could be imported from the U.S. market while also avoiding the same additional 35% tariff.

Thus, with the exception of South Korea and Japan, virtually all of the world’s major automobile-producing countries would have the opportunity to sell new vehicles to Argentina without the current tariff barrier. Even though those two countries have production plants in Europe and the United States, meaning that this limitation could be overcome by importing vehicles from those locations rather than from the brands’ original countries.

A larger and better supply of imported vehicles

These agreements benefit consumers, who would gain access to a broader range of vehicles and technologies of higher quality at lower prices than currently available—at least in low- and mid-priced mass-market models—since the quality standards of higher-end cars and pickup trucks are equivalent to those of other plants worldwide.

However, this benefit could become a drawback for regional production if export competitiveness conditions are not improved, as these remain decisive for the profitability of Argentina’s industrial operations.

In this regard, the latest industrial report released this week by the Argentine Association of Automotive Manufacturers (Adefa) showed that in 2025 Argentina’s industrial vehicle production fell by 3.1%, while exports declined even more sharply, dropping 10.8% compared to 2024.

“Lowering tariffs is always good news, but just as the door is opened for imports, the door for exports must also be opened,” an Argentine automaker recently remarked.

The need to export more domestically produced vehicles

“An agreement like the trade agreement between Mercosur and the European Union will bring benefits to other sectors of the Argentine economy, but not so much to the automotive industry if conditions for exporting are not improved. Today, maintaining export markets is already difficult. If competitiveness is not improved, we will remain expensive, even if we sell without tariffs,” they said.

Importing cars from Europe makes complete sense, but exporting products manufactured in Argentina to EU countries does not seem as easy. Nevertheless, the trade agreement between Mercosur and the European Union could hypothetically allow Argentina’s main automotive product—mid-size pickup trucks—to gain export opportunities, competing with Thailand and South Africa, which are currently major suppliers to the European Union.

There could also be specific cases involving brands that had already decided to shift their production toward electrified vehicles ahead of the 2035 deadline that was set to ban internal combustion engine cars. Although that deadline has now been postponed without a new date in sight, there may be situations in which it is more convenient to source such vehicles from South America while continuing a slower transition toward manufacturing electrified vehicles at European plants.

The same sources who warned about the difficulty of continuing to export without improving competitiveness said they prefer “an agreement of this nature rather than a tariff cut, which could be temporary and short-lived.”  The trade agreement between Mercosur and the European Union, in addition to being long-term and progressively implemented, includes safeguards to protect local industry in the event of harm caused by a massive influx of imports, not only automobiles.

By the third quarter of 2025, non-mining and energy sectors accounted for almost 73% of foreign direct investment (FDI) in Colombia, with the agricultural sector taking a growing share.

Colombia’s agricultural sector has experienced a growth dynamic over the last decade, stimulated by part of the foreign capital that has entered production and export-oriented fruit chains. In crops such as avocado and blueberry, foreign capital has been attracted to productive efficiency projects, infrastructure, technology, and alignment with international standards, in a global fresh fruit market that registered an average annual growth rate of 3.4% in value between 2018 and 2023.

In an international context, with lower growth prospects and tighter financial conditions, FDI has tended to concentrate in destinations that provide more stability, market size, and future potential. In this context, Colombia has managed to maintain the interest of international capital, with an increasingly relevant trend: the growing share of non-mining and energy sectors such as agriculture and agribusiness.

Statistics from the Banco de la República show that, by the third quarter of 2025, these sectors accounted for nearly 73% of foreign direct investment in the country. This trend is based not only on macroeconomic conditions but also on structural changes in the conception of productive projects, in which sustainability, value generation, and integration into global supply chains play a central role.

Exports within the agricultural sector as an axis for investment

In this scenario, the agricultural and agribusiness sector has maintained steady growth over the last decade, in part, thanks to the arrival of foreign capital into production and export-oriented fruit chains. Avocado and blueberry, among others, have been attracting investments that seek to improve productivity, infrastructure, technological practices, and inputs, and alignment with international quality and commercial standards in a scenario in which the international fresh fruit market grew at an average annual rate of 3.4% in value between 2018 and 2023. This has established the sector as an increasingly relevant component of the foreign investment that enters the country.

The agricultural sector, however, has also had to face, in recent years, a series of challenges. Reports on the performance of different branches of the sector agree that 2024 was a growth year for Colombian agriculture. The sector was supported by a relatively stable situation in the international prices of inputs and favorable weather conditions for the crops. At the same time, agriculture has been facing major tests related to the security situation in rural areas, extreme climate events, logistical difficulties, and crop losses. Elements that point to the need to continue strengthening the frameworks of public policies and foreign investment to make the sector more resilient.

Access to Capital has Helped Colombia Agriculture

In this regard, factors such as access to capital have played an increasingly relevant role. As reported by specialized platforms such as ProducePay, external financing allows producers to invest in technology, post-harvest practices, cold storage, and logistics. These elements are essential for continuity, quality, and alignment with the standards required by international buyers, reducing risks and strengthening the stability of the agricultural supply chain.

In this way, the sectoral composition of foreign investment in 2025 reflects the same logic of transformation. Renewable energy led the list of projects that entered the country, followed by software and technology services. While agribusiness took one of the main positions in the investment portfolio of the year, in a scenario in which investors seek projects with productive impact, sustainability, and a long-term horizon.

In the territorial distribution, this trend has translated into an investment spread over more regions. Bogotá added the largest share of projects during the year. But almost twenty departments in the country were able to register foreign investment initiatives, reaffirming the role of regional areas as spaces for productive development, local value chains, and formal job creation, especially in activities linked to agriculture.

In this context, the figures announced by ProColombia for 2025 (178 foreign investment projects projecting the creation of more than 48,800 jobs) serve as an indicator of the type of projects that are coming into the country. For Colombian agriculture, this scenario means important opportunities but also challenges to translate interest from international capital into sustainable, competitive investments capable of strengthening rural development in the medium and long term.

Conclusion

In conclusion, foreign investment in Colombia consolidates an increasingly solid and strategic interest in Colombian agriculture, in such a way that the agricultural and agribusiness sector has established itself as a pillar of economic growth and job generation. Macroeconomic stability, access to financing, the use of modern technologies, and export orientation have made agriculture an attractive destination for foreign capital. However, sustaining this trend will require public policies, infrastructure, and sustainability strategies that allow translating investments into rural development, strengthened value chains, and long-term competitiveness. In this way, Colombian agriculture is building itself as one of the main components of the economic future of the country, with the capacity for attracting capital, generating value, and consolidating its presence in international markets.

The Inter-American Development Bank (IDB) is returning to Bolivia after a 15-year hiatus. The institution’s president, Ilan Goldfajn, will be in the country on January 13 and 14 to hold a series of meetings with government officials and private-sector representatives, at a time when Bolivia seeks to maintain its level of public investment, stimulate private activity, and access new external financing. Should this meeting take place, it will be the first in 15 years to have the bank’s top authority on Bolivian soil. A visit that would be both symbolic and substantive, and many analysts see it as a new window of opportunity that may lead to increased financial flows.

Diplomatic protocol aside, there is an important economic substance behind the visit. For many years, the IDB has been one of Bolivia’s most important partners in development finance, with a particular focus on highway infrastructure and transport. As a matter of fact, virtually all of the official documents refer to the bank as the country’s leading source of external funding for road infrastructure, financing strategic corridors that facilitate connectivity, trade, and mobility. Thus, when the IBD returns to Bolivia, it is not just a matter of showing up but also of redoubling efforts to build long-term capacities and strengthen development bases.

Goldfajn is an experienced professional in his own right. An economist and seasoned professional in multilateral and central bank institutions, he has led the IDB since December 2022. Before that, he was Director of the Western Hemisphere Department at the International Monetary Fund and previously served as president of the Central Bank of Brazil, leading a period in which inflation was reduced, financial instruments were modernized, and policies won international recognition for their credibility. Such a leadership profile gives weight to the idea that the visit is part of a broader strategy as the IDB returns to Bolivia, rather than a one-time move.

Agenda for La Paz and Santa Cruz

Day one of the visit will be based in La Paz and will include official meetings at the Casa Grande del Pueblo. In this stage, Goldfajn will meet with the economic cabinet and the Foreign Minister, later continuing with a session with President Rodrigo Paz. A press conference will be held immediately afterwards in the same place, to give the public an account of the meeting and expose its priorities. The symbolic character of the meetings – high-level, programmed, and with an audience – conveys the message that the IBD returns to Bolivia willing to reinsert itself in the core of policy design.

The second day of meetings will take place in Santa Cruz de la Sierra, with a schedule that includes a meeting with the city’s business community. Goldfajn will maintain a dialogue with the leaders of the private sector about the opportunities that may exist in the financial field as the IDB returns to Bolivia, in projects that could be promoted, and in general, about how to increase productivity and foster economic diversification. Such dialogues are part of the recognition that growth cannot be sustained by public spending alone, but must also involve the promotion of the private sector, the attraction of capital, and the development of competitive sectors that can insert themselves more in regional and international markets.

What does the visit mean for Bolivia?

In the field of international finance, a high-level visit by IDB personnel is often interpreted as a sign of continuity and willingness to design new projects in a country. For Bolivia, which today seeks resources to finance infrastructure works, social programs, and productive projects, these signals are not something to be taken for granted. Documents related to the visit present it as a gesture of confidence that could facilitate the arrival of new lines of credit and foreign currency in a context in which the search for external financing remains relevant. In short, when the IBD returns to Bolivia, it signals that ties built over decades are not lost, but remain alive, adaptable, and capable of updating themselves along with new economic priorities.

Goldfajn himself has stated that Bolivia will be the first official trip of 2026 and that recent adjustments made by the Bolivian government in economic policy, aimed at restoring financial stability and laying the foundations for growth, would work in favor of this type of meeting. In parallel, IDB technical teams have been working in recent months with Bolivian authorities and private organizations on a more comprehensive agenda, to raise productivity, attract investment, and expand exports in the country, issues that become increasingly central to seek sustainable development. The visit, therefore, would not be an isolated exercise of outreach, but part of a coordinated process that is already positioned to turn dialogue into concrete programs.

The IDB’s track record in Bolivia

The IDB has been decisive in the financing of many infrastructure projects that have given shape to Bolivia’s connectivity and integration with its neighbors. In this way, the loans granted by the IDB traditionally have long maturities and development-focused conditions, which are factors that help countries maintain their investments without generating excessive fiscal pressures in the short term. Such characteristics are particularly valuable when governments seek to advance major public works, transport infrastructure, and institutional reforms that take time and stability to bear fruit.

In Bolivia, road projects financed by the IDB have often enabled communities to connect to markets, reduce transportation costs, and access basic services more widely. All these types of investment tend to have multiplier effects, since they not only support trade routes and strengthen supply chains, but also help improve the movement of people, goods, and ideas. Thus, as dialogue is reopened and the IDB returns to Bolivia, many of the actors involved hope the partnership will broaden towards other areas that complement and reinforce infrastructure, such as energy transition, digitalization, climate resilience, and financing programs for micro, small, and medium-sized companies.

A signal — and an opportunity

In short, the upcoming visit represents a symbolic reopening and a pragmatic opportunity. On the one hand, it signals that international partners still consider Bolivia a relevant actor in regional development initiatives, with the capacity to design credible projects consistent with long-term goals. But when the IDB returns to Bolivia, it does not do so only to review existing commitments. In that sense, there is an expectation that this meeting can place an agenda on the table that links the elements of infrastructure and innovation, credit and productivity, stability and inclusive growth.

For policymakers, entrepreneurs, and communities, this is also a moment of reflection on how multilateral cooperation can be leveraged more effectively. The success of the visit, and of the programs that could subsequently be generated, will depend on coordinated action, transparent execution, and a joint commitment to ensure that financing translates into development results that materialize on the ground. If so, the renewed engagement could help strengthen confidence, mobilize resources, and strengthen Bolivia’s capacity to face new economic challenges with greater diversification and resilience.

Peru had the second-lowest country risk in Latin America at the close of 2025. It had a value of 124 basis points, well below the regional average. This is due to the confidence that it has generated among investors. In 2025, Peru demonstrated its economic solidity and financial stability in international markets. According to data released by the Central Reserve Bank of Peru (BCRP), the country maintained a very low country risk level at the end of the year, measured by the EMBIG (Emerging Market Bond Index Global) indicator, remaining the second-lowest risk economy in Latin America after Chile.

This performance is the result not only of a favorable market perception but also of the prudent conduct of macroeconomic policies that Peru has maintained for years. Fiscal discipline, conservative debt management, and the low inflationary performance have positioned Peru as a market with an investment-grade perception among international credit rating agencies. In this sense, the commitment to structural reforms and incentives for private investment has further strengthened the country’s solidity even in periods of regional uncertainty.

This has also reinforced the image of macroeconomic solidity and fiscal responsibility that Peru has been building in recent years, despite being located in a region that has experienced episodes of volatility and financial uncertainty. In this context, Peru has emerged as a highly attractive option for investors seeking stable, predictable returns when considering investment projects in Latin America.

A historical trend that consolidates trust

The EMBIG indicator, which reflects the spread between the returns of Peruvian sovereign bonds and US Treasury bonds, showed a positive evolution throughout the year. While at the end of December 2023, the country risk was at 162 basis points, at the time of closing on December 22 of 2025 it had decreased to 124 basis points. This annual variation of 31 basis points shows a trend of improvement in the perception of international investors regarding the country’s ability to meet its obligations and the prudent management of its macroeconomic variables.

The practical impact of this situation is that Peru finds itself in a better position to access external financing and make itself more attractive for foreign investment. When deciding where to direct their business expansion strategies in Latin America, many companies take into account the country risk of the different economies. By being among the countries with the lowest country risk in Latin America, Peru now enjoys lower costs for new financing, better conditions for its credit lines, and greater confidence in the continuity and stability of fiscal and regulatory policies.

In addition, this situation is the result of the convergence of various favorable factors. Peru has been able to maintain a relatively low level of public debt in relation to GDP compared to other regional economies, and through interventions of its central bank, it has also achieved an inflation performance within the targeted ranges. Furthermore, the accumulation of comfortable foreign exchange reserves has allowed Peru to strengthen its protection against external shocks, which has reinforced its resilience to volatility in global financial markets. These structural advantages have enabled the country to weather external turbulence, such as variations in the prices of certain raw materials, without suffering significant impacts on its financial system.

Peru’s position in the regional landscape

Peru is well below the Latin American average. At the close of December 2025, Latin America’s EMBIG indicator was at 333 basis points, well above Peru’s, while the average for emerging economies it was at 235 basis points.

As for the most solid countries in the region, Chile topped the ranking with an indicator of 90 basis points, consolidating itself as the Latin American economy with the highest financial stability. Peru was in second place with 124 basis points, followed by Brazil with 198 and Mexico with 223. In turn, Colombia had a country risk of 275 basis points.

In contrast, in the economies with high spreads, where the indicators are above the Latin American average, the situations are more complex, due to the challenges associated with high public debts, political uncertainty or higher inflation rates. In Peru, maintaining a prudent economic policy has been a differentiating factor that has allowed it to stand out favorably with respect to its regional peers. In this way, for investors, the difference in country risk between economies like Peru or Chile and those with higher spreads in Latin America is very relevant in the decision-making process when allocating capital, large-scale investments, or financial assets in the region.

In this sense, lower-risk economies in Latin America tend to be the preferred destinations for infrastructure investments, corporate expansion, and portfolio diversification. This is due to the fact that these economies offer more stable and predictable fiscal and regulatory environments, better access to credit, and lower exposure to the fluctuations associated with political and economic volatility. For countries such as Argentina or Ecuador, which, despite having experienced significant improvements in their indicators during the year, still maintain a high level of risk. Argentina closed at 609 basis points and Ecuador at 536, well above the Pacific Alliance countries. For investors, this differential reinforces the importance of evaluating country risk in Latin America when they consider diversifying their portfolios or making investments.

Annual change and its consequences

The BCRP report indicates that most countries in the region managed to reduce their perceived risk in 2025. Peru’s 31-basis-point reduction reaffirmed its place as one of the most reliable economies in the region. Chile also reduced 28 basis points, while Mexico and Colombia decreased 91 and 48 points, respectively.

This behavior is associated with greater investor confidence, which allows economies to access external financing at more attractive rates and with lower additional costs. For countries with a country risk level similar to Peru, this context is fundamental to support their investment strategy, both public and private, as well as to improve their medium-term fiscal position. In this sense, the reduction of costs associated with external debt leaves more space for new public or private investment projects, in addition to allowing the promotion of infrastructure works, social programs, and key strategic projects for strengthening competitiveness.

In addition, the virtuous cycle that the reduction in the perceived country risk triggers also acts as an engine of economic growth. A greater inflow of foreign investment has a direct impact on GDP growth, which in turn allows for the generation of fiscal space that, when added to the reduction in the cost of external financing, contributes to further reducing country risk in Latin America. In this way, the evidence that Peru has demonstrated in 2025 serves as an example of how macroeconomic discipline and confidence in international markets can be translated into tangible benefits for public accounts and the private sector in general.

Country risk in Latin America is an important issue for any investor

In simple terms, country risk can be compared to the evaluation that a bank or financial entity will make of the financial situation of a person who seeks a loan. A borrower who has a stable income, low debt burden, and a good credit history will receive better rates and conditions. Similarly, countries with a low level of country risk, like Peru or Chile, considered economically responsible, pay lower rates on their external debt.

On the other hand, economies with greater uncertainty and instability, either politically, fiscally, or externally, have to pay higher interest rates to their creditors. This is due to the fact that investors demand greater returns as compensation for the risk of investing their money in that market. For this reason, Peru’s low risk at the end of 2025 corroborated its current position as one of the most solid and reliable economies in the region.

For any investor who is deciding between different economies and markets to deploy their financial resources in Latin America, the country risk factor must be taken into account. As mentioned before, a high-risk rating in Latin America forces an economy to have to offer greater risk premiums to its creditors, which translates into an increase in the cost of financing and new investments. Lowering the cost of capital has a direct impact on the country’s ability to carry out infrastructure projects, corporate expansion or new financial investments.

In a region that is characterized by its economic and political diversity, Peru’s commitment to building a solid and predictable investment climate has clearly differentiated it from its regional peers. As Peru continues to strengthen its position as a model of financial stability in Latin America, it will be essential to uphold the high standards that have allowed it to reach the lowest risk levels in the region. This will not only help attract high-quality foreign investment but will also have positive effects on the overall growth of the econom