Introduction
The Comisión Económica para América Latina y el Caribe (CEPAL) has warned that the Latin American and Caribbean region is heading towards a third lost decade, driven by the impact of tariffs on investment and low competitiveness and economic dynamism.
Background on Lost Decades
CEPAL’s Secretary Executive, José Manuel Salazar Xirinachs, explained that the region experienced its first lost decade during the 1980s and a second one from 2014 to 2023, with an average annual growth rate of 0.9%. This is half the 2% growth seen during the first lost decade and significantly lower than the 2.7% and 3.3% growth rates in the 1990s and early 2000s.
Current Economic Outlook
According to CEPAL’s latest economic report, the region’s GDP is expected to grow by 2.2% in 2025, which is below the projected global growth rate of 3% post-pandemic. The weak external impulse is attributed to the arbitrage policy of the United States, affecting countries with trade deficits.
Impact on Individual Countries
Mexico and Brazil:
- Brazil is expected to grow by 2.3% in 2025, down from 3.4% in 2024. The country’s growth is projected to slow down to 2% in the following year.
- Mexico faces a grim outlook, with a projected growth of only 0.3% in 2025 and 1% in 2026, affected by trade uncertainty and deteriorating exports to key partners China and the United States.
Haiti and Cuba:
- Haiti is projected to contract by 1.5% in 2025, while Cuba is expected to shrink by 2.3%.
Guyana and Argentina:
- Guyana is expected to be the most dynamic economy in the region, with a projected growth of 10.3% in 2025 and 23% in 2026, driven by investments in oil exploration that began in 2023.
- Argentina follows with an expansion of 5% in 2025 and 4% in 2026.
Challenges and Context
CEPAL highlights that the region’s economy is trapped in a “growth trap,” exacerbated by ongoing uncertainty. The average growth rate for the region is projected to be 2.3% in the upcoming year.
Conclusion
The Latin American and Caribbean region faces significant challenges due to tariffs, trade uncertainty, and low economic dynamism. CEPAL’s projections indicate that only Guyana and Argentina are expected to show robust growth, while Mexico, Brazil, Haiti, and Cuba are projected to underperform.
Key Questions and Answers
- What is a lost decade? A lost decade refers to a prolonged period of slow economic growth, typically defined as an average annual GDP growth rate below 2%.
- Which countries are projected to have the worst performance? Haiti, Cuba, Mexico, and Brazil are expected to have the weakest economic performance in the region.
- Which countries are projected to perform well? Guyana and Argentina are expected to have the most robust economic growth in the region.
