The UN's Economic Commission for Latin America and the Caribbean (ECLAC) has downgraded its 2025 growth forecast for the region to 2.0 per cent, adding to a chorus of international institutions painting a bleak picture for Latin American economies this year.

The revised projection, released on April 29, represents a four-tenths reduction from ECLAC's December estimate, with the Caribbean and Central America suffering the steepest downward revisions.

By subregion, South America is now expected to grow at 2.5 per cent, down just one-tenth from previous estimates. Central America and Mexico face a sharper correction to 1.0 per cent, seven-tenths lower than earlier projections. Caribbean economies (excluding Guyana) have been downgraded by eight-tenths to 1.8 per cent.

ECLAC's outlook aligns with similarly pessimistic forecasts from other multilaterals. Last week, the World Bank cut its regional growth projection to 2.1 per cent from 2.5 per cent, while the IMF reduced its forecast to 2.0 per cent, both citing deteriorating global conditions.

"The region is facing a very complex and highly uncertain international scenario," ECLAC warned in its statement, pointing particularly to tariff announcements from the United States that threaten both direct export channels and broader financial market stability.

The Santiago-based UN body highlighted that these trade tensions have triggered "significant fluctuations in stock and bond markets" with clear implications for asset yields and interest rates in the US and other major financial markets. The resulting "geoeconomic confrontation" has heightened risks of severe disruptions to global supply chains and international trade.

These global headwinds have prompted significant downward revisions for growth among Latin America's key trading partners. The IMF recently slashed its US growth forecast from 2.7 per cent to 1.8 per cent, while China's outlook was cut from 4.6 per cent to 4.0 per cent.

For regional economies, these shifts translate to weaker external demand, potential imbalances in external accounts, increased exchange-rate volatility, and a greater need for precautionary international reserves. Domestic demand is also expected to cool, with private consumption — though still the main driver of regional growth — continuing to decelerate.

Investment prospects appear particularly vulnerable. ECLAC notes that capital formation will show "less dynamism than what was contemplated" in its December overview, reflecting global trade deceleration and heightened uncertainty.

The region's largest markets have been hit hardest by the changing outlook. The World Bank recently cut Mexico's growth forecast dramatically to zero from 1.5 per cent, while Brazil's projection was trimmed to 1.8 per cent from 2.2 per cent. The IMF has taken an even bleaker view on Mexico, a country whose economy is strongly intertwined with the US, predicting a 0.3 per cent contraction as a direct consequence of trade tariffs imposed by the administration of President Donald Trump.

Yet beneath the gloomy regional outlook lies a striking divergence in country-specific performances. Argentina stands as a rare bright spot, with ECLAC projecting 5 per cent growth for the South American nation in 2025. This aligns with the World Bank's recently upgraded forecast of 5.5 per cent growth for Argentina, representing a significant turnaround for a country that has battled persistent economic crises.

At the opposite end of the spectrum, Venezuela and Haiti face continued economic deterioration. ECLAC forecasts a 1.5 per cent contraction for Venezuela's economy and an even deeper 2 per cent decline for Haiti. Both nations grapple with severe structural challenges compounded by political instability and sanctions.

The growth projections reveal three distinct tiers emerging across the region. High performers include not only Argentina but also oil-rich Guyana, which is expected to achieve an extraordinary 10.3 per cent expansion this year, and the Dominican Republic at 4.5 per cent. Mid-tier economies like Colombia (2.5 per cent), Chile (2.2 per cent) and Brazil (2 per cent) cluster near the regional average. Meanwhile, Mexico's dramatic slowdown to just 0.3 per cent growth — with the IMF even forecasting a contraction — signals potentially serious vulnerabilities in what has been considered one of the region's most stable large economies.

ECLAC emphasised that Latin America must urgently address its persistent low growth trajectory of the past decade. "Invigorating growth requires a combination of more proactive macroeconomic and productive development policies than those the region has had up to now," the report stated.

The commission called for increased investment in both physical and human capital, alongside implementation of targeted productive development agendas in dynamic sectors. "The region not only must invest more, but it also must invest better," ECLAC noted, advocating for adoption of new technologies, promotion of clusters, and better leveraging of social and environmental capital.

With such meagre projected growth projections, Latin America remains on track to be the slowest-growing major region in the world in 2025, continuing a troubling pattern of economic underperformance relative to other emerging markets.