The banking sector in Latin America is closely linked to regional economic performance, channeling savings into productive credit and transmitting monetary policy. In 2026, this role will be even more relevant in the face of an uncertain global environment and persistent domestic challenges.
In this context, evaluating risks and prospects will be key to strengthening financial resilience and taking advantage of opportunities in the region, which faces the structural challenge of accelerating its growth and approaching the average expansion of other emerging countries, which has exceeded 4% annually. Latin America, on the other hand, has remained close to 2%, reflecting lags in productivity and a limited capacity for convergence, which underlines the need for reforms that boost investment, innovation and financial inclusion.
During the first half of 2025, exports from emerging market countries to the United States increased significantly, driven by advance purchases due to the risk of higher tariffs. In Latin America, Chile and Peru benefited from a significant rebound in their shipments, while Brazil and Mexico showed neutral impacts, and Colombia recorded a drop.
It is expected that, after the effective increase in rates in August, we will see a more adverse commercial environment. Once accumulated inventories are exhausted, importers in the United States will face higher costs, and it will be key to observe whether consumers will absorb higher prices.
It must be said that, although in many emerging countries the direct impact of tariffs could be limited, in Latin America it would be more significant. Particularly, for Mexico, Central America and some countries in the Caribbean, considering their levels of exports to the United States in relation to their gross domestic product (GDP). Globally, other vulnerable economies include Vietnam, Thailand and Malaysia.
On the other hand, domestic demand in the region has shown resilience and financing conditions have been favorable. The weakness of the dollar and the expansionary monetary policy of the Federal Reserve (Fed) – with cuts in interest rates – have facilitated the inflow of capital and the reduction of interest rates in several countries in the region. This context has sustained consumption and investment, although doubts persist about how much room there is to continue lowering rates without generating imbalances. If the differential between local rates and those of the Fed narrows too much, it could increase exchange rate volatility and cause capital outflows.
In addition, the weakening labor market in the United States and inflationary pressures from tariffs pose additional risks. In this scenario, it will be essential for Latin American countries to reinforce their macroeconomic response capacity and strengthen their financial systems to mitigate the effects of a possible global slowdown and preserve internal stability.
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Main risks that Latin American banks will face
For next year, banks in Latin America will face a complex environment, with both external and local economic risks. At the international level, trade uncertainty with the United States—accentuated by rising tariffs and high accumulated inventories—could slow down trade flows. In addition, the weakening of the US labor market and changes in immigration policy threaten the sending of remittances to the region. This would be particularly serious for Mexico, Central America and the Caribbean, where they can represent between 10% and 25% of the GDP of those countries, as they support domestic consumption. If this trend persists, demand for regional exports could deteriorate further, aggravated by inflationary pressures in the United States.
The lower global economic growth and the fall in prices of commodities They put pressure on exporting economies. Although the territory has been relatively isolated from geopolitical tensions, the slowdown in external demand and an adverse commercial environment make up a challenging outlook. At the domestic level, the electoral processes planned for 2026, in countries such as Colombia, Peru, Argentina, Brazil and Costa Rica, could generate instability and make the implementation of reforms difficult. In Mexico and Brazil, there is also concern about the moderation of domestic demand.
Despite global and local risks, in general, regional banks are poised to operate in 2026 with solid credit fundamentals: good profitability, adequate capitalization levels, stable asset quality and growth financed by diversified and relatively low-cost deposits. The environment of lower interest rates has improved financing conditions, which could sustain domestic demand and boost credit, especially in Colombia, Peru and Chile, where consumption shows positive signs.
In this way, the combination of expanding economies and less pressure on payment capacity generates fertile ground for banks to continue growing with healthy and profitable businesses. Compared to other banking sectors in emerging markets, Latin America maintains relative advantages that could be consolidated if macroeconomic stability is preserved.
Countries with the greatest credit expansion
By 2026, the countries with the greatest credit expansion (7%-8%) would be Brazil, Mexico, El Salvador and the Dominican Republic. In Mexico, growth will depend in part on the review of the Trade Agreement between Mexico, the United States and Canada (T-MEC), although the relationship with the United States is expected to remain solid. However, pressures on household purchasing power, tighter corporate margins and greater regulatory demands could affect credit demand and the stability of smaller banks.
For its part, in El Salvador, credit will grow in a stable manner in 2026 and in line with the dynamics of the economy, although new liquidity requirements could limit a more accelerated expansion. In the case of the Dominican Republic, credit expansion will be supported by better dynamics in tourism, trade in free zones, and foreign direct investment.
In turn, Colombia, Peru and Costa Rica would register a credit expansion of close to 6% next year. In the first, lower fixed investment is expected in the face of persistent inflation, fiscal weakness and political uncertainty. Banking faces low profitability, limited by the usury rate. In Peru, economic growth will be 2.7% in 2026, supported by lower inflation and rates, although political risk persists. The bank is well capitalized and prepared to face pressures on asset quality. In Costa Rica, the good performance in commercial areas in recent years is already reflected in the economy. For next year, credit will regain strength, supported by the recovery of employment and greater confidence in the private sector.
In 2026, Chile and Panama would show the lowest credit growth (4.5%-5.5%). Meanwhile, for Chile, less economic dynamism is expected. Banks, after implementing Basel III, must sustain their profitability under higher capital requirements, while, in Panama, the gradual recovery of the economy will favor a more accelerated expansion of credit and healthy asset quality.
The author is a specialist in credit ratings and the financial sector in Latin America. Former Managing Director and leader of the financial institutions sector in the region at S&P Global Ratings for 18 years. Likewise, he is an international speaker in specialized forums exposing economic and credit trends. In his day-to-day life, he seeks to provide strategic vision to different Boards of Directors. Contact: (email protected)
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