LATAM Views Steady Winds, Uneven Sails (Ramos)

Economics Research 24 July 2026 | 8:08AM EDT

LATAM Views: Steady Winds, Uneven Sails (Ramos)

“The future is already here – it’s just not evenly distributed” William Gibson Alberto Ramos | (Mar-1948 - ); American/Canadian fiction writer and essayist. Goldman Sachs & Co. LLC

1. Latam Real Activity: Steady but Heterogeneous. LA7 real GDP growth exceeded expectations in 1Q26, expanding 0.5% qoq sa—matching the 4Q25 pace and above our early-May forecast of 0.3% qoq sa. Growth surprised to the upside in Brazil, Ecuador, and Peru. The 1Q26 growth map was notably heterogeneous. After all economies under our coverage expanded in 4Q25, activity contracted in Chile and Mexico in 1Q26, while Brazil led the region with a solid 1.1% qoq sa expansion (final domestic demand +1.3% qoq sa), supported by a strong labor market and robust real household disposable income growth, partly sustained by fiscal transfers. In Argentina, weak and narrow-based Jan-Feb activity was more than offset by the strong 4Q25 carry and a solid Mar print, resulting in a 0.7% qoq sa expansion in 1Q26. We forecast LA7 real activity to expand 0.8% qoq sa during 2Q26, with growth returning to positive territory in Chile/Mexico and accelerating in Colombia but moderating in Brazil and contracting in Argentina and Ecuador (payback for the strong 1Q26). We forecast LA7 growth at 2.0% in 2026, down from 2.2% in 2025; key downside risks are a strong, disruptive El Niño, a renewed global oil shock, and tighter global financial conditions.

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Exhibit 1: Steady But Uneven Real GDP Growth Exhibit 2: Brazil: Robust Real SA Household Gross LA7 Real GDP (PPP Weighted Average) Disposable Income Growth 7.0 Percent change, year ago Percent change, year ago 11.66 Real GDP (% qoq sa) 14 14 6.0

5.0 4Q20 GS Forecast Q Q25 1Q26 4Q26F

0.0 4 4 4Q22 4Q23 4Q May-22 May-23 May-24 May-25 May-26 -4.0 1Q18 1Q19 1Q20 1Q21 1Q22 1Q23 1Q24 1Q25 1Q26

Source: Goldman Sachs Global Investment Research Source: BCB, Goldman Sachs Global Investment Research

2. Latam Inflation: Sticky Services. LA-IT5 inflation remains contained despite the oil shock, though still elevated in the 4% range. The Mar-Apr oil shock disrupted the disinflation trend, but the impact from higher fuel and food prices was cushioned by stable core dynamics and low, well-anchored, tradable goods inflation. Headline inflation accelerated to 4.5% yoy in Apr, from 3.5% in Feb, and by June was still tracking at 4.5%. Services’ inflation remains high and sticky across Latam: running at 5.4% yoy, vs 4.4% a year ago. Currency strength has helped keep tradable goods inflation contained at 2.8%, while fuel inflation surged, peaking at 11.7% yoy in May from a low -3.3% in Feb. We expect LA-IT5 inflation to rise to 4.9% in 2026 from 4.0% in 2025, with headline inflation accelerating across all five economies. Colombia is expected to lead the move, rising 150bp to 6.6%, driven largely by the 23% minimum-wage increase and resilient activity.

Exhibit 3: Oil Price Shock Disrupted the Gradual Exhibit 4: High and Sticky Services Inflation Disinflation Trend LA-IT5 Inflation (Simple Average) LA-IT5 Inflation (Simple Average)

Percent change, year ago Percent change, year ago Percent change, year ago Percent change, year ago 11.0 11.0 14 Goods/Tradable 14 Headline 10.0 10.0 12 Services/Non- 12 9.0 Core 9.0 Tradable 8.0 Services Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Jun-25 Jun-26

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research