South America in 2026: Navigating Political Turbulence and Economic Uncertainty
A Region at a Crossroads
South America enters 2026 confronting unprecedented geopolitical challenges alongside persistent economic headwinds. The continent finds itself at the centre of international attention following dramatic developments in Venezuela, whilst simultaneously grappling with sluggish growth rates and evolving trade relationships with global powers.
The impact of the Trump administration’s stunning airstrikes and capture of Nicolás Maduro are already being felt well beyond Venezuela’s borders—the most significant US intervention in the region since the 1989 invasion of Panama. This unprecedented action has sparked a mix of concern and celebration across Latin America and the globe, with regional neighbours deploying security forces along borders to prepare for potential refugee influxes.
Economic Outlook: Modest Growth Amid Structural Challenges
The Economic Commission for Latin America and the Caribbean (ECLAC) updated its growth projections for the region, estimating that Gross Domestic Product (GDP) will rise 2.4% in 2025 and 2.3% in 2026. For South America specifically, 2026 growth rates are forecast at 2.4%, reflecting what economists describe as a persistent trap of low capacity for growth.
The rise in South American growth reflects an increase in trade between the subregion’s countries and China and a rebound in the prices for precious metals and other products from extractive sectors. However, this modest expansion masks significant variations between countries, with Argentina and Paraguay the only countries projected to grow above 3%, with most economies set to record expansions between 1.0% and 3.0%.
Geopolitical Realignments and Trade Tensions
The continent’s economic future remains closely tied to its relationships with major trading partners. Latin America’s economic performance remains closely tied to its key trading partners—the United States and China—which are also major sources of investment and financing for the region’s economies. Regional leaders face the delicate challenge of balancing economic interests between these competing powers whilst maintaining sovereignty.
Brazilian President Lula said the action evoked ‘the worst moments of interference’ in Latin America and threatened the region’s status as a zone of peace. Meanwhile, other regional powers, including Chile and Mexico, echoed strong condemnation, with Mexico calling the strikes a violation of the UN Charter and urging an immediate halt to acts of aggression.
Looking Ahead: Challenges and Opportunities
ECLAC urges the region’s countries to preserve macroeconomic stability, strengthen their fiscal and monetary institutions, and promote productive development policies aimed at increasing productivity, diversifying exports, boosting intraregional trade and fostering sustainable investment. The year ahead will test South America’s resilience as it navigates political turbulence, economic uncertainty, and the shifting dynamics of global power.
For ordinary South Americans, these developments signal a period of continued economic challenges, with employment projected to increase by just 1.2% in 2026. As the region confronts these headwinds, its ability to chart an independent course whilst managing relationships with competing global powers will prove crucial for long-term stability and prosperity.