Barclays Latin America Outlook Growth rebound seems hard to sustain

FICC Research Economics 14 August 2026

Growth rebound seems hard to sustain Economic activity has been showing mixed results across Alejandro Arreaza Latin America, but the aggregate picture suggests that there was an acceleration in Q226. However, drivers seem hard to BCI, US

sustain, which makes us expect a softer performance in H2 Gabriel Casillas

26. + BCI, US • In Mexico, GDP grew 1.5% in Q2 26, a sharp rebound from the 0.6% contraction in Q1, but Roberto Secemski driven largely by temporary factors. • Economic activity growth has remained resilient in Colombia, but sustained mainly by public BCI, US spending, which we think is likely to revert in the coming months. In Brazil, the softer Nestor Rodriguez performance of economic activity in Q2 happened even amid significant front-loading in fiscal expenditures so far this year. BCI, US • Peru is particularly vulnerable to El Niño. The new administration is trying to promote investment-led growth, but it is still subject to execution capacities. In Chile, economic Ivan Stambulsky + activity has been weak since the beginning of the year. However, fundamentals are favorable, so we expect economic activity to pick up in 2H. BCI, US

• In Argentina, tight fiscal policy coupled with trade liberalization likely requires a weaker currency for non-tradable and import-competing sectors to do better, while in Venezuela, the recent earthquake has led us to moderate our growth expectations.

Economic activity has been showing mixed results across Latin America, but in aggregate there seems to have been an acceleration in Q2 26, propelled by rebounds in Mexico, Colombia, Venezuela and CAC, which mitigated more modest growth in Brazil, Argentina and Peru. However, the question is how sustainable this growth might be, as some drivers seem hard to sustain, which makes us expect a softer performance in H2 26.

In Mexico, GDP grew 1.5% in Q2 26, a sharp rebound from the 0.6% contraction in Q1, but driven largely by temporary distortions, rather than a meaningful shift in underlying momentum (Q2 26 GDP - Reading through the rebound). The security operation against "El Mencho," the leader of the Jalisco Nueva Generación Cartel, disrupted activity across several states early in the year, while the late-2025 surge in Chinese imports ahead of new tariffs inflated Q4 and mechanically weakened Q1 through base effects, factors that seasonal adjustments cannot fully neutralize. More importantly, GDP in the first half of 2026 expanded 1.4% relative to the same period of 2025, supported by strong US demand and a long-awaited turn in the global manufacturing cycle. The widely discussed boom in non-auto manufacturing exports, especially AI-server assembly, remains constrained by limited domestic value added (Latin America: Dribbling to the right, June 24, 2026). AI-related exports carry a foreign content ratio of roughly 71%, far above

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Barclays | Latin America Outlook

autos at 47%,1 and are mirrored by similar increases in related imports, underscoring Mexico’s role as a transit platform, rather than a deep manufacturing hub, despite its being a sector that markets are watching (MXN: The underappreciated AI story, August 5, 2026). Overall, we expect revised GDP figures, due August 24, to show a smaller Q1 26 contraction and a more moderate Q2 26 increase, reinforcing that neither quarter’s headline number should be over-interpreted. We continue to expect Mexico’s GDP to grow 1.2% in 2026 and 2.3% in 2027.

Similarly preliminary data suggest that Colombia's GDP grew about 3.8% in Q2, accelerating from 2.2% in Q1. However, this seems to be mainly the result of the push the economy received from the acceleration of public expenditures made by the Petro administration ahead of the recent elections. This dynamic is likely to revert in H2. First, normally there is a slowdown in the execution of public expenditures in the transition period from one administration to another; second, the new De la Espriella administration has signaled a move into fiscal tightening; and third, the monetary tightening that Banrep made through the first half…