Latin and Central America: Country Risk Ratings

Argentina (ARG)
Argentina has an overall risk of medium-high. Far-right candidate Javier Milei assumed the presidential chair at the beginning of December and has already sent proposals to deregulate the economy and move towards a more market-friendly system to Congress. His government seeks to leverage his popularity to press Congress to approve his proposals, as his party has limited influence in the legislative chambers. Legal and regulatory risk is at medium-high, as sudden changes in regulations are very likely to occur. Political interference is also set at medium-high for similar reasons. Political violence is set at medium. The Government ministry of security has pushed legislation making social organizations responsible for damages in protests they organize. So far, the opposition is staging timid protests, and their mobilization has been weak. However, this scenario could change if Milei's measures are unsuccessful in improving the welfare of the population. Since Milei has limited power in Congress, a decrease in his popularity could trigger the opposition to impeach his mandate.Sovereign non-payment is at medium-high as the government is still negotiating some defaulted bonds. Despite a successful negotiation with the IMF, the country's fiscal situation is very delicate. The government proposes a 2% primary surplus, but its feasibility is still questioned. Consequently, the ability to provide stimulus risk has risen to high, as it is virtually impossible for the government to increase spending. The risk of doing business is at high due to the challenging high-inflation environment for companies in Argentina. Supply chain disruption risk is at medium, and the banking sector vulnerability is medium-low, as most banks in Argentina do not face liquidity problems.

Bolivia (BOL)
Bolivia's overall risk remains high, with tensions on the rise and expected to intensify as the 2025 general elections approach, posing a medium-high risk of political violence. Former president Evo Morales and current president Luis Arce, initially interested in leading the MAS (Movimiento al Socialismo) party in the upcoming elections, faced internal disputes resulting in Arce's expulsion from the party. The Supreme Electoral Court further complicated matters by annulling a MAS meeting where Morales was proclaimed as the presidential candidate for 2025, prompting a call for a new assembly. In line with this scenario, the legal and regulatory risk is deemed very high, exacerbated by a lack of trust in politicians, judges, and magistrates, as indicated in the country’s 2022 World Justice Project's report. Additionally, the country grapples with challenges in law enforcement related to dispute settlements, real property, and intellectual property. Political interference is also a very high risk, given Bolivia's history of nationalizing entities in the banking, electricity, and mining industries, often leading to international disputes. For instance, the Permanent Court of Arbitration of The Hague ruled in September 2023 that the Bolivian State must pay USD 253 million to Glencore for the nationalization of the Vinto metallurgical complex and the Colquiri mine. Recent strikes in the Bolivian Amazon and an operation against illegal gold mining, coupled with a severe drought, contribute to a medium-high risk of supply chain disruptions. Furthermore, various factors conduce to a high risk in doing business in Bolivia, such as lengthy construction procedures, challenging tax payments, and a time-consuming and expensive trading process. From an economic perspective, the IMF anticipates a modest 1.8% growth for Bolivia in 2024 and 2.1% in 2025. The short-term outlook is bleak, marked by high public debt – which the Fund estimates at 81.4% and 82.1% of GDP for 2024 and 2025, respectively –, declining natural gas production, slowing exports, and negative sentiment affecting the country's payment capabilities. Struggling to acquire external debt and sell sovereign bonds, Bolivia has shifted its strategy towards internal funds, making sovereign non-payment a high risk. Additionally, historically low international reserves have pressured the foreign exchange market, leading to a black market for USD and a medium exchange transfer risk.

Chile (CHI)
Chile's overall risk remains at medium-low. Center-left President Gabriel Boric is governing Chile without major support from the Congress, and therefore, not much legislation has been passed during his mandate, which began in March 2022. After the major protests seen in 2019, discussions for a new constitution have begun. A proposal for a more social-democratic constitution was rejected in 2022, and more recently, one more center-right was again rejected. As a result, no further attempts to approve a new constitution will be made during Boric's mandate, which spans until 2026. Although, both the opposition and the government do not have the best of relationships, both sides have been playing by the constitutional rules. Chile has also not seen major events of social unrest and protests. Political violence risk is set at medium-low. Legal and regulatory risks are also medium-low, as no major changes in the current pro-market Chilean economy are expected in the medium-term. Similarly, political interference risk is set at medium-low, as we see both sides of the political forces in Chile respecting each other.  It is very likely that Gabriel Boric will continue to govern Chile until the end of his mandate but is unable to promote major changes in Chilean legislation. On the economic front, the country has seen lower growth compared to its pre-pandemic trend, but the usual fiscal discipline of the Chilean government has been maintained by the current administration, although there has been some deterioration in the latest months. Therefore, the inability of the government to provide stimulus has risen to medium. In Chile, the central bank has started to cut interest rates as inflation has slowed. Overall, the banking system is in a strong position; thus, banking sector vulnerability risk is set at medium. The risk of doing business in Chile is set at medium-low due to pro-market regulation, which has not been changed yet.

Dominican Republic (DOM)
The Dominican Republic overall risk remains medium. In light of the upcoming municipal and presidential elections to take place in February and May of 2024, respectively, the political violence risk remains medium. Current president Luis Abinader, who leads the PRM (Partido Revolucionario Moderno) party, will seek re-election. The opposition is led by Leonel Fernández, member of the Fuerza del Pueblo party and former president of the Dominican Republic during the periods 1996-2000 and 2004-2012. While Abinader is considered the favorite in most polls, the likelihood of a second electoral round versus Fernández is high. In this context, the significance of an alliance forged between opposition parties PRD (Partido Revolucionario Dominicano), PLD (Partido Liberación Dominicana), and Fuerza del Pueblo becomes pronounced. The current government faces criticism for corruption scandals, inadequate implementation of regulations, and deficiencies in intellectual property rights and anti-monopoly regulations, contributing to a medium-high legal and regulatory risk. The country has historically suffered from climate-related natural disasters, such as the Hurricane Fiona and floods seen by the end of 2022. Moreover, the rising tensions in the border with Haiti have intensified, leading to strikes and increased conflicts; thus, supply chain disruptions risks have increased from medium-low to medium. The country is one of the fastest growing and macro-stable economies in Latin America and the Caribbean, which has attracted FDI. Additionally, it has recently executed policies to improve competition, infrastructure and education, but systemic problems like the ones described above still weight on companies trying to do business in the country; hence, the risk of doing business is medium. On the economic front, the IMF expects the Dominican Republic to grow around 5.2% and 5.1% in 2024 and 2025, respectively, with general government gross debt (% of GDP) estimated at 59.4% in 2024 and 58.4% in 2025. While the country still has high levels of public and external debt, it is still supported by a government that is favored by the market and a declining debt; thus, sovereign non-payment is a medium risk. In the short term, with elections on the horizon, the government is expected to prioritize infrastructure, public, and social spending; moreover, further fiscal consolidation, based on tax reforms (in particular the passing of the proposed new Fiscal Responsibility Law) and expenditure rationalization could help improve the risk of inability of the government to provide stimulus which is a medium risk. The banking sector vulnerability risk is medium-low, with healthy growth levels of loans and deposits during 2023, decreasing non-performing loans (being one of the countries in the region with the lowest NPLs), and a well-capitalized and liquid financial sector.

Guatemala (GTM)
Guatemala's overall risk profile remains medium-high, marked by significant challenges to its democracy during the last quarter of 2023. Following Bernardo Arevalo's victory in the August 20 general elections representing the Semilla Party, strong opposition and accusations attempted to invalidate the election outcome. This movement was largely led by the Public Ministry, and was cataloged as an attempt of a coup d'état by different international bodies, including the Organization of American States. By mid-December, the country’s Supreme Electoral Tribunal ratified Arevalo’s victory and ordered congress to ensure the swearing-in of the president-elect in January 14. This scenario coupled with the challenges that Arevalo will face in a congress dominated by opposition ratifies a medium-high political violence risk. In addition, the World Justice Project suggests that around 65% Guatemalans believe that politicians are corrupt. Moreover, in a business setting, issues such as confusing regulations, lengthy bureaucratic procedures, and inconsistent judicial decisions make the legal and regulatory component a high risk. Additional risks emerge from supply chain disruptions, which are cataloged as a medium-high risk. For instance, the country is susceptible to weather events that have historically destroyed infrastructure, disrupted essential services, and destroyed agricultural output; furthermore, during the political turmoil of 2023 the country experienced strikes that affected supply chains. Thus, despite the implementation of policies to promote investment, including leasing, administrative simplification, and insolvency laws, persistent challenges, like the ones discussed above, maintain the risk of doing business at a medium-high level. In terms of economic developments, the IMF forecasts Guatemala's growth at 3.5% in 2024 and 3.6% in 2025. The general government gross debt is projected to remain stable at around 28.0% of GDP throughout 2024 and 2025, as projected by the Fund. The economy's resilience to political shocks, coupled with a relatively low public debt and robust tax collection, positions Guatemala favorably for debt servicing, resulting in a medium risk of sovereign non-payment, as well as a medium risk associated with the government's inability to provide stimulus. Moreover, historically high international reserves and record remittance inflows in 2023 contribute to the stability of the Guatemalan Quetzal, warranting a medium-low risk in exchange transfers.

Haiti (HTI)
Haiti’s overall risk level remains high. Ariel Henry remains prime minister, since being appointed in 2021 after the assassination of president Jovenel Moise. Ariel Henry has been trying to restore the democratic levels of the country, as presidential elections have not been held since 2016. Political violence remains high, as political interference and legal & regulatory risk remain very high. Port-Au-Prince (the capital) is being run by gangs who continue to murder and kidnap and are acting as the de facto government. Prime Minister Henry has been trying, since he got appointed to restore law and order by forming an international security force to minimise the impact of gangs in the country. People have decided to form vigilante groups against the gangs which has worsened the security situation. More than 2,000 killings, but also more than 1,000 kidnappings occurred in just the first half of 2023. Supply chain disruption also remains very high. Haiti is expected to have a negative growth in 2023 of -1.5%, and report a negative growth for the 5th consecutive year. Haiti under the current violence and political condition, has not managed to progress economically. However, Haiti is expected to experience a positive growth in 2024, of 1.4%, according to the IMF. Inflation resumes very high and unstable and is expected to experience a CPI increase of 30.1 in 2023, according to the IMF. CPI is forecast to drop in 2024 to 12.74%. The Bank of the Republic of Haiti has kept the interest rate stagnant at 17% the past 12 months. The current account deficit is expected to increase to -2.9% in 2023, but then decrease to -2.3% in 2024. Sovereign non-payment remains medium high, with exchange transfer at a medium low. The domestic currency, the Haitian Gourde has slightly appreciated against USD, EUR and GBP the past 12 months. The risk of doing business can be considered very high, due to the current situation of the absence of law and order in the country, lack of democracy and high levels of violence.

Jamaica (JAM)
Jamaica’s overall risk level remains medium. Andrew Holness remains prime minister of the country. Political violence, political interference and legal & regulatory risk remain medium. Andrew Holness was reported earlier this year to have been investigated for corruption, due to some contracts the government signed, however after the investigation took place it was noted that no charges should be imposed. Jamaica declared a dengue fever outbreak in September, a disease that was mainly impacted by the extremely high temperatures in 2023. Meanwhile, supply chain disruption remains medium low. Jamaica is expected to experience a drop in growth from 5.2% to 2% in 2023 and a further drop in 2024 to 1.8%. The government of Jamaica has applied very efficient policies creating economic stability, but also reaching the lowest level of unemployment in the country’s history. CPI is forecasted to drop in 2023 from 10.3% to 6.5% and to 5% by 2024, according to the IMF. The central bank of Jamaica, has increased the key interest rate from 4% to 7%, applying a contractionary monetary policy to reduce inflation. The IMF has now approved over USD 1.7 Bln in funds to Jamaica, to help fight high inflation and the effects of climate change. The current account deficit remains at stable and low levels, increasing in 2023 to -1.2% and to -1.7% by 2024, according to the IMF. Sovereign non-payment thus remains medium, with exchange transfer at a medium low. Both the Jamaican dollar and the US dollar are being utilised in the country. The risk of doing business remains medium, as banking sector vulnerability and inability of government to provide fiscal stimulus remain medium low. 

Mexico (MEX)
Mexico's overall risk remains medium-high. As President Manuel Lopez-Obrador reaches the end of his mandate, his political focus has switched towards electing his successor. As re-election is vetoed by the Mexican Constitution, Lopez-Obrador has chosen the former Mayor of Mexico City as the presidential candidate of MORENA. Although, MORENA states they have a democratic process to choose their candidate, it is widely understood that Lopez-Obrador has the final word on the process, and he seeks the next candidate to follow in his footsteps.
The traditional parties PRI and PAN, which governed the Mexican economy for quite a long time, will unify their forces behind candidate Xóchitl Gálvez. Due to the high popularity of Lopez-Obrador, we expect Sheimbaum to win the election. However, the legislative power will not be fully controlled by MORENA, meaning that we may face little change in the balance of power and the type of policies pursued.
Permeating the elections is the narco's power. Violence disruption is always on the radar, and it is likely the reason most candidates are quiet about this theme, as waves of violence could be triggered if measures against them are taken. Political violence risk is kept at high as a consequence of that. Legal and regulatory risk is also set at high as MORENA will keep trying to change the rules of the game, intensifying the role of the state in the Mexican economy. Political interference is also high, as MORENA could intensify its crusade against members of the judicial power.
On the economic front, we raise the ability to provide stimulus to medium-high, as Mexico plans to increase expenditure in 2024, especially on infrastructure, potentially facing debts and higher government debt in the future. Although, this rise is planned to occur only in 2024, the next government could continue this trend, diminishing the fiscal space of the Mexican economy. The risk of doing business was also raised to medium-high as the unit cost of labor increased in the last year in Mexico. Additionally, a new policy over the minimum could be put in motion in the next year, increasing enterprises' costs.

Paraguay (PRY)
Paraguay’s overall risk remains medium-high. Since current president Santiago Peña took office in August 2023, political upheaval has remained contained; although some events have threatened such stability. An example of this is when president Peña pledged to dismantle criminal gangs operating from Paraguay’s prisons, after eight people were killed when security forces entered the Tacumbu facility. Overall, political violence is at medium risk. The legal and regulatory risks are high; for instance, the World Justice Project notes Paraguay as one of the Southern Cone countries where bribery is very common and corruption perceptions are reported higher than regional averages. Supply chain disruptions are considered medium-high, primarily due to the country facing escalating threats from events like droughts, floods, and storms, which are anticipated to increase in frequency and intensity due to climate change. In addition to the factors mentioned above, and recognizing that, despite the Paraguayan government's efforts to promote foreign investment, there are still deficiencies in addressing issues such as investment disputes, judicial insecurity, and trademark infringement, the risk of doing business is assessed as medium-high. From an economic standpoint, the IMF predicts the South American nation to grow 3.8% both in 2024 and 2025. Consistent with this view, the World Bank expects growth to be fueled by large private investment projects, an improved trade balance as a result of positive agricultural and hydroelectric exports, and increased private consumption. The Fund also predicts public debt at 43.0% and 41.1% of GDP for 2024 and 2025, respectively, which are considered relatively low, and positions Paraguay among the countries with the lowest debt levels in the region. Partially attributed to Paraguay's moderate fiscal context and its commitment to reduce the fiscal deficit to the 1.5% of GDP ceiling under the fiscal rule by 2026, the IMF granted in December 2023 approval for a two-year Resilience and Sustainability Facility. This facility permits the country a maximum access of SDR 302.1 million (equivalent to 150 percent of the quota). The risk of sovereign non-payment is evaluated as medium. Despite stable and healthy international reserves and a small current account surplus, exchange transfer risk is considered medium-high due to volatility influenced by external factors, such as high interest rates and dollar flights from Argentina. With a contractionary fiscal policy in place, the government's inability to provide stimulus is a medium-high risk. The banking sector's vulnerability is assessed as medium, with stability, profitability, and low non-performing loans offset by challenges like over-dollarization, high dependence on agricultural exports, and commodity price fluctuations.

St Kitts and Nevis (KNA)
St Kitts and Nevis’s overall risk level remains medium. Terrance Drew remains prime minister of the country after being elected in November 2022.  Political violence, political interference and legal & regulatory risk remain medium. The prime minister recently announced that the government is in the process of creating a plan to address the level of violence in the country. His first measure was to create a task force, which includes high ranking government officials from various sectors. Over the past 12 months, more than 25 laws have been passed by the government of St Kitts and Nevis. The prime minister shared his ambition for St Kitts to become a more sustainable country, during COP 28. Dr Terrance Drew also announced a new mortgage financing scheme named OWN by the National Bank, which will allow citizens to take a loan of 3.99% and up to USD 1 mln  to build a home that will be resilient against the climate change phenomenon. Meanwhile, supply chain disruption remains medium. Growth is expected to slow in 2023 reaching 4.9% and continue to slow in 2024 to 3.8%, according to the IMF. CPI is forecast to rise to 2.9% in 2023 and then slow to 2.3% in 2024. FDI is expected to increase in 2024, with many hospitality projects taking place in the island, totalling more than USD500 mln, if all projects are finalised. The current account deficit is projected to drop to -2.5% of the GDP in 2023 and to -2% in 2024, as tourism continues to recover post COVID. Sovereign non-payment remains medium, with exchange transfer at a medium low. The currency utilised in St Kitts is the East Caribbean dollar, a currency used by 7 other Caribbean states and has been pegged to the USD since 1976. The risk of doing business and the inability of government to provide fiscal stimulus remain medium, while banking sector vulnerability remains medium high.

Trinidad & Tobago (TTO)
Trinidad & Tobago’s overall risk level remains medium. Christine Kangaloo from the Independent party is now president of the country after winning the presidential elections in January 2023. Keith Rowley remains prime minister of the country and has done since 2015. Political violence and political interference remain medium, as legal & regulatory risk has increased from medium to medium high. Trinidad and Tobago is commonly used as an intermediary, due its location by criminal organizations to ship narcotics or other illicit goods, which makes the country vulnerable to money laundering. Trinidad & Tobago is expected to report a growth of 2.2% in 2024. The economy is majorly based on oil and gas production and has also become a financial centre. Moreover, Trinidad & Tobago has been recorded to be the country with highest GNI per capita, in the whole Latin America and the Caribbean. CPI is forecasted to experience a decrease in 2023 to 5.4% and fall even further in 2024 to 2.9%. The Central Bank has decided to keep the interest rate stagnant at 3.5% the past few years. The current account surplus is expected to decrease from 17.8% in 2022 to 5.7% in 2023, and then rise to 7.1% in 2024. Sovereign non-payment remains medium, as exchange transfer remains medium low. The domestic currency, the Trinidad & Tobago dollar is pegged to the US dollar at a low rate, as the increase in foreign direct investment and the trade surplus, in a floating rate system would allow the value of the currency to appreciate. Banking sector vulnerability and inability of government to provide fiscal stimulus remains medium low, with risk of doing business in the country at a medium high. 

Uruguay(URY)
The overall risk for Uruguay is medium-low. Despite the recent political scandals, center-right President Luis Lacalle Pou has seen his approval rate stable in the past months, standing at 42%. This rate of approval does not guarantee that he will be able to elect his successor in the upcoming election in June 2024. As presidential re-election is vetoed by the Uruguayan Constitution, Lacalle Pou's party, the National Party (PN), will nominate their candidate. At the moment, the favorite to represent the National Party is economist Laura Raffo and Lacalle Pou's right-hand man, Alvaro Delgado. The other political force in Uruguay is the left coalition, Wide Front (FA), with two possible candidates being Montevideo Mayor Caroline Cosse and Intendente Mayor Yamandu Orsi. It is predicted that a tough election will be seen, and the winner will come out by a small margin. Political interference and political violence risk in Uruguay are set at medium-low, as both political forces will respect the election results, and no violent protests are expected in the medium-term. Legal and regulatory risk are also medium-low, as no stronger changes in regulations are expected in Uruguay. Moving to Uruguay's economy, it is in a healthy state, and inflation has fallen considerably. The banking sector's vulnerability risk is at a medium-low level, as banks have enough liquidity, and no major crisis is in sight. The inability of the government to provide stimulus is also at medium-low due to the balanced fiscal situation of Uruguay. Finally, the risk of doing business is at medium-high due to government bureaucracy in opening new businesses.
 

USA-Guam (GUM)
Guam’s overall risk level remains low. Guam is a United States territory and elects a governor and a lieutenant every 4 years. The government is body that consists of 15 senators, who are elected for a 2-year term. Lou Leon Guerrero remains governor of Guam after winning the November 2022 elections. Political violence, political interference and legal & regulatory risk remain low, due to U.S. guidance. However, locals are scared of the USD1.5 bln defence system that the US are planning to build in Guam, considering it might make them a target. Supply chain disruption remains low. Guam’s economy is expected to expand in 2023, due to a record level of construction projects, but also the continued recovery of the tourism sector. Sovereign non-payment and exchange transfer remain low. The currency utilised in Guam, is the USD, as Guam is considered a United States territory. Tourism, federal expenditures, and construction capital investment are the 3 main sources of inflows of Guam. However, COVID-19 will be an issue, as it continues to affect Guam, and the measures that the government will take against it will be watched. The risk of doing business and banking sector vulnerability remain medium, with the inability of government to provide fiscal stimulus at a medium low.
 

USA – PUERTO RICO (PRI)
Puerto Rico’s overall risk remains medium-low. The current governor, Pedro Pierluisi of the New Progressive Party (PNP), will be challenged by Jenniffer González when internal elections take place next November 2024. Reports from El Nuevo Dia newspaper suggest that González holds the support of 55% of party members as of November 2023, compared to Pierluisi's 41% endorsement (in February 2023 González had a support of 64% and Pierluisi of 25%). Opposition does not seem to be strong enough to challenge either PNP candidate thus political violence is a medium-low risk. The legal and regulatory risk is also medium-low, as Puerto Rico actively works to establish an attractive framework for foreign investment. Initiatives such as expediting the process for new construction and digitalizing permitting contribute to this positive environment, but challenges persist, notably in the form of corruption. The diversion and theft of millions of dollars earmarked for public housing maintenance by relatives of Puerto Rico's governors is one example. Supply chain disruptions are evaluated as a medium-low risk, primarily linked to threats posed by natural disasters like hurricanes leading to electricity shortages. The risk of doing business in Puerto Rico is evaluated as medium. While the island presents an enticing advantage with the ability to offer tax breaks that outshine those available in most states, recent developments indicate challenges. The Fiscal Board, responsible for overseeing the island's finances, has cautioned Governor Pierluisi against implementing proposed corporate and personal income tax breaks. Their argument is rooted in the potential financial impact, estimating a cost of USD 750 million for the current fiscal year and nearly USD 3 billion over the next five years. Moreover, Puerto Rico grapples with problems that contribute to talent outflow, complicating business operations. Issues such as a shortage of affordable housing, inadequate healthcare, and a lack of quality schooling are cited as factors that make conducting business on the island more difficult. From an economic perspective, the IMF anticipates Puerto Rico to contract 0.2% in 2024 and no growth in 2025; likewise, the Fund estimates general government gross debt at around 17% of GDP through 2024 and 2025. After emerging from a bankruptcy that began in 2017, Puerto Rico's federally-appointed financial oversight board approved a USD 12.7 billion budget for the 2024 fiscal year. However, potential budget deficits loom in the coming years, contingent on uncertain federal Medicaid funding. Sovereign non-payment is considered a medium-low risk. The banking sector's vulnerability is medium, but strategic measures introduced by Governor Pierluisi, such as increasing minimum capitalization requirements and enhancing money laundering controls, aim to strengthen the sector's solvency and compliance.