Latin America Faces Slower Growth as Trade Tensions and Weak Investment Bite

The Economic Commission for Latin America and the Caribbean (ECLAC) has revised its 2025 growth forecast for the region, now projecting GDP expansion of just 2.0 percent.

This adjustment, published April 29, 2025, reflects a reduction of 0.4 percentage points from previous estimates. The revision underscores mounting economic pressures as global trade tensions rise and investment remains subdued.

ECLAC’s updated outlook points to a region facing persistent challenges. South America is expected to grow by 2.5 percent, Central America and Mexico by 1.0 percent, and the Caribbean by 1.8 percent.

These figures reveal a pattern of slow, uneven growth that has characterized Latin America for the past decade. The region averaged only 0.9 percent annual growth from 2015 to 2024, highlighting structural weaknesses that continue to limit economic momentum.

Trade policy shifts in the United States have amplified uncertainty. Tariff announcements by the U.S. have not only reduced direct export opportunities for Latin American economies but have also triggered volatility in global financial markets.

This volatility affects asset yields and interest rates, with repercussions for both the U.S. and global markets. The resulting instability has led to greater exchange-rate volatility and forced countries to accumulate more international reserves as a precaution.

Latin America Faces Slowing Growth Amid Weak Investment

The region’s reliance on private consumption as the main driver of growth has become more pronounced. However, ECLAC expects the pace of consumption to slow, while investment remains weak.

High interest rates and persistent inflation have eroded household purchasing power and discouraged new investment. The labor market shows little improvement, with employment growth forecast at just 1.7 percent for 2024, the lowest since the pandemic.

Informal employment remains widespread, with nearly half of all workers lacking formal job security. External demand has also weakened. China’s slowdown and the prospect of further U.S. trade barriers have reduced export opportunities.

For Mexico, which is deeply integrated with the U.S. economy, even a 10 percent tariff could cut GDP by up to one percentage point. Central American countries face the added risk of reduced remittances if U.S. immigration policy tightens.

Some countries show resilience. Argentina is projected to rebound with 5 percent growth in 2025 after a recession, while Brazil is expected to grow by 2.3 percent. Panama, Costa Rica, and the Dominican Republic also have positive outlooks.

Yet, the region as a whole remains stuck in a low-growth trap, with poor investment performance and low labor productivity. ECLAC stresses that reversing this trend requires more proactive economic policies, better-targeted investment, and a focus on productive sectors.

Without these changes, Latin America risks continued stagnation, vulnerable to external shocks and unable to create enough high-quality jobs to support its population. The latest figures and analysis reveal a region at a crossroads, facing both immediate risks and long-term structural challenges.