February 24, 2026
Latin American sovereign upgrades could exceed downgrades again in 2026 given the balance of rating Outlooks, Fitch Ratings says in a new report. Five sovereigns are on Positive Outlook and none on Negative Outlook; 12 are on Stable Outlook, with three in the ‘CCC’ category where Outlooks are not typically assigned.
Steady economic growth, favourable external financing markets, a weak U.S. dollar, and supportive commodity prices should support sovereign creditworthiness in the region this year. Key potential risks stem from geopolitical tensions, weaker-than-expected growth in the U.S. or China, or more volatile and difficult funding conditions. Domestically, policy slippage and political shocks could spark investor aversion and undermine growth.
We forecast regional GDP growth of 2.2% this year. Near-shoring prospects, especially relevant for Mexico, are unclear amid global trade uncertainties. Structural challenges include weaker investment rates and a lack of growth-enhancing reforms amid political polarization and policy drift.
Positive rating Outlooks are mostly on Caribbean and Central American countries. Fitch generally expects smaller economies to outperform, with growth rates of 4.0%-4.5% forecast in Paraguay (BB+/Positive), Panama (BB+/Stable) and the Dominican Republic (BB-/Positive). A potential slowdown in remittances remains a risk for Central America.
Fiscal consolidation stalled in many countries last year. We expect the median deficit to drop slightly to 2.2% of GDP in 2026, but significant deficit reduction is becoming harder absent structural fiscal reforms. Diverging debt trajectories reflect larger countries’ inability to deliver primary surpluses to stabilize their debt burdens while smaller Caribbean islands and select Central American sovereigns reduce theirs.
Positive rating trends over the past three years partly reflected economic recovery and fiscal consolidation since the 2020 Covid-19 pandemic and the invasion of Ukraine in 2022. These shocks drove numerous sovereign downgrades, and Latin America’s average sovereign rating is relatively low in the ‘BB’ category.