As we enter the final quarter of 2024, Fitch Ratings has revealed its latest growth forecast for Latin America, focusing on the economic outlook post-US elections.
Among the countries analyzed Colombia and Brazil stand out with the most promising prospects for regional economic growth heading into 2025.
Both nations are positioned to benefit from key sectors like digital infrastructure and tourism, while other countries face distinct challenges.
From Brazil’s booming data center sector to Ecuador’s political instability ahead of its elections, the region presents a dynamic mix of opportunities and risks.
Brazil’s booming data center market
Brazil is making significant strides in the digital infrastructure space, attracting over $4 billion in investments in September 2024 to bolster its data center capabilities.
This influx of capital is expected to dramatically increase the country’s data center capacity, with projections exceeding 415 megawatts (MW) over the next three years.
Much of this growth is driven by surging demand for digital services, especially from US-based companies seeking to expand their operations in Latin America.
Brazil’s favorable regulatory environment and growing focus on digital solutions have positioned the country as a burgeoning regional digital hub.
Analysts believe that as demand for cloud computing and other digital services rises, Brazil will play an increasingly important role in meeting the region’s technological needs.
Colombia: tourism boom
Colombia is set to experience a sharp increase in tourist arrivals in both 2024 and 2025, largely due to aggressive promotional campaigns targeting key markets in North and Latin America.
These marketing efforts have been tailored to highlight Colombia’s cultural and natural attractions, drawing a diverse range of visitors to the country.
The Colombian government is also investing in upgrading tourism infrastructure to accommodate this growth.
This boost in tourism is critical for the country’s economy, which relies heavily on travel-related revenue.
With a focus on long-term growth, the country is diversifying its source markets, ensuring that its tourism sector remains resilient in the coming years.
Chile: slow recovery in banking sector
Chile’s financial sector is seeing a gradual recovery, particularly in the area of lending.
Loan growth is forecasted to pick up in 2024 and 2025, but Credit Suisse has revised its earlier projections downward, now expecting year-on-year lending growth to hit 5.8% by the end of 2024, down from a previous forecast of 7%.
Several factors are contributing to this slower-than-expected recovery.
Profitability pressures on major banks, coupled with fluctuating interest rates, are hampering efforts to restore strong lending activity.
While growth is still anticipated, the pace may be slower than initially hoped, and it could take longer for the sector to fully rebound.
Ecuador: political instability ahead of elections
Ecuador is facing significant political challenges as it gears up for its February elections.
Recent insights from BMI’s acquisition of GeoQuant, a political risk analysis firm, have highlighted growing sociopolitical tensions in the country.
These factors are expected to play a crucial role in shaping the electoral outcome, with potential impacts on the country’s economic and political stability.
As Ecuador navigates this period of volatility, concerns are mounting about its future, particularly in light of the unpredictable environment.
The elections will serve as a litmus test for Ecuador’s ability to manage its political challenges while safeguarding its economic interests.
Latin America’s energy transition
While much of the world is transitioning to cleaner energy, Latin America continues to face significant hurdles in reducing its dependence on fossil fuels.
Despite efforts to promote low-carbon energy sources, the region is still heavily reliant on oil and gas, particularly in countries like Argentina, Brazil, and Mexico.
According to projections, emissions in Latin America are expected to rise by 18.1% between 2024 and 2033, driven by the transportation, industrial, and energy sectors.
This trend raises concerns about the region’s contribution to climate change, as key economies struggle to balance economic growth with environmental responsibility.
Uruguay: steady growth
Uruguay remains one of Latin America’s bright spots, with real GDP growth projected to reach 2.5% in 2024, slightly adjusted to 2.3% for 2025.
The resurgence of the agriculture sector, which has faced difficulties in recent years, is a major contributor to this growth.
Uruguay’s ability to manage its economic resources while maintaining political and social stability has bolstered its resilience in the face of global economic uncertainties.
As the country continues to capitalize on its strengths, it is well-positioned for continued growth in the coming years.
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