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Latin America’s Surprise Growth
The surprising resilience of Latin America’s economic growth in 2025.
BY JOHN PRICE
Latin America entered 2025 with a thick fog of uncertainty—slowing global growth, tight financing, and a sudden escalation in U.S. trade measures under the returning Trump administration. Yet mid-year, the region looks more resilient than many expected. The headline picture is messy and uneven—Mexico is the chief casualty of tariff shock and policy uncertainty, while Argentina is (for now) surging on the upside as stabilization takes hold. Brazil’s domestic demand has held up better than feared; Chile and Peru are riding a copper up-cycle; and Colombia is limping forward as interest-rate cuts gradually feed through.
Latin America’s 2025 economic growth story, neither exciting, nor disastrous, is being met by most multinationals with a sigh of relief. As a result, growth plans written in late 2024 and gathering dust since, are being revived or redesigned for implementation.
Below, we walk through what changed from the forecasts made in October 2024 to mid-2025, how U.S. policy helped or hurt different economies, and what’s actually driving Brazil, Mexico, Argentina, Colombia, Chile, and Peru.
What Changed: October 2024 vs. Mid-2025 Growth Calls
The IMF’s October 2024 World Economic Outlook (WEO) set a baseline for 2025. Since then, policy shocks—especially U.S. tariffs announced early 2025—and local dynamics have forced notable revisions, most sharply for Mexico.
The 2025 U.S. trade turn is not just bluster; it materially changed incentives and near-term growth paths:
- A universal baseline tariff:In early April, the administration activated a 10% across-the-board “baseline” tariff via executive action, framed as a reciprocity measure. This raised average U.S. tariff rates to levels not seen in decades. Steel and aluminum tariffs were simultaneously lifted to 50%, reviving and intensifying 232-style protection. Legal and policy notes emphasized complex carve-outs/authorities (IEEPA, Section 301/232) and the expectation of litigation.
- Special Mexico/Canada exposure:In February, Mexico (and most Canadian imports) initially faced 25% tariffs until subsequent proclamations clarified exemptions for many USMCA-compliant goods (especially after April 5), while a separate tranche of measures linked to fentanyl and migration policy created frictions, inspections, and uncertainty at the border. The net result in H1-2025 was higher effective tariff exposure and real-world delays for North American supply chains.
- IMF’s macro call:The IMF flagged these tariff shocks as growth-negative for the hemisphere, explicitly marking down the regional 2025 forecast to 2.0% in April. Mexico’s projected move from +1.4% to −0.3% is the emblematic case. Subsequent IMF commentary warned that further U.S. tariffs on Brazil would deepen its slowdown beyond the 2.3% baseline. So far however, Brazilian growth has not faltered.
Where It Helped:
Tariff shields for USMCA-compliant content (and ongoing nearshoring trends) still protect longer-term Mexico manufacturing—but not enough to offset the 2025 cyclical hit. Some Andean commodity exporters benefited indirectly: copper’s 2025 rally—driven by AI-data-center electrification and a fresh capex cycle—buoyed Chile and Peru notwithstanding U.S. protectionism.
Where It Hurt:
North American auto, electronics, and general manufacturing supply chains took the brunt via higher costs, uncertainty, and delays, feeding straight into Mexico’s downgrade.
Brazilian metals were dinged by the 50% steel/aluminum tariff; the IMF explicitly noted more tariffs would bite harder. These hurt because 54% of steel exports and 17% of aluminum exports from Brazil normally go to the US market.
Country Drill-Downs: What Is Driving 2025 Growth (and What’s in the Way)
BRAZIL
Domestic demand cushions, tariffs loom
What’s working: After a soft Q4-2024, Brazil re-accelerated in Q1-2025 on household spending and capex, helped by renewed payroll-deductible credit and housing programs. A Reuters poll pointed to ~3.2% y/y growth in Q1 and improving labor markets. The government nudged its 2025 call to ~2.4%; consensus is a touch lower.
Policy mix: The Selic is inching down but remains restrictive; the central bank signaled a “higher for longer” stance in mid-2025 to keep disinflation anchored. The new fiscal framework continues to guide consolidation, while tax reform implementation (VAT unification phases) should gradually lift medium-term productivity. One of the world’s highest real interest rates keeps the Real strong, helping basic consumption (i.e. spending without the use of credit).
Headwinds: The big external watch-item is U.S. metals tariffs and any spillovers to Brazilian industrial exports. The IMF’s July briefing warned that additional U.S. tariff steps would push Brazil below the current 2.3% 2025 baseline. The more commoditized the product (raw materials), the easier it is for Brazil to sell its excess supply to non-US markets but industrial goods are often customized to a limited number of clients.
MEXICO
The tariff hit interrupts a nearshoring story
What’s working: The structural nearshoring narrative is intact—Mexico still attracts manufacturing FDI tied to autos, electronics, and appliances—but 2025 is a cyclical step-down. US firms may feel emboldened to continue nearshoring to Mexico but direct investors from Europe and Asia are less certain.
In the first year of any sexenio, it is customary for Mexico’s investor class to sit on their monies for a year to see which way the wind will blow under a new administration.
Remittances remain a consumption pillar; however, the growth impulse faded into negative amid deportations and border frictions.
Policy/monetary issues: Banxico has carefully started rate cuts in 2025 as inflation eased, but financial conditions stayed relatively tight during tariff turbulence. The upshot is a short-run contraction call for 2025: the IMF revised Mexico from +1.4% to −0.3%; the World Bank’s mid-year read is +0.2% (softer but not outright contraction). A strong Peso seems to be doing more good than harm as consumption holds up.
Headwinds: The tariff environment, secondary inspections, and uncertain exemptions for specific supply chains created a confidence tax on investment and trade—precisely what shows up in the IMF downgrade. The flow of nearshoring investment shift to Mexico by Chinese assemblers has all but stopped while that of other Asian and European investors has dramatically slowed.
ARGENTINA
Stabilization bounce—strong, but fragile
What’s working: The new IMF-supported program (EFF) launched in April 2025 and FX regime tweaks (a wider moving band) helped normalize macro signals: reserves rebuilding, primary fiscal surplus targets, and disinflation from the late-2023 peak. Activity picked up—Q1-2025 GDP +5.8% y/y—and the IMF now projects ~5.5% growth in 2025. The Milei administration has shifted gears temporarily from an orthodox neoliberal approach to something more political ahead of legislative elections on October 26th, 2025. The government has allowed the Peso to dramatically appreciate to deliver a sense (albeit temporary) of supercharged consumer spending power ahead of the elections. The casualty is Argentina’s impressive trade surplus. If Libertad Avanza and its allies do well in the elections, the government will likely resume its orthodox libertarian policies and the currency will weaken.
Headwinds: Inflation remains high in levels, real wages are still healing, and social strains are acute. The recovery’s durability depends on policy credibility, the pace of capital-control normalization, and reinvestment into productivity and energy logistics. Execution risk is the keyword.
CHILE
Copper tailwinds meet cautious easing
What’s working: The copper price run in 2025—touching record levels in May—has improved terms of trade and investment signals. Meanwhile, Chile’s central bank delivered substantial easing through 2024, then moderated cuts as inflation progress slowed; the macro mix remains orderly. IMF’s 2025 call is ~2.0% growth. Next year should prove even more robust if the next government (to be elected at the end of 2025) is the pro-business political stripe that many anticipate.
Headwinds: Household balance sheets still carry scars from the pandemic and withdrawal cycles; regulated tariff adjustments and electricity costs have also complicated the disinflation path. The lithium policy framework is progressing but the investment cadence is gradual, so most of the 2025 boost is copper-led.
PERU
Mining-led normalization
What’s working: Peru entered 2025 with momentum—eight straight months of expansion into early 2025—and policy guidance clustered around ~3% for 2025 at the start of the year. The IMF now pegs ~2.8% as copper projects lift output; authorities highlighted regulatory streamlining and financing plans to support investment. President Boluarte, despite her Marxist beginnings, has proven remarkably acquiescent to the pro-business leanings of congress, the real power in Peruvian politics today.
Headwinds: Public investment execution and social conflict management around mining corridors remain the pivotal risks. There remains a large chasm between the voracious fiscal appetite of the national government and the expectations of local mining communities who forever come up short on the capture of royalties owed to them under Peruvian law. There is no love lost for Lima when one visits the Sierra, such that the central government struggles to exercise its will and quell mining conflicts.
The decade-long dysfunction of Peru’s relatively small government has been a blessing to the 70% of informal employment that drives the consumption driven half of the economy but has dramatically slowed progress in building infrastructure and other large projects that national governments naturally lead.
COLOMBIA
Slow lane, but easing helps
What’s working: Rate cuts are underway; the central bank accelerated easing in Q2-2025, aiming to revive demand. The IMF’s mid-year call is ~2.4% growth in 2025—sub-par but improving from 2024. In spite of an embattled presidency under Petro whose political support is built on class warfare and the demonization of the investor class, Colombian economic growth continues thanks to optimal demographics and a resilient informal sector that employs 70% of working Colombians.
Headwinds: Investment sentiment has been dented by erratic and negatively positioned policies under Petro. Add in lingering inflation stickiness (especially food and services earlier on), and the recovery slope stays shallow—more 2026 than 2025.
Other System-Level Drivers of 2025 Resilience
- Monetary Turning Point—Carefully
Unlike advanced economies, much of Latin America began hiking early in 2021–22 and started cutting in 2024. By mid-2025, Brazil, Chile, Peru, and Colombia had all moved policy rates lower versus peak levels, though some paused or slowed cuts as inflation surprises re-emerged. This front-loaded disinflation is a major reason 2025 growth didn’t roll over.
- Commodity Mix Tilted Supportive
Copper’s spike (records in May) and solid oil prices improved external accounts for Chile, Peru, and Colombia. These windfalls cushioned weakening domestic demand, even as tariffs and global uncertainty weighed on manufacturing exporters.
- Policy Frameworks Hold
Brazil’s fiscal framework and tax reform implementation help anchor expectations; Chile’s inflation-targeting credibility and fiscal rule matter; Peru’s macro discipline and project pipeline still attract capital; Mexico’s debt metrics remain manageable despite slower 2025 growth; Argentina’s program anchor with the IMF is stabilizing the near-term trajectory (with caveats).
Obstacles Still in the Way (2025–26)
Tariff overhang and policy fog: Even with clarifications and partial exemptions for USMCA-compliant content, policy risk remains elevated. The April tariff layer—especially metals—still bites, and businesses are repricing North America supply-chain risk.
Tighter global funding vs. local consolidation: Fiscal repair is back in focus (Chile, Brazil, Peru), limiting counter-cyclical spending room even as investment needs (infrastructure, energy transition, security) rise.
Execution risk in big reform stories: Mexico’s energy bottlenecks and permitting; Argentina’s arduous path from stabilization to sustainable growth; Peru’s social conflict cycle around mining; Colombia’s reform trajectory; Brazil’s fiscal deliverables. These micro frictions will partially define whether 2025 resilience extends into a stronger 2026.
Who Has Gained and Who Has Lost from 2025 U.S. Policy—Net of Everything Else
Net Losers (2025): Mexico in the short run (tariff shock + border frictions), Brazilian metals (50% steel/aluminum tariff exposure).
Partial Winners: Chile and Peru via copper prices, which swamped tariff effects; Argentina, as external policy noise mattered less than its internal stabilization bounce.
Holds Steady: Brazil overall (domestic demand offsetting external drags – only 15% of Brazilian exports go to the US), Colombia (dragging but not derailed).
Bottom Line
Latin America’s 2025 growth is not booming, but it’s more resilient than the tariff headlines suggest—and very heterogeneous:
Mexico took the largest tariff-driven hit and is likely flat-to-slightly negative in 2025 before nearshoring fundamentals reassert.
Argentina is surprising to the upside as stabilization gains traction—though it’s still a high-wire act.
Brazil is muddling through at ~2–2½%, helped by households and targeted credit.
Chile and Peru are finding altitude on copper; Colombia is easing into a slow recovery as investors gain confidence that Petro is an administration long lame duck.
The regional average near 2.0% doesn’t scream “surge,” but for multinationals who depend upon Latin America both for its customers and its suppliers, the region is a surprising source of stability vis-à-vis many other parts of the world in 2025.
John Price is the Managing Director of Americas Market Intelligence. With 32 years of experience in Latin American market intelligence consulting, Price has supervised nearly 1,200 client engagements and advises clients in more than 20 countries across Latin America. He can be reached at jprice@americasmi.com
This article was originally published by AMI. Republished with permission.
