Central and Latin America: Country Risk Ratings

Argentina (ARG)

Argentina's overall risk level is medium-high, mostly due to the country's poor economic situation. Although there has been some improvement lately, there is still a long way to resolve most of its economic imbalances. In recent months, Javier Milei's administration has secured some victories in the Congress, such as passing the "Clean Record" bill and cancelling the primaries for the midterm election in Congress. Most polls suggest that Milei's party, La Libertad Avanza, will increase its participation in Congress, with Milei's party likely to secure more than 30% of the seats. However, Milei is formally accused of fraud as well. He retweeted an advertisement for a new cryptocurrency called Libra, which, after hours, saw its value plummet. Although we do not expect investigations to result in any sort of impeachment, this incident could temporarily affect Milei's popularity.

In Argentina, the political violence risk is medium. Despite political division in Argentine society and some protests against Milei's administration, political violence has been controlled in the first year of Milei’s presidency and is expected to continue in that way. Legal and regulatory risk is medium-high, with Milei’s administration aiming to liberalize the Argentine economy, which could lead to sudden regulatory changes. For similar reasons, political interference risks are medium-high. Exchange transfer risk is also medium-high, as Argentina currently holds a low level of international reserves, standing at less than USD 30 billion. We believe the Argentine administration will seek a new deal with the IMF before liberalizing access to foreign currencies in Argentina, this will likely happen in the second half of 2025. The risk of doing business is high, mainly due to the poor economic situation in Argentina, which is characterized by high inflation and limited access to foreign currency. Banking sector vulnerability is low despite the poor condition of the Argentine economy, since banks are well-covered in terms of liquidity and are generally in good health. Finally, the inability of the government to provide stimulus is medium-high, as the government is aiming for significant fiscal consolidation and there will be no space in the budget for any sort of stimulus, nor will there be any sources to finance it.

Brazil (BRA)

Brazil's overall risk level is medium, the same as in our last assessment. The biggest new developments from Brazil are related to politics

On one side, President Lula's approval rating has dropped to 24%, according to a Datafolha poll—the lowest across all his mandates. Most of this decline in approval is likely related to food inflation. Food prices have risen recently, especially for meat and coffee, affecting most household budgets. Furthermore, these increases come from an already elevated baseline. Other hypotheses suggest that the government's communication strategy, perceived as antiquate in an era of social media, has also contributed to the drop in Lula’s approval rating.

On the other side, Jair Bolsonaro has been formally accused of taking part in an alleged coup attempt aimed at cancelling the 2022 elections to keep him in power. The coup was unsuccessful as not all parts of the armed forces supported the narrative. We believe Bolsonaro will not be able to participate in the 2026 elections, but the candidate representing his political base will be highly competitive against Lula.

The risk of political violence is medium-high, as Brazil continues to experience a high level of homicides, and the general population remains divided between the country’s two main political forces, bringing some isolated episodes of violence.

Legal and regulatory risk remains medium-high due to Brazil’s high level of bureaucracy and frequent changes in the regulatory framework. Political interference risk is also medium-high, given the possibility of government intervention in the economy to benefit certain sectors at the expense of others. Sovereign non-payment risk is medium-high due to the federal government's high debt level, which has reached 76% of GDP in 2025. However, 95% of this debt is in local currency, mitigating some of the associated risks. Exchange rate transfer risk is medium, given Brazil’s solid level of international reserves, which amount to USD 350 billion—enough to finance over 21 months of imports.

The risk of doing business is currently high, due to the extensive bureaucracy required to operate in Brazil and the heavy tax burden on enterprises. Banking sector vulnerability is medium-low thanks to the adequate liquidity levels of Brazilian banks and their overall financial health.

Finally, the government’s inability to provide stimulus is medium-high, due to the country's high debt levels and the necessity of improving fiscal results.

Chile (CHL)

Overall, the risk for Chile is medium-low, with all the sub-indices we cover also marking medium-low. As Gabriel Boric enters the last year of his presidency, most of the political landscape is turning toward the November elections. Since re-elections are vetoed in Chile, Boric, who has a 26% approval rating, will try to elect a center-left successor, with some pointing to former President Michelle Bachelet as one of the candidates. Boric was unable to move forward with a new constitution in Chile and made few changes to the current pro-market framework in which the country operates. Recently, he was able to pass a pension reform increasing enterprise contributions and creating new benefits for workers. During Boric’s tenure, economic growth has been modest, averaging only 1.7%.

Political violence is at medium-low, as no large demonstrations have been seen in Chile. The current homicide rates are dropping, averaging 4.5 per 100,000 inhabitants, which is low by Latin American standards. Legal and regulatory risk is also at medium-low, despite being governed by left- and right-wing presidents, Chile has maintained its pro-market framework. Political interference risk is at medium-low, as Chile holds important institutions capable of curbing political interference. Sovereign non-payment risk is at medium-low, as Chile has a debt-to-GDP ratio of 44%, which is below that of most emerging markets, and its administration is marked by fiscal discipline. Exchange transfer risk is at medium-low taking into account that Chile holds an adequate level of international reserves of USD 44 billion and has been accumulating current account surpluses, mitigating foreign reserve liquidity crises. The inability of the government to provide stimulus is also at medium-low considering Chile could run a fiscal deficit to stimulate the economy without facing significant issues.

El Salvador (SLV)

El Salvador’s overall risk remains medium high. Nayib Bukele remains President after his 2024 election victory and re-elected on his tough stance in dealing with gang violence through his emergency measures bringing up the minimum sentence for being part of a gang, seeing more than 2% of the adult population now imprisoned. Political violence is medium high and legal & regulatory risk high. President Bukele is looking to work closer with the new US administration, having made clear they would be open to housing US prisoners and ‘violent immigrants’ in exchange for a fee. Bukele and El Salvador have become a model for the far right with policies gaining support from the likes of Elon Musk. Bukele is the self-proclaimed ‘’CEO of El Salvador’’ as he is believed to have more domestic support than any other world leader. However, there remains levels of scepticism from the parts of the international community and Human Rights Watch with laws being passed believed to infringe of freedom of speech particularly from the press, highlighting a potential lack of transparency. 3% growth is forecast for 2025 and 2.8% for 2026 by the IMF. Remittances from the US will remain strong and improved perception has helped boost business confidence and private investment alongside a more stable inflation backdrop with 1.9% inflation forecast this year by the IMF. Furthermore, in December, a seven-year ban on metals mining was overturned, a huge boost for President Bukele and growth prospects set to boost export industries. The belief is that there are gold deposits worth up to USD132 billion to exploit. Gold mining has divided environmental groups. The President has also promised to make El Salvador’s highly dollarized economy a tax-free ‘Bitcoin City’. However, to secure a USD1.3 billion IMF loan, they have to scale back their bitcoin ambitions and reduce government deficits. Government debt remains high with the IMF projecting 84.6% of GDP for 2025 and 84.7% for 2026 with USD1.75 billion of bonds due in 2025, 2027 and 2029. On top of an IMF loan, El Salvador have refinanced a USD1 billion worth of debt with a US government-backed loan from JP Morgan Chase used to service debt, buy back bonds alongside the promise of conserving the Lempa River. Sovereign non-payment risk remains medium high. A -2.4% of GDP current account deficit is estimated for 2025 and -2.7% for 2026, as exchange transfer risk stays at a medium rating. El Salvador remain vulnerable to earthquakes and extreme climate conditions, most recently having been hit by 5.6 earthquake in the north of the country in December requiring emergency protocols in the area. Supply chain disruption is now medium while the risk of doing business remains medium high.

Guatemala (GTM)

Guatemala’s overall risk level remains medium high. Bernardo Arevalo was elected as president in 2023 on a mandate for greater transparency and anti-corruption. His inauguration in early 2024 was filled with controversy after being delayed due to opposition protests. Political violence remains medium high and legal & regulatory risk high. The US remain Guatemala’s most important partner in the international community geographically and financially. Significantly, since President Trump has come back to office, Guatemala have accepted 40% more deportation flights from the US to help fight off the tariffs threat from President Trump. In addition, the US government’s decision to cut USAID which will have an impact in Guatemala as they have been a large beneficiary of support through the program. 3.6% real GDP growth is anticipated for 2025 and 3.7% for 2026. Stable growth has been and will continue to be supported by their export industries such as in natural resources, food exports and clothing particularly to their biggest trading partner the US and their resilient economy. Furthermore, increases in spending on public services and construction is boosting growth, however despite this over half of the population are estimated to still be living in some form of poverty and growth will persistently be undermined by Guatemala’s large informal economy. 71.1% of the workforce work in the informal economy, according to the World Bank. Inflation does however remain on the downward trajectory with 4.2% forecast by the IMF for 2025 and 4% for 2026, down from 2022’s 6.9% peak. Guatemala and its climate remain more than ever susceptible to natural disasters such as hurricanes and earthquakes. For instance, November saw Tropical Storm Sara hit Guatemala leaving around 1,000 households flooded months after Central America were hit with Hurricane Beryl. Supply chain disruption is thus medium high alongside the risk of doing business. The current account is expected to remain in surplus but fall in the coming years from 1.8% of GDP in 2025 to 1.5% of GDP in 2026 as remittances from workers in the US are expected to fall. The IMF estimate stable 26.8% of GDP government debt for 2025 and 2026. As a result, exchange transfer risk remains low and the inability of the government to provide fiscal stimulus remains medium low.

Guyana (GUY)

Overall, the risk for Guyana is medium-high. After the strong threat of annexation of half of the country by Venezuela, tensions between the two countries have cooled, and war between them is very unlikely. In December, the country will hold general elections, electing the President for a 5-year term and the 65 members of the General Assembly. Incumbent President Irfaan Ali is set to be re-elected for his final 5-year term. In economic terms, Guyana is preparing to explore new oil fields, which are expected to foster growth in the coming years.

Political violence risk is medium, as violence is relatively controlled, and no strong clashes are expected between government and opposition forces. Legal and regulatory risk is medium-high due to the possibility of government intervention in economic matters, as President Ali also holds the majority in the National Assembly and could quickly change the rules of the game. For similar reasons, political interference risk is also medium-high. Exchange transfer risk is medium-low due to the adequate level of international reserves and the prospect of Guyana increasing its revenues in US dollars with the production of new oil fields. Sovereign non-payment risk is medium, as the level of debt is currently at sustainable levels, around 25%. The risk of doing business is high due to the archaic bureaucracy needed to conduct business in Guyana. Banking sector vulnerability risk is medium-low due to the adequate level of liquidity in the banks of Guyana. Finally, the inability of the government to provide stimulus is medium-high, as the country has registered some fiscal deficits recently.

Jamaica (JAM)

Jamaica’s overall risk rating remains at medium alongside political interference and legal & regulatory risk. Andrew Holness continues to lead Jamaica as PM with legislative elections set for 2025. As a member of the Commonwealth, King Charles III acts as Head of State for Jamaica, however PM Holness remains insistent on ending ties with the British Crown and initial steps have been taken to progress this transition as a bill has been presented in the Jamaican parliament to abolish the monarchy. A bill of this sort still needs to pass obstacles such as a debate and vote in parliament leading to a national referendum. However, it is believed that over 50% of Jamaicans are pro the idea of a republic in Jamaica. In terms of the economy, the IMF expect 2.1% growth in 2025 and slowing to 1.6% growth in 2026. Jamaica’s growth is being heavily supported by persistent strength in tourism since COVID, particularly from the US. However, there continues to be many factors holding back the economy. High crime levels and poor levels of digital infrastructure alongside the climate risks contribute in halting growth and discouraging foreign investors. The potential costs of hurricane season could worsen in the coming years as extreme weather patterns become more of a threat. Hurricane Beryl left around 60% of Jamaica without power and cost the economy hundreds of millions of dollars particularly to agriculture. Over half of Jamaicans live in rural areas and many live near the coast leaving them more vulnerable and affected to hurricanes and the harsh weather conditions. High government debt at 64.9% of GDP for 2025, according to the IMF, reflects both progress from debt levels above 100% of the economy during the pandemic but also fiscal consolidation measures – this can also explain slowing economic activity.  Sovereign non-payment risk is now medium low. 5% inflation is anticipated by the IMF in 2025 and 2026 in line with the Bank of Jamaica’s 5% target. A 0.5% of GDP current account surplus is estimated for this year and a -0.3% deficit for 2026, helping to stabilise a Jamaican dollar which has been depreciating against the USD since the turn of the year. Exchange transfer risk is medium low and the risk of doing business remains at a medium level.

Mexico (MEX)

Mexico’s overall risk is medium-high. The first months of Claudia Sheinbaum’s administration have been marked by controversy. As her coalition won the qualified majority (2/3) in the Chamber of Deputies and Congress, the controversial judicial and electoral reform standing in Congress was quickly approved after the swearing-in of the new Congress. Now, all federal judges, including Supreme Court justices, will be elected in an election set to occur in 2025. Some criticism was raised, as this will be an unprecedented event and seen as a way to undermine the judiciary's independence. Despite this, Sheinbaum governs with staggering support, registering an 80% approval rate. Another controversy, and more important in economic terms, is Mexico’s relationship with Trump’s administration. Currently, the U.S. is threatening to impose a 25% tariff on Mexico. We believe Mexico’s administration will concede to the U.S. demands to avoid the tariffs since much of Mexico’s growth and value chain is dependent on integration with U.S. value chains.

Political violence risk in Mexico is high due to the high level of violence in zones controlled by the narcos, which can exert great influence on local politics. Legal and regulatory risk is high, as the left-wing coalition led by MORENA controls both houses, giving them a free hand to implement changes to the Mexican constitution, which could lead to regulatory changes likely in an anti-market manner, favoring state presence in the economy. Supply chain disruptions are very high, especially now with the Trump administration favoring more isolationism and advocating for tariffs, jeopardizing the nearshoring process. Political interference risk is medium-high due to the power MORENA and Sheinbaum now hold in the country. Sovereign non-payment risk is medium, as the 51% debt level is controlled, and the government is currently undergoing a fiscal consolidation process to stabilize the debt/GDP ratio. Exchange transfer risk is medium, as the country holds an adequate level of foreign reserves capable of fulfilling its obligations in foreign currencies. Banking sector vulnerability is medium-low considering the banking sector is in a healthy situation, and there is no crisis in sight. The inability of the government to provide stimulus is medium-high. Mexico registered a fiscal deficit of 5.9% in 2024 and now seeks consolidation to ensure debt sustainability, giving little room to stimulate the economy through fiscal policy.

Nicaragua (NIC)Nicaragua’s overall risk remains medium high. Daniel Ortega continues to assume the role as President and his wife Rosario Murillo as vice-President as they have done since 2007. After their 2021 election victory, the next set of presidential elections are set for 2026. Their party, the FSLN, have 75 of the 92 seats in parliament. Their rule is viewed by many as authoritarian and anti-democratic, shutting down opposition with violence. They are under sanctions from the US and EU and as well as this they are establishing closer ties with Russia and China, with Russian military bases being set up there in recent years and a trade deal being recently clinched with Beijing. As a result, many people from Nicaragua are fleeing to the likes of the US and Costa Rica, as Nicaragua remains one of the poorest countries in the region. Political violence is high and legal & regulatory risk is very high. The IMF forecast 3.8% growth in 2025 and 3.5% in 2026. In recent years, Nicaragua has seen increases in inward foreign direct investments as well as remittances from abroad, which have hit 6.7% and 26.1% of GDP respectively. Additionally, despite inflation falling it remains elevated with 5% expected for 2025 and then 4% for 2026, just inside the central bank’s target of between 2 and 4%. Nicaragua’s strong current account surplus will continue its downward path into the next few years from 6.1% of GDP for 2025 to 4.1% for 2026, as restrictions on exports to the US (who remain their biggest trade partners) and challenging global trade conditions impact their trade balance alongside stalling private investment. Public debt at 38.2% for 2025 is not seen as major concern with sufficient central bank reserves and loans from China offering Nicaragua support. Nicaragua is also aiming to become more fiscally solid and sustainable by cutting public expenditure. The inability of the government to provide fiscal stimulus remains medium low. Nicaragua is however becoming more susceptible to the climate crisis and natural hazards. The El Nino and La Nina weather phenomenon are directly impacting Nicaragua with more flooding, drought and landslide risk emerging, adding pressure onto the agricultural and water industries. Supply chain disruption is high as unemployment also remains at record levels. The Nicaragua cordobas remains set to USD at a rate of 36.6243 cordobas to the dollar. Exchange transfer risk remains low.

Peru (PER)

Overall, the risk for Peru is medium. Despite President Dina Boluarte is currently holding only a 4% approval rate, according to local pools, and facing three constitutional complaints, she remains in the presidential chair, likely due to a deal with Congress, which also holds minimal approval rates (6%). During her two-year tenure, there have been 7 reshuffles in her ministry, and members of her entourage have been accused of corruption. However, the popular movement to impeach her has lost momentum, and the unpopular Congress also holds little legitimacy to impeach her. Now, the most likely scenario is that she will remain in office until 2026 when new elections are scheduled.

Political violence is at medium-high. Some political violence has been seen recently due to the assassination of a lawyer linked with a prostitution network aimed at buying votes for Congressmen. This case is currently under investigation by authorities. Legal and regulatory risk is high, as the current government and Congress can suddenly change the rules of the game in Peru. For similar reasons, political interference risk is medium-high. Sovereign non-payment risk is medium, as the country holds a low level of debt (33%) and is able to easily finance its debt. Exchange transfer risk is low due to the robust level of foreign reserves, currently standing at 30% of GDP. Risk of doing business is medium, as despite some recent setbacks, Peru maintains a pro-business framework. Banking sector vulnerability is medium-low due to the solid position of Peruvian banks, with adequate levels of liquidity. Finally, the inability of the government to provide stimulus is medium-low, as the country holds a solid position to increase its debt if the government wishes to stimulate the economy through an expansionary fiscal policy.

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