Geopolitical alliances, shifting trade rules and a dense electoral calendar will continue to fuel uncertainty across the region in 2026.
Uncertainty defined 2025. In Latin America and the Caribbean (LAC), economic, social and political uncertainty reached historic highs and is expected to continue into 2026, driven by geopolitical alliances, changing trade rules and an intensive electoral cycle.
These forces are shaping development prospects unevenly. Some countries are benefiting from higher commodity prices and renewed investor interest, while others remain trapped in low growth or face rising vulnerabilities. Climate shocks are becoming more frequent and costly, while populations are aging faster than care systems can adapt.
This #GraphForThought highlights the main development trends in LAC in 2026, revealing emerging risks and where opportunities may arise in a more fragmented and uncertain world. Excerpt from a regional article by the United Nations Development Programme (UNDP), part of the series Development Pathways.
1. Expect the unexpected: uncertainty is rising.
Uncertainty in LAC has been increasing since the pandemic, but 2025 marked a clear break with the past. Levels reached an all-time high, more than 2.5 times higher than in 2024, driven mainly by external forces.
A shifting geopolitical landscape, led by changes in United States policies, has been a central factor. As the United States rose to the top of the global uncertainty ranking, the effects were transmitted to LAC through trade, investment, migration and financial flows, remittances and democratic governance. This trend may intensify in 2026, as anti-migration policies gain ground in different parts of the world.
In 2026, seven countries representing 52% of the region’s population will experience presidential transitions, in a context in which LAC is the most politically polarized region in the world. The overlap between global uncertainty and domestic political change increases the risk of policy reversals, investment delays and short-term instability.
2. LAC, a key region in the global realignment
The year 2026 began with the region at the center of geopolitical attention. Its endowment of strategic resources (lithium, copper, rare earth minerals and nearly 19% of the world’s known oil reserves) has heightened international interest in its role within global supply chains. At the same time, the expansion of organized criminal networks has added complexity to the regional security environment.
These dynamics have increased uncertainty and insecurity at both national and international levels. In response, security, governance and economic sovereignty have gained greater prominence on public agendas.
Trade patterns are also shifting. Over the past two decades, LAC has deepened its economic ties with China, now the region’s second-largest export destination, accounting for 12.3% of merchandise exports in 2024. Although the United States remains the main trading partner (14.9%, excluding Mexico), the tariffs introduced in 2025 could accelerate a shift toward alternative markets.
At the same time, the trade agreement between Mercosur and the European Union, still pending ratification, could further transform the trade landscape.
3. Moderate, uneven and uncertain growth
LAC is expected to experience a modest acceleration in growth in 2026, although it remains fragile and uneven. The region is projected to grow by 2.3% in 2026, following 2.2% in 2025, below global growth rates. On average, LAC continues to lag behind other emerging regions.
Beyond the regional average, outcomes diverge. Some countries are benefiting from higher commodity prices and stronger external demand, with growth rates close to 4%. Others face a more challenging outlook, with exposure to new tariffs and geopolitical tensions weighing on exports and investment.
The outlook is not fixed. Commodity prices are expected to weaken in 2026. Nevertheless, interest in minerals and energy reserves could drive new investment.
4. Less poverty, but fragile progress
Poverty in LAC is projected to fall to 25.2% in 2025, the lowest level on record and approximately half the rate observed in 2000. The post-pandemic recovery continues, but unevenly. Progress has been driven largely by Brazil and Mexico. Excluding these countries, the regional poverty rate is almost three percentage points higher and the pace of recovery is considerably slower.
5. Climate pressures
LAC is one of the regions most exposed to climate shocks. After Asia, it ranks second globally in exposure to extreme weather events, with nearly three-quarters of its countries classified as highly vulnerable. These risks are already structural. The frequency of extreme events increased from an annual average of 11.7 between 2000 and 2010 to 12.9 between 2011 and 2025. The human impact has doubled, exceeding 10 million people affected per year, with particularly severe effects in the Caribbean. Despite this, the region has significant potential to contribute climate solutions. Renewable energy accounts for 62.5% of electricity generation in LAC, and the region contains 23% of the world’s forests.
Navigating turbulence
The changes observed in 2025 set the stage for a complex 2026. Although LAC has achieved substantial progress, advances remain uneven and are compounded by climate risks and rapid population aging.
Reducing poverty and vulnerability requires expanding social protection, improving labor market outcomes, ensuring quality education and strengthening resilience to shocks. At the same time, demographic change demands the expansion of care systems and the strengthening of health services. Sustaining these reforms in a polarized environment will require stronger governance. The path ahead may remain turbulent, but integrating economic, social and climate priorities, as highlighted in the UNDP Regional Programme Document for LAC, can provide the stability needed to navigate uncertainty.
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