IMF Latin America Outlook: Brazil Up, Argentina Cut
Key Facts
— — The IMF’s April WEO cut global growth to 3.1% (down 0.2pp from January) and raised global inflation to 4.4%, citing the Iran war as the primary risk. Chief Economist Gourinchas said the world is “somewhere between the baseline and the adverse scenario.”
— — Latin America was raised to 2.3% growth (up 0.1pp), with Brazil upgraded to 1.9% from 1.6% as a net energy exporter. Argentina was cut to 3.5% from 4.0%, Mexico held at 1.6%, and Bolivia is projected to contract 3.3%.
— — Under the severe scenario—oil at $110/barrel in 2026, $125 in 2027, gas prices tripling—global growth falls to 2.0% and inflation exceeds 6%, bringing the world to the edge of recession.
The IMF published three versions of the future on Tuesday: in the best one growth merely slows, in the worst the global economy enters recession. The chief economist admitted the world is already past the optimistic version.
The IMF WEO Latin America chapter landed on Tuesday as part of the Fund’s April World Economic Outlook, presented at the Spring Meetings in Washington. The Rio Times, the Latin American financial news outlet, reports that Latin America and the Caribbean is projected to grow 2.3% in 2026—a 0.1 percentage point upgrade from January—while the global economy was cut to 3.1%, down 0.2 points, as the Iran war disrupts energy markets and tightens financial conditions worldwide.
The IMF WEO Latin America Country Map
Brazil received the biggest upgrade in the region: 1.9% growth in 2026, up from 1.6% in January, with the Fund noting that Brazil benefits from the war as a net energy exporter. The 2027 forecast was trimmed to 2.0% from 2.3%, reflecting the expected drag from higher input costs and tighter financing conditions once the oil tailwind fades. The dollar below R$5 and R$65 billion in foreign inflows confirm the market is already pricing in this relative advantage.
Argentina was cut to 3.5% from 4.0%, as the second-half 2025 slowdown and rising inflation erode the recovery. The Fund still sees Argentina outperforming the region, but the gap between the government’s 10.1% inflation target and the market’s 29.1% consensus signals that the stabilization narrative faces a credibility test.
Mexico was upgraded to 1.6% from 1.3%, though it remains constrained by trade tensions with the United States, fiscal consolidation, and restrictive monetary policy. Colombia holds at 2.3%, with inflation projected to rise to 5.9%—the fourth-highest in South America—as the central bank and the Petro government clash over rate policy. Chile is projected at 2.4% and Peru at 2.8%.
Venezuela stands out at 4.0% growth in 2026 and 6.0% in 2027, benefiting from post-Maduro political changes and elevated oil prices, though inflation is forecast at 387%. Bolivia is the region’s worst performer: a 3.3% contraction in 2026, deepening from -1.2% in 2025, with no 2027 projection published due to what the Fund called “significant uncertainty.” Paraguay leads the mid-sized economies at 4.2%, while Uruguay grows 1.8%.
Three Scenarios, One War
The most consequential feature of this WEO is not the baseline forecast but the two alternative scenarios the Fund constructed around the Iran war. The baseline assumes a short conflict and oil averaging $82/barrel in the second half of 2026. The adverse scenario assumes oil at $100/barrel through 2026, gas prices rising 160% in Europe and Asia, and food staples up 2.5%—cutting global growth to 2.5% and pushing inflation to 5.4%.
The severe scenario assumes infrastructure damage to Middle Eastern energy facilities, oil at $110 in 2026 and $125 in 2027, gas prices tripling, and food costs rising 5–10%. Global growth would fall to 2.0%—a level the IMF describes as “near recession,” reached only five times since 1970. Inflation would exceed 6% by 2027, and emerging markets would bear nearly twice the impact of advanced economies.
Chief Economist Pierre-Olivier Gourinchas then said the quiet part out loud: “I would say we are somewhere between the baseline and the adverse scenario.” With Brent trading near $100, Hormuz partially blocked, and no ceasefire in place, the baseline’s assumption of $82 oil by year-end is already under severe strain.
What This Means for Latin America
The Fund’s core message for the region is one of divergence. Net energy exporters—Brazil, Venezuela, Colombia, Ecuador—benefit from elevated commodity prices. Net importers and smaller economies face the opposite: higher fuel costs, tighter financial conditions, and rising inflation expectations that constrain central banks’ ability to cut rates.
The World Bank’s separate April assessment was gloomier, projecting LATAM growth at just 2.1%—below the IMF’s 2.3%—and calling the pace “insufficient” for meaningful poverty reduction. For investors, the takeaway is clear: the war has created a two-speed Latin America where commodity producers attract capital and importers struggle to finance their way through the crisis. Brazil, sitting at the intersection of high real rates, commodity exports, and record foreign inflows, is the Fund’s implicit winner in a region where the margin between growth and contraction now depends on which side of the oil trade a country sits.
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