Economic Hurdles and Modest Gains: Latin America’s 2025 OECD Outlook Revealed

The OECD’s latest economic report, released on June 3, 2025, paints a cautious picture for Latin America’s economic growth.

The organization forecasts that the seven largest economies in the region—Brazil, Mexico, Colombia, Argentina, Chile, Peru, and Costa Rica—will grow by an average of 2.4% in 2025, up from 1.4% in 2024 but still below the 1.9% growth recorded in 2023.

This modest recovery comes amid a global environment marked by increasing trade barriers, tighter financial conditions, and policy uncertainty that weigh heavily on the region’s prospects.

Brazil, the region’s largest economy, is expected to grow by about 2.1% in 2025, a slowdown from 3.8% in 2024. Household spending will drive growth, supported by a robust labor market, yet external demand remains weak.

Mexico’s growth is expected to slow to around 0.4% in 2025, down from 2.1%–2.5% in 2024, due to higher US tariffs and weaker export demand.

Colombia anticipates a partial rebound with growth 2.5%, helped by improving investment conditions despite persistent inflation pressures.

Argentina stands out with a projected rebound ranging from 2.7% to as high as 5%, recovering from a severe contraction in 2024 caused by hyperinflation and fiscal tightening.

Chile and Peru are expected to grow around 2.4% to 3.0%, benefiting from stable inflation and external demand for key exports like copper and lithium. Paraguay and Uruguay maintain moderate growth, supported by agriculture and energy sectors.

Inflation remains a challenge across the region. Brazil and Mexico expect inflation to moderate but stay above central bank targets, while Argentina’s inflation remains high but is projected to decline gradually.

Energy inflation in Latin America has recently dropped to its lowest in six months, helped by falling international oil prices, which offers some relief to consumers and businesses.

Fiscal constraints limit governments’ ability to stimulate growth. Latin American countries collect an average of 21.5% of GDP in revenues, significantly less than the OECD average of 34%.

This limited fiscal space forces many governments to pursue austerity or fiscal consolidation, reducing public spending and investment. Such policies, while necessary for debt sustainability, risk slowing the recovery and delaying private investment.

Growth Projections for 2025: Country Highlights

The OECD highlights several risks that could undermine growth. Rising trade tensions and protectionist measures, especially tariffs imposed by the United States, threaten to disrupt supply chains and increase costs.

Geopolitical conflicts and volatility in financial markets add uncertainty. Climate-related disasters also pose risks to agricultural production, a vital sector for many countries.

Understanding these dynamics matters because Latin America’s growth affects global commodity markets, migration flows, and regional stability.

The slow pace of productivity improvements and persistent poverty—over a quarter of the population lives in poverty—underscore the need for structural reforms. Without increasing productivity and investment, economic gains will remain limited.

In summary, Latin America faces a fragile recovery in 2025. Modest growth driven by domestic demand and some export recovery contends with inflationary pressures, fiscal limits, and external shocks.

The region’s economic future depends on navigating trade tensions, managing inflation, and implementing reforms to boost productivity and investment. These factors will determine whether Latin America can close the gap with more developed economies or remain trapped in slow growth.