Latin America and the Caribbean's economy will expand 2.2% in 2026, down from 2.4% growth in 2025, and pick up to 2.5% in 2027, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) said on August 20, warning that the region's persistently sluggish pace of growth is too weak to lift living standards or close development gaps.

The Santiago-based agency, presenting its annual Economic Survey of Latin America and the Caribbean 2026, said the region is on track to post five consecutive years of average growth of around 2.3%, a rate it described as insufficient to sustainably raise per capita income, narrow development gaps or expand governments' policy options.

"To overcome the trap of low capacity for growth, we must increase investment and productivity and simultaneously move toward productive formalisation that strengthens people's and businesses' productive capacity, expands social protection, and generates more high-quality formal employment," ECLAC Executive Secretary José Manuel Salazar-Xirinachs said.

Forecast largely unchanged since April

The latest projection confirms the estimate ECLAC issued in April, when the commission cut its outlook from the 2.3% it had forecast in December 2025, citing a surge in oil prices after the escalation of the Middle East conflict, tighter global financial conditions and slowing world trade. The updated report indicates those pressures have persisted rather than eased, with ECLAC again pointing to elevated geopolitical tension, financial volatility and pressure on international energy markets as part of the drag on 2026 growth. World output is now expected to expand 2.9% in 2026, its slowest pace since 2022, ECLAC said, adding that high international interest rates and a stronger dollar could further tighten financing conditions for emerging economies.

Even so, the UN regional body reiterated that the main constraint on regional growth is structural rather than external, mentioning low investment levels, weakening formal job creation and persistently high labour informality, which still affects nearly half of the region's workforce.

Wide gap between economies

Growth will vary sharply across the region in 2026. Venezuela is forecast to lead with growth of 6.5%, unchanged from April's estimate and still attributed to oil sector revival and improving business confidence in the wake of the ouster of former president Nicolas Maduro, followed by Nicaragua at 4.5%, Panama at 4.4%, Paraguay at 4.3%, and Guatemala and the Dominican Republic both at 4.0%.

A second group of economies is expected to expand at a more moderate pace, including El Salvador (3.9%), Costa Rica (3.7%), Honduras (3.5%), Argentina (3.3%), Peru (3.2%), Colombia (2.6%), Ecuador (2.4%) and Brazil (2.2%). Argentina's forecast held steady from April, while Brazil's was revised up from the 2% ECLAC projected in the spring and Colombia's edged up from 2.5%.

Chile (1.6%), Uruguay (1.5%), Mexico (1.3%), Caribbean island economies as a group (1.1%) and Bolivia (0.5%) are forecast to post the weakest expansions among growing economies, while sanctions-hit Cuba and violence-ridden Haiti are the only economies expected to contract, by 10.3% and 1.9% respectively. Chile's outlook was trimmed from the 2% ECLAC forecast in April, and Mexico's was lowered slightly from 1.5%.

By subregion, ECLAC projects South America will grow 2.5% in both 2026 and 2027, an improvement on the 2.4% pace forecast for this year in April. Central America is expected to expand 1.6% in 2026 and 2.8% in 2027, though excluding Cuba and Haiti the subregional average would be closer to 4.0% and 4.2% in those years. The Caribbean is forecast to grow 5.6% in 2026 and 7.9% in 2027, a figure ECLAC said is driven largely by oil-rich Guyana; stripping out that economy would leave Caribbean growth at 1.1% in 2026 and 2.2% in 2027 — broadly consistent with the subregional breakdown ECLAC gave in April.

Labour market and public finances

Employment across the region rose 1.6% in 2025, adding roughly 4.3mn jobs, though ECLAC noted the pace of job creation slowed for a third consecutive year and unemployment fell to 5.3%. Informality declined only gradually and still affects nearly half of employed people, with early 2026 data pointing to a further easing in job growth.

On public finances, the organisation said gross public debt stabilised at around 52% of GDP in Latin America and 73% in the Caribbean in 2025, levels it said remain too high, alongside elevated borrowing costs, to free up resources for public investment and social spending.

Comparison with other outlooks

ECLAC's 2.2% forecast for 2026 aligns closely with the World Bank's regional projection, published in its June Global Economic Prospects report, which also put 2026 growth at 2.2% and 2027 growth at 2.5%, matching ECLAC's figures exactly. The World Bank had cut its 2026 estimate from a prior 2.3%, citing inflationary and monetary fallout from the conflict in the Middle East, even as a ceasefire reached between Washington and Tehran in June raised hopes that the worst of the oil price shock had passed. Like ECLAC, the World Bank pointed to persistent informality, weak formal job creation and tight fiscal positions as structural constraints on the region's growth potential.

The three institutions diverge more at the country level. The World Bank projected Brazil would grow 1.9% in 2026, below both ECLAC's 2.2% estimate and the IMF's 2.4% forecast, while its 1.3% projection for Mexico was identical to ECLAC's figure, against 1.2% from the IMF. For Argentina, the World Bank forecast growth of 3.6%, compared with 3.3% from ECLAC and 3.5% from the IMF. The World Bank put Colombia's 2026 growth at 2.3%, below ECLAC's 2.6% estimate, and projected Chile at 2.1%, above ECLAC's 1.6% forecast.

ECLAC's 2026 forecast also remains below the 2.4% growth the IMF projected for the region in its World Economic Outlook published on July 8, which forecast 2.7% growth for 2027, an upward revision from the 2.3% the Fund had held to in April, when its regional forecast stood a tenth of a point above ECLAC's then-estimate of 2.2%. The IMF's July report cut its global growth forecast to 3% for 2026, citing fallout from the conflict between the United States, Israel and Iran. The fund predicted Argentina would lead major regional economies with 3.5% growth in 2026, while Brazil and Mexico were forecast to grow 2.4% and 1.2%, respectively.