Central and Latin America: Country Risk Ratings

Argentina (ARG)

Argentina’s overall risk remains medium high, with President Javier Milei’s administration in a solid position after being boosted by strong election results last October. However, Milei’s LLA party does not have a majority in congress, which requires moderate party support for legislation and this will likely slow the reform process in coming years. Thus, political interference and legal & regulatory risk levels remain medium high. Meanwhile, Milei has been supportive of Trump’s pivot toward the Americas in the U.S. security strategy, and this has been rewarded with a new bilateral trade deal with the U.S. This involves preferential terms, including for beef, but is also designed to increase bilateral trade between the two countries. 

Economically, Argentina’s GDP growth is projected to rebound from the 2023-24 recession with a positive growth of 4.0% in 2026, forecasted by the IMF. Growth also sits in a positive position due to the continued reassurance of Argentina’s move towards macroeconomic stability and reform, a well performing agricultural sector and investment into the energy sector. Additionally, Argentina continues to benefit from the 4-year IMF USD20bn Extended Fund Facility in April 2025. This leaves the inability of the government to provide stimulus at a medium risk rating. However, Argentina lies as the IMF’s largest debtor and still has an overall government debt of 73.6% of GDP in 2026.  Additionally, FX reserve accumulation has been lower than expected, while the government has delayed implementation of a new CPI measure, prompting the head of the national statistical agency to resign. Therefore, sovereign non-payment risk stays at medium. Inflation has also been on a downward trend since 2024 and is forecast to be 16.4% by the IMF in 2026 versus 41.3% in 2025. However, exchange transfer risk remains medium high due to the country’s previous economic performance. Finally, the risk of doing business continues at a high level.

Brazil (BRA)

Overall risk in Brazil remains at a medium rating. The biggest 2026 issue is the outcome of the October presidential election, with a fluid situation for the right-wing candidate to oppose President Lula. Flavio Bolsonaro has overtaken Tarcísio de Freitas (an ex-Bolsonaro minister) in first round opinion polls. However, opinion polls show Lula with a modest lead over either right wing candidate. Markets are watchful for any extra fiscal giveaways from Lula administration. Elsewhere, given Trump’s dislike of Lula, Brazil is looking to build closer ties with other countries across the world.  The EU is keen to work with Brazil on its large rare earth mineral deposits (2nd only to China), while this could act as a restraint on Trump’s actions against Brazil. The critical long-term economic issue is the budget deficit and government debt trajectory, with the latter forecast at 95.0% of GDP in 2026, according to the IMF. While the government has pledged a primary surplus from 2026, debt servicing costs are now 7% of GDP. Thus, the inability of the government to provide fiscal stimulus has moved up from medium high to high. If fiscal consolidation is not seen post-election, then it could cause domestic financial tensions in the coming years. The long-term fiscal problems also mean that the risk of doing business remains high. Economic growth is projected by the IMF to slow from 2.4% in 2025 to 1.9% in 2026, as the lagged effects of ultra-restrictive monetary policy continues to feedthrough. However, the Brazilian central bank is expected to start cutting rates in March from 15%, as inflation continues to come down towards the 3% inflation target -- the IMF also forecast 4.0% inflation in 2025. The impact of the U.S. President’s 50% tariffs on Brazilian imports is diminished by the closed nature of Brazil’s economy; 50% of goods being exempt and only 12% of goods exports going to the U.S. Banking sector vulnerability is medium, with high interest rates likely to boost non-performing loans. 

El Salvador (SLV)

Overall risk for El Salvador remains unchanged at medium high. President Nayib Bukele, who is now serving his second term in office since his election victory in 2019, has shown personal interest regarding another decade as El Salvador’s leader. Nayib Bukele is eligible for the upcoming 2027 presidential election, after term limits were abolished in the ruling party’s constitutional reform. Political violence and political interference both continue to be considered as medium high risk. President Bukele’s strict approach to nation’s violent crime, extortion and gang violence has significantly decreased homicides while boosting the president’s approval rate to one of the highest globally. Human right groups and critics, however, continue to question the President’s handling of civil rights, as many have been tortured in custody and describe inhumane conditions throughout the maximum-security prison CECOT. The El Salvadoran government denies such accusations. Legal and regulatory risk remains high.

In terms of El Salvador’s economy, real GDP growth is projected to be 2.5% in 2026 and 3% in 2027 by the IMF, following developments of public investment and the tightening of national security. In particular, investment in the exploration and export of critical mineral throughout will be encouraged by its nearby trade partner of the United States. The agreement, which was signed in late January 2026, focuses on minerals such as rhenium and silicon, helping supply chain disruption remain assessed as medium risk. U.S. agreements have also recently removed a 10% tariff on many exports. Inflation is set to remain stable as forecasts indicate a 1% rate in 2026. Overall government debt, however, continues its high burden on the economy. The IMF indicate levels of government debt are starting to fall gradually but remain reasonably high, through the 2026 forecast of 86.9% in 2026 and 84.6% in 2027. El Salvador’s public debt, which is mainly dominated in USD, causes sovereign non-payment risk and the risk of doing business to remain medium high.

Guatemala (GTM)

Guatemala’s overall risk remains unchanged at medium high. Current President of Guatemala, Bernardo Arévalo (since his election victory back in 2023) has continued to face resistance to his reforms, a high poverty rate and the recent 30-day state emergency (which was declared due to prison riots in early 2026). Political violence and political interference continue to be assessed as medium high. Riots had sprawled across three Guatemalan prisons leading to security forces working to restore peace to all three locations, while freeing the 46 hostages held by inmates. Although potential tensions still remain between Guatemala and the U.S., a trade agreement on reciprocal trade had been agreed and signed towards the end of January 2026. The agreement, in particular, addresses trade barriers, expands and solidifies markets for U.S. exports and strengthens ties in the West. However, the EU Council had renewed its restrictive measures, which include travel bans and asset freezes, until January 2027 for individuals undermining Guatemala’s democratic processes. Legal & regulatory risk remains high due to ongoing political and social instability.

The IMF forecast stable GDP growth at 3.6% for 2026 and 2027. Robust remittance inflows -equivalent to nearly 20% of GDP - alongside strong agriculture and manufacturing sectors continue to support Guatemala’s growth. Stable inflation is projected at 3.3% in 2026 by the IMF but may rise to 4% moving into 2027. The Bank of Guatemala eased its policy rate in late November 2025 by another 25 bps, as the central bank’s easing cycle continues. The reduction in policy rate aims to anchor inflation in the target range of 3% - 5% while stimulating economic growth. Banking sector vulnerability therefore remains medium low. However, the inability of the government to provide stimulus has remained at medium low, while the risk of doing business has remained unchanged at medium high. In terms of government debt, the IMF have signified the potential for Guatemala’s debt to continue rising, however, for the meantime it remains relatively low at a forecasted 27.8% of GDP in 2026. Sovereign non-payment risk is assessed as medium, while exchange transfer is expected to remain medium risk.

Guyana (GUY)

The small oil-producing nation of Guyana, located on the North Atlantic coast of South America, has an overall risk of medium. September 2025 had seen President Irfaan Ali, the leader of the ruling People’s Progressive Party, successfully gain his second term as president following his party’s victory with 36 parliamentary seats. President Ali expressed his commitment in diversifying Guyana’s economy in the aim to create jobs while raising incomes. Legal & regulatory risk and political interference both remain medium high. Opposition leader Azruddin Mohamed accuses the ruling party for his arrest around his charges of fraud and corruption, who is wanted by the U.S. alongside his father, Nazar Mohamed. The long-running territorial dispute between Venezuela and Guyana, where both nation’s claimed ownership over the oil and gas rich territory around the Essequibo River, is potentially set to ease following the removal of Venezuelan President Maduro. Therefore, political violence remains unchanged at medium. An overall ease in the country’s border dispute and the U.S.’s activity in Venezuela has given Guyana the opportunity to expand its oil sector, as the IMF indicate a surge in GDP growth to 23% in 2026 and 21% in 2027. The South American nation’s oil sector is expected to remain at the forefront of its economic drivers, with the firm ExxonMobil scheduling to expand upon its production to 1.15 mln bpd from 900,000 bpd in 2025. A five-year agreement has also been established between oil producers Total Energies, Qatar Energy, Petronas and the Guyanese government in an effort to explore a shallow-water block, providing competition for its previously dominated energy industry. Additionally, Guyana’s non-oil sector has seen further development in an effort to diversify away from the nation’s reliance on the oil sector. In 2025, it is calculated that the non-oil sector had grown 14.3%, supported by the agriculture sector, mining and construction following the government’s infrastructure-heavy budget. For now, the risk of doing business remains high. Government debt to GDP is forecast by the IMF to remain sustainable at 29.3% in 2026 and 28.3% in 2027, reasoning for the unchanged sovereign non-payment risk of medium. Finally, exchange transfer continues to be assessed as medium low as the Guyanese Dollar, GYD, operates under a floating exchange rate regime. The Bank of Guyana has maintained relative stability in its currency by injecting USD 1.2 bln into the country’s financial system in response to the occasional foreign currency shortages.

Jamaica (JAM)

Jamaica’s overall risk rating remains medium, alongside both legal & regulatory risk and political interference. Prime Minister Andrew Holness and Jamaica’s ruling Labor Party had declared victory following the 2025 general election, as 34 seats were acquired by Jamaica’s Labor Party, while the opposing People’s National Party gained 29. PM Holness had promised in his campaign to cut income tax by 10%, secure a national minimum wage that is double the rate in late 2025 and continue his efforts to reduce poverty. The Caribbean nation remains within the Commonwealth, although discussions continue regarding the removal of the British monarch as their head of state and the transition to a republic. Meanwhile, Hurricane Melissa has caused catastrophic loss throughout Jamaica, a category 5 storm that slammed into Jamaica on the 28th October 2025. The region now faces a USD 9.5 bln finance gap in order to rebuild, and further reports of an outbreak of the bacterial disease leptospirosis following the strongest-ever storm faced by the region. In terms of the Jamaican economy, the World Bank foresees GDP growth to approximately fall by -2.3% in 2026 before recovering. Economic growth is usually driven by a strong tourism industry alongside services and construction, and large hotels have made efforts to rebuild quickly to 85% of its maximum capacity by May 2026. Remittances are expected to rise substantially to help rebuilding. The IMF’s government debt projection of 70% for 2026, prior to Hurricane Melissa, will likely be higher. The government had suspended its Fiscal Responsibility Law (FRL) for the next two years, as the Hurricane’s economic shock will sharply increase spending and put more pressure on the nation’s fiscal deficit. Sovereign non-payment risk is assessed as medium low and the risk of doing business remains medium. Finally, exchange transfer is a medium low rating, as foreign exchange availability appears as stable, while inflation is projected to rise above the central bank’s target range in early 2026.

Mexico (MEX)

Mexico’s overall risk is medium-high. The main trade tensions with the U.S. are unresolved, but are not escalating. This is largely due to the good relationship that Mexico’s president Sheinbaum has with Trump. Mexico is seeking to make further progress on dealing with illegal immigration into the U.S. and the fentanyl trade, though Mexico remains strongly opposed to Trump’s idea of direct U.S. military action against the Mexican cartels. However, Trump wants to renegotiate the USMCA in 2026, where he will likely take a tough stance on China’s exports via Mexico. Additionally, Trump is threatening extra tariffs on countries such as Mexico that exports oil to Cuba, which has reluctantly prompted Mexico to stop exporting oil to Cuba in February. With growth remaining sluggish due to existing tariffs and uncertainty, a renewed trade war would delay the projected 2026 economic recovery. On balance, Sheinbaum will likely concede on the USMCA trade battle to win the wider war of keeping most Mexican exports going to the U.S. In the end, we see a trade deal by late 2026/early 2027, with the key negotiations set to start in July 2026. Meanwhile, Sheinbaum’s approval rate has fallen from 70% to 61%, reflecting concerns over the weak economy and high level of violence (amplified by the cartels). November also saw generation Z protests in 50 Mexican cities on corruption/cartel driven violence, turning violent itself, amid the country’s ongoing fuel corruption crisis. Political violence risk in Mexico therefore remains high. Legal and regulatory risk is also high, as the left-wing coalition led by MORENA controls both houses and could potentially lead to regulatory changes in an anti-market manner. Sovereign non-payment risk is medium, as the government debt level is projected to be 59.9% in 2026 according to the IMF, and the government is currently undergoing a fiscal consolidation process to stabilize the debt/GDP ratio. The inability of the government to provide stimulus remains at medium, reflecting the fiscal consolidation. Exchange transfer risk is medium, as the country holds an adequate level of foreign currency reserves alongside a current account in broad balance.  

Nicaragua (NIC)

Nicaragua’s overall risk remains unchanged at medium high. Daniel Ortega has held his role as the Central American nation’s head of state since January 2007, now sharing a co-presidency with his wife, Rosario Murillo, following 2025 constitutional reforms that promoted Murillo from Vice President to Co-President. The ruling party, the Sandinista National Liberation Front (FSLN), holds 76 of 92 parliamentary seats available.  The delayed general elections now taking place in 2027 are not expected to have a major change in power. The Co-Presidents operate as a consolidated authoritarian, dynastic regime, as the government escalates its campaign to repress critics beyond its own borders, following the deaths of many opposition leaders in state custody. Political interference and political violence both remain high. A temporary lift of a federal judge’s order, which had blocked President Trump from axing deportation protection for many migrants from Nicaragua, will now put the many that had fled Nicaragua at risk of being deported. However, the U.S. still remains Nicaragua’s largest export partner, even as ties with Russia and China continue to strengthen. Targeted sanctions have been imposed by both the U.S. and EU. The EU, in particular, has extended its restrictive measures until October 2026, following EU evaluations that fundamental freedoms still need to be restored and that all remaining political prisoners should be released immediately. Nicaragua has followed this by releasing 40 political prisoners in late November 2025. Legal & regulatory risk still remains very high.

In the IMF’s forecast, GDP growth is set to keep some stability throughout 2026 as levels are estimated to be 2.9% in 2026 and 3.3% in 2027. Levels have moderated following the nation’s immediate post-pandemic rebound and the imposition of U.S. tariffs, with 10% now operating under section 122. In 2026, private consumption is expected to remain the country’s main economic driver, as the potential tightening of U.S. immigration policies may constrain the overall contribution of remittances to the Nicaraguan economy. Inflationary pressures seem to be in the past, indicated by significant stabilization after peaks in 2022-23, as forecasts expect inflation to remain in the Central Bank’s target at 2.7% in 2026 and 2027. The government’s inability to provide stimulus is unchanged at medium low risk. Public debt to GDP is not seen as a major concern, supported by the IMF’s 40.1% forecast for 2026 and 40.3% for 2027. A majority of Nicaragua’s public debt is denominated in USD, with possible restrictions being countered by strong FX reserves. Sovereign non-payment risk remains medium high, however, as sanctions have limited the country’s access to traditional lenders and has caused for reliance on certain sources, such as China. At last, exchange transfer has worsened to medium low, while the Nicaraguan Cordoba is pegged to the USD at an approximate rate of NIO 36.62 per USD.

Peru (PER)

Peru is regarded to have an overall country risk of medium. Political instability continues to create tension, as previous President Dina Boularte was ousted from her position following a congress vote, as public frustration and protests were building around the now ex-president’s corruption allegations. Even so, interim President Jose Jeri faced forceful protests days after he had taken over office, which ultimately led to a state of emergency being declared in the capital. Gen Z protesters continue to demonstrate against the country’s rising crime rate and ongoing corruption. Additionally, Jeri had clarified that meetings held with a Chinese businessman, had been part of a smear campaign intended to offset his chances in the upcoming election. Political interference and political violence both remain unchanged at medium high. Legal & regulatory risk is assessed as high, while the Peruvian President has aimed at preserving economic stability through a fiscal pact. Following meetings with leaders of state agencies and businesses, the World Bank has approved a second policy reform framework, building on the first operation back in August 2024, with USD 500 mln to support government reforms and boost productivity. According to the IMF, GDP growth is forecasted to slow slightly to 2.7% in 2026, amid uncertainty around the 2026 election, and to 2.5% in 2027. Peru is home to a robust mining sector, especially in gold and copper, alongside current high commodity prices which helps support growth. Extension of the program REINFO, which grants temporary legal status for small scale mining groups, has had its fifth extension until the end of 2026. Therefore, the government’s inability to provide stimulus remains medium low, while the risk of doing business is assessed as medium. Inflation levels are set to continue their trend of stability, with the IMF forecasting 1.9% in 2026 and 2% in 2027. This inflation outlook prompted the central bank to hold rates at 4.25% in January. In addition, government debt to GDP is expected to rise marginally in the coming years from 33.6% in 2026 and 34.3% in 2027. Therefore, sovereign non-payment risk continues to hold its rating of medium, while exchange transfer remains low risk due to the Peruvian sol (PEN) being measured as one of the most stable currencies throughout South America.

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