Central and Latin America: Country Risk Ratings

Argentina (ARG)

Overall risk in Argentina is still deemed as medium high, as President Milei’s liberalisation policies continue to slow down inflation, reduce the fiscal deficit and improve the growth outlook with 5.5% growth projected by the IMF this year. After 2 years of recession, inflation reaching 219.9% in 2024 and strict currency and capital reforms, Milei has finally managed to secure a vital agreement with the IMF, worth 20 billion USD, in order to replenish low foreign currency reserves. Net foreign currency reserves were said to be at least 4 billion USD in the red, there will now be less pressure on central bank FX intervention. Furthermore, the peso (ARS) will float between a range of 1,000 to 1,400 ARS to the USD, replacing the previous crawling peg which devalued the ARS at 1% each month. This comes alongside a 12 billion USD support package from the World Bank, as well as an extension of a 5 billion USD FX swap with China for another year to prop up FX reserves. Argentina is confident the ARS can stay at the stronger end of the range, as the ARS has appreciated in real terms greater than any currency in the last year. The removal of the currency controls has also further squeezed the FX black market with this rate now closing in on the official rate, reflecting the boost in confidence it has given. The stronger peso and the continuation of Milei’s austerity programme which saw Argentina achieve its first budget surplus in 14 years last year, is anticipated to continue to help them reduce inflation. The IMF forecast 35.9% inflation this year and 14.5% in 2026. Moves welcomed by investors with Argentinian bonds rallying as a result and also after 4.3 billion USD was paid to bondholders in January (the largest repayment since 2020). Sovereign non-payment risk is medium and exchange transfer medium high. However, the impacts of high inflation and austerity continue to hit the population, with poverty levels remaining high as real wages have dropped significantly. ARS strength is impacting trade with large surges of imports, however Argentina remain confident that the oil and gas as well as mining industries can support sustained trade surpluses. The IMF forecast a -0.4% of GDP current account deficit in 2025 and a -0.3% deficit in 2026, as Argentina have stated they expect an 8 billion USD energy trade surplus boosted by the beginning of gas exports from the Vaca Muerta shale reserve into Brazil, via Bolivian pipelines. Despite, lots of work still to be done and Argentinians still feeling the impacts of the monetary crisis, support for Milei is generally getting stronger, ahead of October’s midterm elections. Most polls show Milei’s La Libertad Avanza party gaining more seats, particularly after success in local elections in May. Supply chain disruption remains medium as agriculture has been heavily impacted this year by heavy rainfall, for instance soybeans sales have been at lowest levels for a decade. The risk of doing business remains high.

Belize (BLZ)

Overall risk in Belize remains medium high. In March, John Briceño was re-elected as Prime Minister after his People’s United Party (PUP) retained 26 of their 31 seats in the House of Representatives that they secured in 2020. Political violence and legal & regulatory risk remain medium high as the administration continue to aim to tackle issues such as drug trafficking crimes in the South American country. Belize is among other countries in the region, is supporting Haiti in fighting against their gang violence crisis. Strong diplomatic, bilateral ties with Taiwan will remain after they congratulated Prime Minister Briceño on his election victory nearly a year. Briceño attended Taiwanese President Lai Ching-te’s inauguration in May 2024.  Elsewhere, the border dispute with Guatemala will keep relations tense. According to the IMF, real GDP will grow by 3.2% in 2025 and 2.5% in 2026. Tourism, infrastructure projects, remittance growth all continue to support growth alongside agriculture. However, Belize’s strong export economy comes with the risk of President Trump’s tariff regime with around a third of Belize exports going to the US in 2024. Pre Trump’s tariff announcement the current account was forecast by the IMF to remain at -1.6% of GDP this year and -1.5% next, financed by FDI and multilateral loans. 2.1% inflation is anticipated for 2025 and 1.5% for 2026 by the IMF, back down from 2022’s 6.3% high. In addition, progress remains on government debt and the government’s budgetary reforms. Government debt to GDP is at 59.5% for this year and is expected to reach 58.8% next year. Belize was one of the first in recent times to complete a debt for nature swap arrangement which provided around 200 million USD of debt relief as they invest 4 million USD a year to protect their 170-mile coral barrier reef. Fiscal consolidation has persisted with greater tax collection and resilient growth in recent years boosting revenues. Sovereign non-payment risk remains medium. The Belizean dollar, BLZ remains pegged to the USD at 2 BLZ to the USD. The high climate risk will continue to pose a threat however for the dominant agricultural sector in Belize with rising sea levels and natural climate hazards becoming more frequent such as Storm Sara and Nadine disrupted Belize with widespread flooding and heavy winds in 2024. Supply chain disruption is medium high, while the risk of doing business remains high.

Bermuda (BMU)

Overall risk in Bermuda remains medium low. David Burt remains premier after his election victory in February 2025, which saw his centre-left Progressive Labor Party (PLP) retain its majority, winning 25 of the 36 House of Assembly seats. Political interference and legal & regulatory risk both remain at medium low levels. Premier Burt has been looking to boost transparency amongst the people as well as a strong focus on tackling the cost of living and expensive healthcare. The start of 2025 saw the new Personal Information Protection Act (PIPA) law come into effect, while there have also been improvements to cybersecurity and government transparency through the launch of the Red Tape Reduction Consultation last year. According to the finance ministry, nominal GDP is estimated to grow 4.5% in the 2025-26 period after growing 5.5% in 2024-25. Bermuda has increasingly attracted international business with low barriers to set up business and low regulation on financial reporting. The tourism industry is always going from strength to strength with more of population employed in the sector than ever before. The ministry of finance’s pre budget report ahead of the 2025-26 fiscal year show they expect public debt to fall in the coming years with net debt to GDP falling to 33.3% of GDP in 2025-26 from 35.7% of GDP in 2024-25. The government have said that they will repay all the 605 million USD worth of debt due in January 2027, which will lower their annual interest expenses by 18%. 2025-26’s budget will be the first year that the government will benefit from the new corporate income tax, anticipated to raise 187.5 million USD, with 50 million USD of this being committed towards universal healthcare spending. The inability of the government to provide fiscal stimulus is medium low, while sovereign non-payment risk is now medium. The Bermuda dollar remains pegged to USD at a rate of 1 to 1. Exchange transfer risk is low and the risk of doing business medium low. Bermuda remains susceptible to hurricanes and extreme weather hazards given its geography. In 2024, Hurricane Ernesto for example, hit the country leading to 71% of the population losing power, damage to building and trees as well as flooding.

Bolivia (BOL)

Overall risk in Bolivia remains high. Luis Acre is President as he aims to get re-elected in general elections set to be held in August. Political interference and legal & regulatory risk are both very high. The president’s Movimiento al Socialismo party remains divided ahead of election between support for the president and ex-president Evo Morales, who cannot technically run again having served the new two term limit. However, the former president Morales, has launched his fourth bid for the presidency, thus ignoring the constitution. Morales remains subject to an arrest warrant and remains defiant to oust his political rival president Acre. This comes after last year Morales’ car came under gunfire, with his supporters blaming the government for an attempt on his life, leading to many protesting, blocking roads and severe altercations with police, said to have come at a 1.7 billion USD cost to the economy. Political violence is medium high. Political tensions remain elevated ahead of the elections with persistent clashes and violence in the country, such as in April a violent clash between mining groups over the exploration of gold deposits killing six people plus a couple of high-profile incidents involving bus and truck crashes. The economic outlook also remains extremely fragile. Bolivia have been grappling with the issues of high inflation and public debt. Growth is stalling with the IMF forecasting just 1.1% growth for 2025. Gas production has plummeted and gas exports which have the biggest source of income from abroad have halved in the past decade with new gas field not been found to replaced old ones. 15.1% inflation is forecasted for this year as high food prices alongside stalling wage growth is limiting private consumption and increasing food insecurity. The current account balance is projected at -2.5% of GDP by the IMF this year as government debt to GDP hits 92.4% of the economy with bond yields hitting record levels with investor fears of default, while the government claims they intend to meet debt obligations. Sovereign non-payment risk is high and the inability of the government to provide fiscal stimulus is very high. Central bank FX reserves have been run down substantially, putting pressure on the Bolivian boliviano and made fuel imports more expensive. The fuel shortage is affecting agriculture whilst large queues have been seen as motorists wait for fuel. Russia is now increasing fuel supply to Bolivia as Bolivia’s tariff duties on gasoline imports has now been slashed to zero. In addition, Bolivia is suffering from their heaviest rainfall seen in decades, leaving fields under water. This is adding further pressure onto food security and prices as well as their export markets. The floods have estimated to have put around 200,000 cattle at risk and affected 590,000 families, killing 55 people. Supply chain disruption is medium high as the risk of doing business remains high.

Brazil (BRA)

Overall risk in Brazil remains medium. The economy has remained resilient in the face of both political and economic issues. The economy grew by 1.3% in Q1 of 2025, while the IMF forecast 2% growth this year and next. Consumer spending has remained solid and the labour market tight, however inflationary pressures has seen the BCB hike the Selic rate to the highest level in 20 years in May to 14.75%, causing investment to stall. After issues relating to the El Nino crisis in 2024, agriculture will a big supporter of growth this year. The agricultural industry has benefitted from the US/China trade war just like in Trump’s first term, with Brazil now China’s biggest food supplier, as beef sales to Beijing growing by a third in 2025 Q1. In addition, Brazil have felt well positioned as president Trump’s tariff policy, given their vital commodity exports, the further expansion of trade with China as well as the agreement of new trade deal between the Mercosur bloc and the EU. All despite falls in commodity prices this year. In addition, Brazil hopes for greater oil output expansion as trading relations with Argentina grow stronger. However, a current risk which has emerged is the bird flu outbreak from a commercial farm leading to the likes of China, Japan and the EU to ban poultry imports from Brazil. The IMF forecast 5.3% inflation in 2025 as food inflation remains elevated and fiscal concerns caused for the Brazilian real (BRL) to plunge last year, despite some bounce back this year. As for the fiscal situation, government debt to GDP is expected to reach 92% this year. 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. The BRL is however expected to have a cushion to further depreciation risks, given the wide Brazil-US interest rate differentials. Lulu’s government have also needed to push forward with spending cuts to reform income taxes to achieve required fiscal consolidation and appease markets. Sovereign non-payment risk is medium high and exchange transfer risk is at a medium level. Lulu and his government’s popularity remain under significant pressure, given inflation and fiscal concerns ahead of October 2026 general elections, despite progress in areas such as poverty reduction. It currently remains unclear whether Lulu will run again in 2026, given recent health challenges. The electorate remain divided ahead of elections, leading to continued long-term policy uncertainty. Amidst the new US policy, Brazil is looking to build closer ties with their BRICS counterparts. China have pledged to invest 4.5 billion USD in manufacturing, renewables, pharmaceuticals and semiconductors. In addition, Brazil have agreed a 157 billion BRL FX swap agreement with China in order to boost liquidity in financial markets. Banking sector vulnerability is medium, while the risk of doing business remains high.

Cuba (CUB)

Overall risk in Cuba remains high. Miguel Diaz-Canel remains President as he has done since 2018 in the one-party state, having won the 2023 elections. Political interference is very high, while legal & regulatory risk remains high. Relations with the US remain tough. Sanctions persist on Cuba from the US, while the US have piled further pressure on Cuba over immigration as well as counter-terrorism measures. It was reported that over half a million Cuban have fled to the US since 2022 and the new US administration are making efforts to increase deportation flights to Guantanamo Bay, despite reluctance from Cuba’s side. Relations with Russia and China will remain strong, after Russia announced its ‘’Plan 2030’’ for Cuba, promising more than 1 billion USD investment into their ally by 2030. In December, Economy Minister Joaquín Alonso Vázquez forecast 1% growth for 2025. Meanwhile, Cuba is facing one of their most significant energy crises in years. Cuba is facing daily power outages, a shortage of fuel, climate disasters and inflation in double digits. These blackouts have caused in some instances for schools to be shut and non-essential workers to stay at home. Only six of the 15 oil power plants are said to being currently used in Cuba. It blames their economic crisis on the long lasting impacts of COVID and US sanctions such as the US trade embargo and remittance restrictions, tightened by President Trump. The economy minister claimed exports fell by 900 million USD with agriculture, sugar production and tourism all particularly affected. Sugar production is expected to fall below 200,000 tons this year, the first time below this level since the 19 century. Cuba hope tourism can recover, particularly from allies China. The government have implemented price caps on essential items and cut spending to relieve pressure on the budget deficit. The Cuban peso has been weakening as it remains pegged to the USD at 1 USD to 24 CUP. Sovereign non-payment risk is medium high and exchange transfer risk stays high. Cuba remains susceptible to natural disasters particularly in hurricane season, a risk now heightened as the impacts of climate change become more prevalent. Supply chain disruption is high, while the risk of doing business is very high in one of the world’s most closed off economies.

Dominican Republic (DOM)

Overall risk in the Dominican Republic remains at a medium level. Luis Abinader continues as president after his huge election victory in 2024. He is ruling with a supermajority as his Modern Revolutionary Party (MRP) won 29 of 32 seats in the Senate and 147 of 190 seats in the Lower House. He aims to pass more pro-market reforms as well as bills to limit presidents to two terms in office and boost public services. Political interference remains medium, while legal & regulatory risk is medium high. A major issue continues to be relations with neighbour crisis-hit Haiti. Haiti’s gang violence crisis has led to mass immigration into the Dominican Republic. The President has vowed to toughen border security by the construction of a 164km wall that splits Haiti and the Dominican Republic as well as placing an additional 1500 soldiers at the border as they aim to deport more migrants back to Haiti -- a move opposed by Haiti and the UN. The IMF forecast 4% GDP in 2025 and 4.8% growth in 2026. Record tourism will support growth as well as increases in private consumption from a boost in remittances. The Central Bank of the Dominican Republic have begun easing their policy rate as inflation has come back around the 4% mark. The IMF forecast 4.3% inflation in 2025 and 4% in 2026. The current account is to remain in a large deficit, projected at -3.3% of the economy this year. The economy will suffer from the new U.S administration’s tariff policies. The Dominican Republic will be hit by a 10% blanket tariff from the US, despite the CAFTA-DR free trade deal. In 2024, 59% of Dominican exports went to the US, according to the International Trade Centre. In addition, the country’s second largest client remains Haiti, emphasising the rising geopolitical trade exposure risk. The risk of doing business remains medium. Government debt to GDP will hit 58.2% of GDP this year, according to the IMF. Fiscal reforms have outlined a spending growth cap of 3% and cut backs on electricity and energy subsidies after spending uplifts in recent years caused by the Haiti crisis and last year’s elections. Despite appreciating against the USD post the US tariff announcements, the Dominican Peso remains historically weak against the USD. The Dominican Republic have been increasing debt issued in pesos, reducing the share of debt denominated in foreign currencies from 75% in 2019 to 67% in 2024. Sovereign non-payment risk is medium while exchange transfer risk is at a medium low level. Climate change remains an issue for the country, being one of the most impacted in the world. To highlight their commitment to become more climate resilient, they have issued their first green bond onto international markets, raising 750 million USD as well as emphasising their commitment to the Paris Agreement at COP 29.

Ecuador (ECU)

Ecuador’s overall risk remains medium high. Daniel Noboa was re-elected as president after his victory in April’s snap election, gaining around 56% of the vote. This will allow him to continue to pursue his mandate of tackling gang violence by giving police greater powers and toughening up prisons and the justice system -- as Ecuador has become one of the most violent in the region. Violent death increased 65% in the first quarter of 2025. Noboa’s opponent Luisa Gonzalez has called for a recount and claimed the elections were fraudulent, however the election court has dismissed her request. Political violence and political interference are both medium high, while legal & regulatory risk remains high. As well as the rise in homicide rates, other issues facing Ecuador includes the smuggling of guns, fuel theft as well as a stagnating economy faced with rising unemployment. Noboa’s administration are aiming to build closer ties with the US administration, offering a US military base in the country as well as stating his hope for the two countries to agree a trade deal, given the US are Ecuador’s biggest trading partners. President Noboa has also made clear his reluctance to take in migrants of other nationalities into Ecuador. The IMF forecast 1.7% real GDP growth in 2025 and 2.1% growth in 2026. Key priorities remain the response to gang violence in the country, however president Noboa also aims to unlock key investments particularly into the oil sector. The country expects around 42 billion USD worth of investments from foreign companies into the sector over the next 5 years, aiming to produce 600,000 barrels per day in 2026. The IMF forecast a 3.4% of GDP current account surplus for 2025. Growth has been slowed by falling confidence due to political uncertainties, a rise in illegal economic activity such as mining and drug smuggling as well as the impacts of their worst drought in 60 years at the start of 2024 causing power outages. Supply chain disruptions continues to be deemed as medium high. In addition, Ecuador have applied a 27% tariffs on goods from Mexico as relations remain tense since the police raid of the Mexican Embassy in Quito in capture of their former vice-President. In the meantime, a new trade deal with Canada was finalized in February. As a result of the domestic violence crisis and a slow recovery since COVID, government debt has become an increasing concern. Tax rises such as on VAT and higher income tax bands have stabilised the budget deficit as well as a 4 billion USD IMF Extended Fund Facility agreed over 48 months. In addition, Ecuador have completed their second debt-for-nature swap agreement. This allows Ecuador to buy worth 1.5 billion USD worth of existing bonds at a discount with new cheaper money in order to unlock 500 million USD able to be invested in conservation efforts in the Amazon. It is expected to reduce debt by 527 million USD. Sovereign non-payment risk is medium. Prices will remain stable, with 1.3% inflation projected by the IMF this year in Ecuador’s highly dollarized economy. Exchange transfer risk remains medium while the risk of doing business remains high.

Haiti (HTI)

Overall risk in Haiti remains high and the gang violence crisis continues to bring about high levels of uncertainty and insecurity. Political violence is high while political interference and legal & regulatory risk remain very high. Fritz Alphonse Jean is currently heading a transitional council in Haiti after taking office in March while it has been announced that general elections will take place in November. The last set of elections were in 2016. The humanitarian crisis as a result of the conflict is worsening. At present, the administration is working with an armed paramilitary group who previously aimed to overthrow the government to contain the violence. Kenya remains Haiti’s biggest source of support to help control the impacts of the violence, but as foreign aid budgets are being cut particularly from the US the situation will remain fragile. Many schools, airports and hospitals continue to be halted by the violence. The conflict has displaced over a million Haitians and over 5 million are reported to be going hungry. Many Haitians have fled to the US; however, President Trump’s new immigration agenda has led to him revoking the temporary legal status of more than half a million migrants. The IMF forecast a -1% real GDP decline this year as economy activity continues to be disrupted, particularly as gangs aim to gain greater control of business districts as they continue to disrupt the transport of goods. The lack of safety has caused both public and private investment to plummet. In addition, the effects of climate disasters particularly in hurricane season have been felt which heavily affects agriculture. Supply chain disruption is high. Inflation is forecast at 27.2% by the IMF for 2025, as the risk of doing business remains very high. Haiti is the poorest country in South America, thus inflationary pressures are drawing more households below the poverty line. Government debt to GDP is however on a firmer footing with the IMF projecting it to hit 11.8% of GDP this year and 10.3% next year as they benefitted from debt support from Venezuela and improvements to tax collection but limited economic activity will continue to have a greater, more damaging effect. The inability of the government to provide fiscal stimulus remains medium.

Honduras (HND)

Overall risk in Honduras remains medium high. Xiomara Castro remains President ahead of elections set to take place on the 30 November 2025. The President is grappling with security issues with homicide rates still high, despite progress with state of emergency measures still affecting regions of the country. Drug trafficking gangs remains an issue as cooperation with the US remains key on this front after Honduras and the US extended their extradition treaty in February after saying last year it would end US involvement in domestic issues. There remains concerns over levels of corruption and lack of progress on social justice and poverty and inequality remains elevated. In addition, many Hondurans have migrated to the US in recent times and many rely on remittances from the US.  However, President Trump’s crackdown on immigration could hurt financial security for many Honduran families. The risk of doing business is high. The IMF forecast 3.3% real GDP growth in 2025 and 3.4% in 2026. Global uncertainty surrounding the Trump’s tariffs will affect Honduras significantly. Around a half of Honduran exports have consistently gone to the US in recent years. Remittance slowdown, which have contributed to around a quarter of GDP will also be impacted. There is now expected to be greater pressure on the current account deficit, estimated at -4.3% of GDP this year by the IMF. Further affected by weakness seen in the Honduran Lempira in the last year against the USD. Exchange transfer risk remains medium. Private investment and consumption is however likely to slowly pick up as inflation starts to come under greater control after the big impact of the energy crisis on prices. 4.7% inflation is forecast for 2025 as the policy rate remains restrictive at 5.75%. The economy remains heavily dependent on the agriculture sector and it remains a critical sector for growth, accounting for around 15% of the economy. However, the El Niño climate crisis has threatened supply and going forward there will be challenges relating to climate change and weather needing to be met.  Honduras also suffered from a significant power blackout in late February. Supply chain disruption will remain medium high. Honduras have benefitted from support from the likes of the Central African Development Bank and in April an agreement was reached with the IMF allowing for 155 million USD of financing support under the Extended Credit Facility (ECF) program. Government debt to GDP is forecast at 43% of GDP in 2025 leaving sovereign non-payment risk at a medium level.

Mexico (MEX)

Mexico’s overall risk is medium-high. The critical issue is the tariffs imposed by the U.S. that will likely depress growth for the remainder of the year and will likely ensure a small recession in 2025. Though USMCA goods are exempt from the 25% tariffs, the auto tariffs are sufficient to impact exports, while the trade war has been a major headwind for business investment.  While Mexico’s effective tariff rate will likely be lower than the average of other countries, a significant reduction is unlikely.  Meanwhile, the economy is also suffering from the adverse impact on confidence from the wide ranging constitutional reform that are feared to weaken the rule of law and market forces.  Despite this, Sheinbaum governs with staggering support, registering an 80% approval rate, as her diplomatic handling of Trump is seen to have benefitted Mexico relative to other countries.

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 has rejected Trump offers of military help against narcos, as it wants to control the fight against narcos with Mexican resources. Legal and regulatory risk is also 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 in an anti-market manner and favouring state presence in the economy. Supply chain disruptions are very high, especially now with the Trump administration favouring more isolationism and implementing tariffs, jeopardizing the nearshoring process. 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. 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.

Panama (PAN)

Panama’s overall risk level remains medium. José Raúl Mulino is president having won last year’s elections. The new president has outlined his aims to boost macroeconomic stability, make progress on environmental sustainability, social security reforms and control crime as well as immigration. However, in his first year as president the main talking point has been relations with the new US administration. U.S President Trump has put significant pressure on Panama over its running of the Panama Canal, in which he has threatened to take specific control of the cost of tolls for American ships using the canal (the canal’s biggest client). Trump and his Secretary of State Marco Rubio have expressed concerns that Chinese influence has been growing in the Canal, with increases in China investment in ports and terminals by the canal and a Hong Kong based company running two of ports by the canal’s entrance until earlier this year. However, Mulino’s government has insisted the canal is Panama’s and no compromises can be made to US ships. To ease US worries over China influence in Panama, Mulino’s government have not renewed an agreement with China’s Belt and Road investment program, a move welcomed by Trump and Rubio as Panama look to keep on the US on side amidst the ongoing trade war.  Another major promise by Murillo when he took office was his commitment to reduce immigration and close off the dangerous Darién gap route between Colombia and Panama, with many preceding to the US. Last year, the number of migrants who crossed the gap fell by 42% from 2023 to around 300,000. Panama have agreed to temporarily take some migrants from the US over a short period. The IMF forecast 4% growth in 2025 and 2026. Uncertainty remains over the closed Cobre Panama mining closure, once the world’s biggest copper mine and has been shut since 2023 over environmental protests. The mine accounted for around 5% of GDP and the mining firm First Quantum have filed attribution seeking 30 billion USD of damage from the closure with large amounts of copper concentrate stuck in the mine. In addition, the heightening climate risk including droughts, which limited canal activity in 2023/2024 and remains a concern to the longer term future to canal revenues. The current account deficit is forecast at -1% of GDP for 2025. Meanwhile fiscal consolidation should see the budget deficit on a more sustainable path after larger increases brought on by the COVID and drought crises. Government debt to GDP is projected at 58.1% this year as sovereign non-payment risk increases to a medium high level. Panama have just secured a 1.29 billion USD loan with 2-year maturity from a Bank of America subsidiary. Panama is very aware of climate action and environmental sustainability is one of the government’s core missions. Supply chain disruption is medium. Inflation is set to remain low forecast at 0.5% this year and 2% next, while the economy remains highly dollarized. Exchange transfer risk and the risk of doing business both remain at medium levels.

Paraguay (PRY)

Paraguay’s overall risk remains at a medium level. Santiago Peña remains president after his 2023 election victory. His popularity continues to plummet with promises on lower corruption and tackling crime and drug smuggling seeing limited progress. There has been further controversy relating to a new bill signed into law by the President, giving government powers to shut non-profit organisations (NGOs) who don’t comply with regulations and suspend directors for up to 5 years. This forces companies to documents specifics such as funding and greater detail in financial reporting. The President has received support from former president Horacio Cartes, who is under severe US sanctions for bribery, in order to bring greater transparency as president Peña seeks to make Paraguay a favourable place to do business and boost private investment. This legislation has come under fire from bodies such as the UN and Amnesty International with it threatening freedom of expression whilst comparing it to similar authoritative measures in Russia, Venezuela or Nicaragua. 3.8% growth is forecast by the IMF in 2025 and 3.5% in 2026. Paraguay’s economy remains dominated by agriculture and particularly the export of soybeans and beef. The agricultural sector remains under threat from changing climate conditions and the increasing drought threat. The weather has been drier and the Paraguay river is struggling to sustain affecting crops. The government and farmers put a large portion of the blame on climate change. Paraguay is the third largest exporters of soybeans so the lack of certainty relating to global trade, provides further instability. The IMF forecast a reduction in the current account deficit at -2.4% of GDP, as the Paraguayan Guarani remains weaker and helped by strong remittances from the US and Spain. Inflation is set to hit 3.7% in 2025. Sovereign non-payment risk remains medium while government debt to GDP will fall to 43.9% of GDP in 2025, according to the IMF. Continued high poverty, corruption and climate risks is expected to hold Paraguay back from becoming a high income economy. Supply chain disruption is medium high.

Trinidad and Tobago (TTO)

Overall risk in Trinidad and Tobago remains at a medium level. Christine Kangaloo remains President after her 2023 election victory while Kamla Persad-Bissessar has been elected as Prime Minister after her recent election victory. Her United National Congress (UNC) Party won 26 of the 41 seats in the House of Representatives defeating the incumbent People’s National Movement (PNM) party. Persad-Bissessar becomes PM for the second time having previously served between 2010 and 2015. She has pledged to deliver on her mandate of public sector pay increases and boosting education and healthcare facilities for all as well as imposing further legislation to combat rising violence. Political interference is medium and legal & regulatory risk is medium high. Trinidad and Tobago have also been dealing with the threat of an insurgence of gang violence. In December, the country declared a state of emergency after numbers rose, seeing Trinidad and Tobago now having one of the highest homicide rates in Latin America with many murders linked to the international drugs trade. The decree originally set for 15 days, was extended by parliament for a further three months. The state of emergency has allowed police to arrest those of suspicion of any involvement in violence. The IMF project 2.4% growth for 2025. Growth has been supported by progress in the oil and natural gas sectors. For instance, BP have begun their production at the Cypre project. The Cypre project is expected to produce around 250 million standard cubic feet of gas. Trinidad and Tobago are Latin America’s biggest LNG exporters however reserves are declining and they have been relying on the development of joint offshore field projects with BP and Shell in Venezuela such as the Dragon field and Cocuina-Manakin projects to overcome this. However, President Trump has revoked BP and Shell projects in Venezuelan waters to pile pressure on Venezuelan President Nicolas Maduro and his authoritative regime. This will likely have a huge impact on Trinidad’s economy alongside the new US administration’s tariff plans with over 40% of Trinidad exports going to the US in 2024. The current account surplus is expected to remain strong at 8% of GDP this year but the IMF forecast it to fall to 5.9% of GDP next year with the current account continuing to be reliant on hydrocarbon exports but should benefit from a continued weaker Trinidad dollar to USD seen. Inflation is expected to remain stable at 1.3% this year while government debt is expected to increase in coming years from 67.8% of GDP in 2025 to 69.6% of GDP in 2026, with the threat of lower oil and gas revenues and increased spending due to election year and increases in public spending. Sovereign non-payment risk remains medium while exchange transfer risk is medium low. Private consumption will be boosted by lower inflation and the continued historically lower policy rate of 3.5%. The risk of doing business remains medium high.

Uruguay (URY)

Overall risk in Uruguay is medium low. Yamandu Orsi has been elected president after his victory in recent elections. The centre left candidate from the Frente Amplio coalition (FA) has promised to push forward his ‘’modern-left‘’ regime focussing on economic growth whilst balancing social welfare reforms. He holds a majority in the Senate, however his party are just short of a majority in the Chamber of Deputies. Political interference and legal & regulatory risk both remain medium low with Uruguay remaining one of the most stable and equal in the LatAm region, despite fears of a rise in drug gang activity and violence amongst voters. The Uruguayan economy remains very dependent on agricultural and particularly beef exports. Whilst not relying too heavily on trade from the US in the midst of the new US administration’s protectionist regime, Uruguay have been part of a new trade agreement with themselves and three other south American economies in their Mercosur trading bloc and the EU. The deal signed by the EU, however subject to a vote by EU members, will give EU states better access to Uruguay’s raw material with tariffs being reduced. 2.8% growth is forecast by the IMF for 2025, while the current account is set to remain in a deficit of -1.5% of GDP. As well as the agricultural sector, strong private consumption should also support growth. Whilst, the impact of Trump’s tariffs expected to be limited, the further impacts of a trade war could have effect in Uruguay as they remain strong trading partners with China. Lower agriculture and commodity prices will impact the current account deficit, which will be funded by FDI. Sovereign non-payment risk and the inability of the government to provide fiscal stimulus both remain medium low as Uruguay continue have the lowest cost of debt in Latin America, with a strong proportion held by locals and more debt is now denominated over a larger period of time (more than 5 years). The new administration will try and promote more fiscal consolidation to keep debt levels sustainable. Government debt to GDP is forecast at 68.5% of GDP this year. Moving forward, the high reliance on agriculture and location is making it more vulnerable with the threat of droughts becoming heightened in recent years, particularly off the back of the La Nina climate impact. Supply chain disruption does remain very low for the moment, however. The Uruguay Peso remains at historically weaker levels to the USD. Exchange transfer risk is medium low and banking sector vulnerability low.

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