Latin America’s economy will grow just 2.2% in 2026 as ECLAC warns of a prolonged low-growth trap

Latin America and the Caribbean will grow by only 2.2% in 2026, extending a prolonged period of weak economic expansion that is limiting the region’s ability to raise living standards, increase investment and close development gaps, according to the latest outlook from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

The forecast leaves the organisation’s previous estimate broadly unchanged but points to a slowdown from the 2.4% growth recorded in 2025. ECLAC expects activity to accelerate moderately to 2.5% in 2027, although that would still leave the region far from the growth rates required to generate a sustained improvement in productivity and per-capita income.

The figures are part of ECLAC’s Economic Survey of Latin America and the Caribbean 2026 and underline what has become one of the region’s central economic challenges: Latin America is not facing a conventional recession, but rather a persistent inability to generate stronger long-term growth.

If the current trajectory is maintained, the region will have completed five consecutive years with average economic growth of around 2.3%, a pace ECLAC considers insufficient to sustainably improve living standards or give governments greater fiscal space to invest in infrastructure, education and social policies.

“To overcome the trap of low capacity for growth, we must increase investment and productivity and simultaneously move toward productive formalisation,” ECLAC Executive Secretary José Manuel Salazar-Xirinachs said when presenting the report.

The economic environment has also become more difficult. Higher energy prices following the escalation of conflict in the Middle East, geopolitical tensions, volatile financial markets and weaker international trade have added pressure to regional economies. ECLAC expects global output to grow 2.9% in 2026, its slowest pace since 2022, while elevated international interest rates and a stronger dollar risk tightening financing conditions for emerging markets.

Yet the organisation argues that Latin America’s biggest problems remain domestic and structural. Low investment, weak productivity, slowing formal job creation and persistently high labour informality continue to restrict the region’s ability to move onto a faster growth trajectory.

Argentina outpaces Brazil and Mexico, but regional differences widen

The headline regional figure masks considerable differences between countries.

Argentina is forecast to grow 3.3% in 2026, maintaining ECLAC’s previous estimate and placing the country ahead of several of Latin America’s largest economies. Brazil is expected to expand 2.2%, slightly higher than the 2% previously forecast, while Mexico’s outlook has been lowered to just 1.3%.

Colombia is expected to grow 2.6%, Peru 3.2%, Costa Rica 3.7% and Paraguay 4.3%. Chile, by contrast, is forecast to expand only 1.6%, down from the 2% previously expected, while Uruguay is projected to grow 1.5%.

Among the faster-growing economies, Panama is expected to expand 4.4%, Guatemala and the Dominican Republic 4% each, while ECLAC places Venezuela at 6.5% and Nicaragua at 4.5%. At the other end of the table, Bolivia is forecast to grow only 0.5%, while Cuba and Haiti are expected to contract.

South America as a whole is projected to expand 2.5% in both 2026 and 2027.

The Caribbean presents a particularly distorted picture. ECLAC forecasts growth of 5.6% this year and 7.9% in 2027, but those figures are heavily influenced by Guyana’s oil-driven expansion. Without Guyana, Caribbean growth would fall to just 1.1% in 2026 and 2.2% in 2027.

The outlook for Argentina is particularly relevant for investors because the country is expected to outperform the region despite remaining below the growth rates forecast for some smaller Latin American economies.

There is also broad agreement among the main international institutions that Argentina will grow faster than Brazil and Mexico this year, although their precise estimates differ. ECLAC forecasts 3.3% growth for Argentina, compared with 3.6% from the World Bank and 3.5% from the International Monetary Fund.

For Brazil, ECLAC expects 2.2%, compared with 1.9% from the World Bank and 2.4% from the IMF. Mexico’s outlook is considerably weaker, with ECLAC and the World Bank forecasting 1.3% and the IMF estimating 1.2%.

The comparison reinforces another feature of the 2026 outlook: Latin America is increasingly moving at different speeds, with individual countries benefiting from different combinations of commodities, domestic demand, investment cycles and economic reforms, while the region as a whole remains stuck in relatively modest expansion.

Jobs, informality and debt expose Latin America’s structural challenge

The weakness of the regional economy is particularly visible in the labour market.

Employment increased 1.6% in 2025, equivalent to approximately 4.3 million additional jobs, while unemployment fell to 5.3%. But the pace of job creation slowed for a third consecutive year, and early 2026 indicators suggest that employment growth is continuing to lose momentum.

Perhaps more significant is the persistence of informal employment, which still affects nearly half of the region’s workers.

That limits productivity, tax collection and access to social protection while reducing the ability of companies and employees to access formal financing. For ECLAC, improving economic performance therefore requires more than simply stimulating demand: Latin America needs to raise investment and productivity while moving workers and businesses into the formal economy.

Public finances provide another constraint. Gross government debt stood at around 52% of GDP in Latin America and 73% in the Caribbean in 2025. Combined with high borrowing costs, those levels restrict the resources available for infrastructure, productive investment and social spending.

The regional outlook is broadly consistent with other major international forecasts. The World Bank also expects Latin America and the Caribbean to grow 2.2% in 2026 and 2.5% in 2027, exactly matching ECLAC’s projections. The IMF is slightly more optimistic, forecasting regional expansion of 2.4% this year and 2.7% next year.

The differences are relatively small. More important is the common message emerging from the forecasts: Latin America continues to grow, but not fast enough to fundamentally change its economic trajectory.

For businesses and international investors, that creates a more complex regional picture than the headline 2.2% figure suggests. Markets such as Argentina, Paraguay, Costa Rica and Panama are expected to expand considerably faster than the regional average, while some of the largest economies will deliver much weaker growth.

For governments, however, the challenge is broader. External shocks — from wars and energy prices to global interest rates and slower trade — can worsen the outlook, but they do not fully explain Latin America’s persistent underperformance.

Without stronger investment, productivity gains, greater formalisation and improved fiscal capacity, the region risks turning low growth from a temporary economic condition into a defining structural characteristic of the decade.