Central and Latin America: Country Risk Ratings

Argentina (ARG)

Argentina’s overall risk remains medium high, with President Javier Milei’s administration providing notable and positive economic progress in Argentina. The upcoming election in October 2025 looks to further cement Melei’s place as President, as the opposition Peronist party’s leader, Cristina Fernandez de Kirchner, has been banned from government while placed on house arrest. The former president was said to be involved in numerous corruption scandals during her tenure, being convicted in 2022. However, in the long term we expect that change of leader could lead to the modernization of the opposing party, as Milei’s role as President currently looks secure. Thus, political violence, remains medium. In terms of political interference and legal & regulatory risk, levels remain medium high. Earlier in May, Javier Milei had tightened Argentina’s historically open migration rules, both deporting and not allowing entry for people who commit crimes, setting requirements financially for residency but also applying a charge for migrants that want to access public healthcare and education. This is aligning Argentina’s migration approach with parts of Europe and the U.S..

Economically, Argentina’s GDP growth is projected to rebound from the 2023-24 recession with a positive position of 5.5% in 2025 and the IMF project a still strong 4.5% in 2026. Growth also sits in a positive position due to the continued reassurance of Argentina’s macroeconomic stability, a performing agro-industrial sector (sitting as one of its top exports) and investment into the energy sector. In addition, the IMF approved a four-year deal with Argentina. The deal proposed a USD20bn Extended Fund Facility in April 2025, with an initial disbursement of USD12bn to continue the economy’s stabilization and improve its foreign currency reserves. Thus the reasoning for a reduction to medium risk, in relation to the inability of the government to provide stimulus. However, Argentina lies as the IMF’s largest debtor with an overall government debt of 73.1% of GDP in 2025. While debt is an issue to the state, it is projected by the IMF to reduce over the coming years, predicted at 68.2% in 2026. Therefore, sovereign non-payment risk stays medium. Inflation has also been on a downward trend since 2024 and is seen to be 35.9% by the IMF in 2025. Since the deal with the IMF, year-long capital controls were also removed, easing access to official currency markets. The removal of such controls also reduces the reliance people had in the informal economy, as many would resort to black markets for foreign currency needs. However, exchange transfer risk remains medium high due to the country’s previous economic situation. Finally, the risk of doing business continues at a high level.

Brazil (BRA)

Overall risk in Brazil remains medium. U.S. President’s 50% tariffs on Brazilian imports have caught the headlines, but the economic impact is diminished by the closed nature of Brazil economy; 50% of goods being exempt and only 12% of goods exports going to the U.S.  Brazil can divert the most effected exports to other markets. Amidst the new US policy, Brazil is looking to build closer ties with their BRICS counterparts. With Trump’s tariffs being designed to punish Lula for Brazil prosecution of ex-president Bolsonaro, public support for Brazil president Lula has increased meaning he is now slightly ahead in opinion polls for the October 2026 election. However, it currently remains unclear whether Lulu will run again in 2026, given recent health challenges. Tarcísio de Freitas (an ex-Bolsonaro minister) is seen as the most likely run off candidate in the 2nd round.  The critical long-term issue is the budget deficit and government debt trajectory, with the latter forecast at 92% of GDP in 2025. Sovereign non-payment risk is medium high. This comes as now more than 62% of debt is sensitive to short term rate changes. Debt servicing costs are now 7% of GDP, while the government has pledged a primary surplus from 2026. If fiscal consolidation is not seen post-election, then it could cause a domestic financial crisis. The long-term fiscal problems means that the risk of doing business remains high.  For now, the economy has been reasonable in 2025 helped by global demand for agriculture and economic momentum from the past couple of years.  However, recent economic data shows the economy slowing, as super high policy rates at 15% start to hurt. The IMF forecast 5.3% inflation in 2025 as growth remains above trend and the labor market is tight. Additionally, the Brazilian central bank is not expected to cut interest rates until 2026. Banking sector vulnerability is medium, with high interest rates likely to boost non-performing loans.  Economic growth is projected by the IMF to slow from 3.4% in 2024 to 2.0% in 2025.

El Salvador (SLV)

El Salvador remain on an overall risk of medium high. The next presidential election is planned to take place on February 2027, while Nayib Bukele continues his tenure as president. Nayib Bukele has led major crackdowns on crime throughout El Salvador, and has also had congress approve constitutional reforms to abolish presidential term limits. The abolishment means president Bukele can run for the role an unlimited number of times, but also alters term times from five to six years. The U.S. State Department has shown rare support for the abolishment of presidential terms. Donald Trump has further praised Bukele’s crackdown by submitting a deal with the El Salvadorian president, who ultimately agreed to hold Venezuelan deportees in El Salvador’s Centre for Terrorism. However, Bukele’s supposed “crackdown” on crime has long faced allegations. These allegations accuse the president of negotiating through back-door dealings with the local gangs, to create a far more peaceful situation. In addition, Human right reports published by previous U.S. president Biden had reported significant human right issues with unacceptable treatment or punishment by security forces – though they have been downplayed by Trump’s administration. Political interference and Legal & Regulatory Risk remain medium high and high. Political violence is also affirmed at medium high. In 2022 the Salvadoran gang crackdown was a collection of government measures to address the sharp increase in gang violence, which made Bukele a popular figure in El Salvador. In August 2025, however, a congressional security committee aimed to extend the detention of alleged gang members until 2027. The extension comes in order to gather extensive and detailed evidence cases against those detained back in 2022.

In terms of the economy, GDP growth is forecasted at 2.5% in 2025 and projected to stabilize at 2.5% in 2026 by the IMF. A decline in public spending, but also a reduction in investment associated with El Salvador’s consolidation plan, is capping growth. The consolidation plan has shown to have a short-term effect on growth due to spending cuts and the efforts to stimulate tax collection. Inflation also is showing signs of stabilization with a rate of 1.8% in 2025, set to continue at the similar rate of 1.8% in 2026. The risk of doing business remains medium high. The consolidation plan had been met with an agreement in May, with the IMF, after the first review of the USD1.4bn 40 month extended fund facility program. The review concluded that the IMF would disburse about USD120mn to El Salvador in the next instalment. Government debt continues to remain high at an 87.9% of GDP, although is to see a reduction in the coming years according to the IMF. In 2026, 86.5% is projected and the consolidation plan is part of this ambition to reduce this ever-rising government debt. Sovereign non-payment risk remains medium high. Furthermore, El Salvador’s current account currently sits at -0.9% of GDP and the IMF forecast a marginal decrease to -0.8% in 2026. Accumulation of Bitcoin from the Salvadorian government had been halted due to their commitment to the IMF and that increases in Bitcoin holdings were consistent with the agreed program conditions. This provides reasoning for exchange transfer risk to remain medium.

Guatemala (GTM)

Guatemala’s overall risk has remained at a medium high level. Since Bernardo Arevalo’s election victory back in 2023, prosecutors have attempted to invalidate his election win. Meanwhile, Arevalo has continued to reaffirm Guatemala’s, more then 90-year, alliance with Taiwan. Thus Guatemala still remaining one of the 12 countries to keep connection to Taiwan and a collection of agreements to boost investment and technology development had been signed between the allies. Due to Taiwan’s heavily invested semiconductor industry, its industrial technology research will allow for collaboration between the two states but also an expansion of supply chains. With political interference remaining at a medium high and with the inability of Government to provide stimulus sticking at a medium low level. In addition, political violence had remained medium high. Since protests had delayed Arevalo’s inauguration in 2024, there has been further disagreement with the Guatemalan people due to a plan to make car insurance compulsory. March 2025, violent protests had filled the streets of the Central American state which led to the plan being withdrawn, compromising with the creation of a technical committee to introduce a new plan for compulsory car insurance in the coming year. In terms of the economy, growth has stabilized with a real GDP growth of 4.1% in 2025 and an expected growth of 3.8% in 2026, forecasted by the IMF. The stabilization of Guatemala’s growth has been and will remain supported by the United States.  Industries like food exports and clothing are exported to the U.S., while refined petroleum being the top export from the U.S. to Guatemala. The moderate overall current account surplus is projected to continue. Inflation levels for Guatemala in 2022 had peaked at 6.9%, the highest since the financial crash in 2008. Rates now are projected to be on a slight upward movement with an IMF forecast of 3% in 2025 and an increase to 4.3% in 2026.

Government debt has remained at a controlled level for the state, at a projected rate of 27.2% of GDP in 2025 by the IMF and 27.7% of GDP in 2026. Exchange transfer risk has increased to a medium low level of risk. Meanwhile, Guatemala and its unforgiving climate are currently even more vulnerable to natural disasters. Supply chain disruption is therefore continuing at a level of medium high.

Mexico (MEX)

Mexico’s overall risk is medium-high. The trade tensions with the U.S. are unresolved, with Trump providing a 90-day extension to end October to negotiate a trade deal and discuss a lot of goods exempt due to USMCA rules. This is largely due to the good relationship that Mexico’s president Sheinbaum has with Trump. However, Trump wants to renegotiate the USMCA in 2026.  With growth very sluggish due to existing tariffs and uncertainty, a renewed trade war would delay the projected 2026 economic recovery. Though the Mexican central bank continues to cut interest rates consistently (with inflation set to reach the 3% target in 2026), this is only a partial offset to the negative trade effects. On balance, Sheinbaum will likely lose the trade battle to win the wider war of keeping most Mexican exports going to the U.S. and in the end, we see a trade deal in Q4 or Q1 2026. Sheinbaum registers a staggering 75% approval rate and trade negotiations have allowed other issues to be eclipsed politically. However, concerns over the wide-ranging judicial elections and reforms have not diminished, though the impact will not be clear until 2027. Political violence risk in Mexico is still high due to the high level of violence in zones controlled by the narcos, which can exert great influence on local politics. People disappearing also remains at a high rate. Mexico crackdown on immigration and fentanyl has also increased tensions between the government and the drug gangs. Legal and regulatory risk is also high, as the left-wing coalition led by MORENA controls both houses. This gives them a free hand to implement changes to the Mexican constitution, which could lead to regulatory changes in an anti-market manner and favouring state presence in the economy. Sovereign non-payment risk is medium, as the 52% debt level is controlled, and the government is currently undergoing a fiscal consolidation process to stabilize the debt/GDP ratio. The inability of the government to provide stimulus is reduced from medium-high to medium reflecting the fiscal consolidation. 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, with no crisis in sight.

Peru (PER)

Peru’s overall risk still remains at a medium level. President Dina Boluarte continues to hold the Presidential chair, recently doubling her salary to match with nearby heads of state, despite having an all-time low approval rate of just 2%. Recently during the President’s tenure, previous prime minister Gustavo Adrianzéz had stepped down from his role moments before he was due to face a no-confidence vote in congress against the government inability to control rising crime. Further, with this resignation the newly announced minsters of finance, transport and interior had to follow Gustavo Adrianéz in stepping down from their respective roles. The Andean nation’s justice Minister, Eduardo Arana, filling in as Prime Minister.  Risk of political violence continues at a medium high level, in recent months as hundreds of people had shared their views, through protests, about the growing problem of extortion throughout the country. With Peruvians becoming more and more impatient about the President efforts of tackling crime. Legal and regulatory risk continues to be high, especially relevant to the illegal mining issue apparent in Peru. In response, the government has pledged new security responses, however the long-term impact is a worry. Further problems lie with the political system, as officials have been accused of colluding with criminal enterprises.

 Sovereign non-payment risk is at a medium level, due to a government gross debt of 33.7% of GDP and projected by the IMF to reach a level of 34.7% in 2026. With healthy financial reserves Peru is able to finance its debt. Similarly, exchange transfer risk is at a low level due to the sturdy levels of foreign reserves. Peru also have obtained strategic infrastructure projects to improve connectivity and logistics. Despite such expansion, there is still the risk of Peru’s vulnerability to extreme weather conditions and natural disasters, due to their geological location, interrupting transport links. Lastly banking sector vulnerability continues at a risk level of medium low with the Peruvian banking sector being a mix of both state and private-owned banks, remaining in a good position, with sufficient levels of liquidity.

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