Latin America: it is necessary to attend to the urgent, but also the important

Latin America is subject to external winds: changes in economic policy in the main economies or the air of conflict from other latitudes. In the midst of this uncertain outlook, the region clings to maintaining a dynamic of activity with stable growth, around 2% in 2026 and 2.1% in 2027. The improving trend in Mexico stands out, although it does not compensate for the slowdown in Brazil and Colombia, to name a few. This dynamic of activity has also been conditioned by constant internal political changes and climatic conditions.

The world is currently facing a very intense El Niño phenomenon: the warming of the Pacific Ocean around the equator. The most recent metrics taken by NOAA (the United States climate agency) suggest that this will be the worst in at least 50 years.

In Latin America, El Niño causes a marked drought and rainfall deficit in much of Central America, Colombia and Venezuela, while it implies excess rainfall in the northern part of Mexico and in the south of the continent, from Peru to Argentina. The incidence of this climate anomaly, especially when it is so strong, tends to produce lower growth in these two countries. For its part, in Colombia the impact is mainly through inflation.

Thus, lower growth is expected in Peru in 2026 and 2027 compared to what was previously estimated, while in Argentina it is somewhat premature to estimate its impact, since it depends on its degree of incidence in the soybean and wheat production area. For Colombia, the impact is already beginning to be felt in its most recent inflation record, with perishable foods leading the increases, but it is expected to have a greater effect at the beginning of 2027.

In this environment, Latin America faces inflationary pressures that have led it to be placed above the objectives of its central banks, and to them to harden their messages or even their policy stance in some cases, such as Colombia. This response has helped to limit, at least partially, the depreciation of regional currencies against the dollar.

The region faces several short-term challenges, but in a context of higher global rates for a longer period of time, attention must focus on these more structural imbalances. It may sound like a very repeated recipe, but the only sustainable path is to address these social and economic needs through a productive revolution, which is still elusive for Latin America. It is relevant not only to attend to what is urgent, but also to what is important.