China Research

Currently, South America is receiving increasingly positive forecasts by international investors. This optimism is mainly motivated by high commodity prices and liberal reforms in some countries. However, I have heard this story before. More evidence is needed to believe in a forthcoming success story for South America.

So far uneven and only slight upswing

In my memory, South America has never been a broadly booming continent. And Brazil, by far the most important economy in South America, has been considered as an emerging country with a big potential through many years – without really sticking to its opportunities.

According to most predictions, South American GDP growth will slow down somewhat in 2026 compared to 2025 – and only see a slight improvement to around 2 1/2 percent next year. Such a growth outlook can hardly be described as a boom.

Looking at different countries, Paraguay and Peru seem to look better than the two biggest economies, Brazil and Argentina. Also after the re-election of president Lula, expectations of clearly better Brazilian economic growth remain limited. 

Furthermore, it does not look probable that Argentina will perform visibly better next year – nor will probably the other South American economies. Only Venezuela may achieve a notable growth improvement – but from very depressed levels. 

Conclusion: Sure, a commodity boom may support South American economies in forthcoming years. But we also know about the volatility of commodity prices. I would feel much more confident about South America if all – or most – countries finally could go for comprehensive institutional reforms.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University