LatAm Outlook 2026: Mexico holds steady. Colombia faces pressure.
Deep Dives
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Economy of Colombia
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The article highlights Colombia's suspended fiscal rules, raised deficit targets, and investor demands for higher risk premiums. The broader context of Colombia's economic structure and fiscal challenges helps readers understand why debt stabilization is so critical for the next administration.
This week I sat down with two economists who track every shift in emerging markets. Elijah Oliveros Rosen and Harumi Hasegawa Sanchez from S&P Global Ratings joined me to unpack why Latin America did better than expected this year and why Mexico and Colombia are now moving in opposite directions.
Latin America closed the year in better shape than many predicted. Credit spreads dropped to levels we have not seen in more than ten years. Capital inflows picked up once the Federal Reserve started cutting rates and the dollar lost strength. AI lifted global risk appetite and that helped raise the value of assets across the region.
Mexico and Colombia show how uneven this recovery is. One country kept its balance. The other is trying to find it.
MEXICO
Mexico lives with a heavy exposure to the United States. Close to a third of its GDP depends on exports to the US. On paper this should have made Mexico one of the most vulnerable economies in the region during the tariff cycle. Yet the story turned out to be the opposite. Growth projections held up and even moved higher during the year.
The real twist came from the domestic side. Public investment dropped by about twenty percent. That alone removed close to half a point from GDP. Even so, the wider economy stayed stable. Consumption remained solid. External demand held. Capital inflows helped lower borrowing costs.
Mexico also rode the global shift in risk appetite. AI pushed asset prices higher everywhere and that included Latin American credit and equities. Mexico gained from that move even without hosting major AI infrastructure.
The next big date is 2026. The USMCA review will add uncertainty, but the long term trade relationship with the United States is not at risk. The real work will be rebuilding public investment and keeping fiscal policy on track.
COLOMBIA
Colombia enters 2026 with a heavier load. Growth is still weak and below potential. Domestic demand is doing most of the work and household consumption is the main driver. Wage gains supported that dynamic. Investment remains soft. Infrastructure projects and energy projects are improving, but slowly.
Inflation is another obstacle. It is coming down, but not fast enough. It sits near five percent. The central bank wants three percent. Rates stay near nine percent until inflation becomes more cooperative. High rates keep financial conditions tight and limit new credit.
The ...
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