As the region swings to the political right, sustained development will depend not only on restoring macroeconomic stability and improving national security, but also on strengthening institutions, raising productivity, fostering innovation and creating more diversified and resilient economies.
Latin America is in the global spotlight. Politically, the region is swinging right at an unprecedented pace. Several new presidents have taken office in 2026 already – and several of these incoming governments have adopted approaches that echo elements of the Trump era in the United States, including tougher positions on crime, migration and aggressive economic policy.
But the story isn’t only political. The region has also captured global attention through sport, culture and entertainment.
Football has once again brought Latin American countries to international attention, with Argentina reaching another World Cup final and its highly charged encounters with England and Spain reviving historic rivalries and attracting global audiences. Ecuador’s unexpected victory over Germany further highlighted the region’s growing presence on the world stage, prompting celebrations across the country, including a national holiday declared by President Daniel Noboa. Paraguay subsequently beat Germany in the knockout stages of the tournament.
Culturally, Latin America’s influence is spreading even faster. Artists such as Bad Bunny and Karol G have become international cultural figures, bringing Spanish language music to audiences far beyond the region and contributing to a renewed interest in Spanish, particularly among younger generations in continental Europe, the UK and the United States (see Figure 1).
Figure 1: The rise of Spanish in UK schools
Source: Growth Lab team’s own elaboration using the British Academy School Indicators.
This combination of political transformation and cultural influence has created a new moment of global focus on Latin America. At a time when migration, identity and language have become highly contested issues, particularly in the United States, the visibility of Spanish-speaking communities and Latin American culture has never been greater.
The result is a complex picture: a region often portrayed through political tensions and economic challenges, but also one whose cultural influence is reshaping global conversations about identity, language and belonging.
Last week and this, the Economics Observatory has been exploring some of these tensions across the region. Our series examines how Latin American countries are responding to a changing political landscape, including the emergence of new right-wing governments and leadership styles that share similarities with Trump’s America, while also looking at the deeper structural economic challenges that continue to shape their development paths.
Across six articles, we have explored the experiences of Argentina, Chile, Colombia, El Salvador, Mexico and Peru, highlighting the different approaches that they are taking to address longstanding barriers and new pressures.
The political pendulum swings right
The political landscape of Latin America looks markedly different from what it did just four years ago. In 2022, most countries in the region were governed by left-leaning administrations, with Brazil standing out as one of the few major exceptions before Luiz Inácio Lula da Silva returned to office in early 2023 (see Figure 2).
Some observers have described this shift as the Trumpification of Latin America. The comparison reflects not only the region’s move towards right-wing governments, but also the emergence of leaders who have adopted political styles and governing approaches reminiscent of the current US president.
These similarities are particularly evident in the adoption of tougher, security-focused approaches to crime and migration, as well as in a political style that mirrors Trump’s administration. Indeed, many of the region’s new right-wing leaders have embraced an outsider image, a more confrontational communications strategy and an increasingly aggressive approach towards political opponents and the media.
Figure 2: Political swing in Latin America, from 2022 to 2026
Source: Author’s calculations.
Notes: Political orientation is based on the president in office following each country’s most recent presidential election. For Peru, the 2022 observation refers to President Dina Boluarte, who assumed office after Pedro Castillo was removed from office in December 2022. For Colombia and Peru, the 2026 observations reflect the candidates elected in the 2026 presidential elections.
The key question is what explains Latin America’s recent shift to the right. This is a complex, multifaceted issue that cannot be fully answered here, but several articles in our series offer useful insights.
Chile and Colombia
In his piece on Chile, Felipe González (King’s College London) describes how the country moved from the 2019 social unrest, with demands for greater fairness, dignity and a new social contract, to a more conservative government promising order, fiscal discipline and economic recovery. Felipe suggests that Chileans did not shift from wanting more to less government: rather, they demanded a state that could deliver. The country’s political shift, he says, ‘reflects a deeper frustration with institutions that have struggled to deliver both economic opportunity and everyday security’.
Other countries are following a similar pattern. As Andrea Correa (OMFIF) highlights in her article on Colombia, the country’s recent election reflects a broader trend across Latin America: left-wing governments struggling to reconcile ambitious social agendas with fiscal credibility, while voters increasingly turn to right-wing alternatives promising order, security and economic stability.
The electoral victory of incoming Colombian president Abelardo de la Espriella – by around one percentage point in a highly competitive second round – mirrors the tight electoral dynamics seen in Peru, where the result was also decided by a very small margin. These close contests illustrate the high levels of polarisation that have increasingly become a defining feature of politics across the region.
The new generation of right-wing leaders has also embraced a common economic narrative: the need for rapid ‘shock therapy’ rather than gradual reform to restore fiscal stability. Similar arguments have been central to the political strategies of leaders in Argentina, Chile and now Colombia, where voters have supported promises of decisive action and a break with previous approaches to economic management.
Crime at the top of the agenda
Another defining feature of Latin America’s new political landscape is the growing importance of security, particularly the fight against organised crime. Concerns about insecurity have become a key factor behind the rise of several right-wing leaders, who have positioned themselves as capable of restoring order and strengthening the state’s ability to protect citizens.
El Salvador provides the most prominent example. As Frank Muci (LSE) highlights in his article, President Nayib Bukele has placed security at the centre of his political agenda, bringing international attention to his government’s aggressive crackdown on gangs. The policy has transformed daily life in a country that was, until recently, among the most violent in the world. Shortly after taking office, Bukele introduced a security strategy that involved the mass detention of suspected gang members, significantly weakening criminal organisations that had controlled neighbourhoods, extorted businesses and shaped communities for decades.
But as Frank notes, this approach has also generated significant concerns over human rights and democratic safeguards. The state of exception used to carry out arrests has weakened legal protections, while mass detentions have raised concerns about due process and the presumption of innocence.
Despite these controversies, Bukele’s model has attracted considerable attention across the region, with several political leaders adopting similar rhetoric and promising tougher responses to organised crime and insecurity.
The article on Chile illustrates a similar pattern. Crime has become a central political issue, with 88% of Chileans reporting that crime had increased nationally. Although the country remains safer than many in the region, perceptions of insecurity, particularly around violence, drug trafficking and organised crime, have risen sharply. These concerns, alongside migration pressures, contributed to the success of candidates promising stronger action on security and public order.
A similar narrative has emerged in Colombia, where the incoming president campaigned on a tough security agenda. Abelardo de la Espriella, a conservative outsider and businessman who brands himself as El Tigre (the tiger), promised a hardline approach to crime, including the creation of ten mega-prisons, a stronger military response and an end to negotiations with armed groups.
Economic development and investment
One key common thread in our series is the centrality of economic growth. The countries of Latin America represent very different economic models and levels of prosperity, but they share many of the same structural challenges.
The region continues to face deep-rooted productivity challenges that constrain its ability to achieve stronger, more inclusive and sustainable development. Low productivity remains at the centre of Latin America’s economic difficulties, limiting growth and slowing convergence with advanced economies.
A key challenge is the limited complexity of production and exports: many countries remain heavily dependent on primary commodities and low-technology goods, reducing opportunities for economic upgrading, innovation and productivity improvements. Across the region, governments are attempting to build new growth models, although their approaches and starting points differ considerably.
Argentina
The experience of Argentina illustrates both the opportunities and challenges of economic transformation. In their article analysing whether President Javier Milei’s stabilisation programme can deliver lasting growth, Fernando Garcia and Lucila Venturi (both Harvard University) show that the administration has achieved greater macroeconomic stability: inflation has fallen, growth has returned and exports have become a more important driver of recovery.
This is the authors’ second contribution to the Economics Observatory. In a previous piece shortly after Milei became president, they examined his aggressive fiscal and monetary reforms and the significant economic challenges facing the country.
In their new analysis, Fernando and Lucila argue that stabilisation and recovery are also reshaping the structure of the economy. Sectors with the greatest potential, particularly energy, mining and agriculture, are more capital-intensive, export-oriented and often located outside the urban labour markets where employment and wage pressures are most visible.
The challenge for Argentina is whether the new export-oriented sectors can generate sufficient spillovers across the wider economy, and whether they can do so quickly enough to offset the social and political costs of adjustment.
Mexico
For Mexico, the growth challenge centres on whether its integration with North America can translate into broader economic transformation. In her piece, Vanessa Rubio-Márquez (LSE) examines whether ‘nearshoring’ (moving outsourced business operations to neighbouring countries rather than more distant locations) can become a driver of long-term growth, but highlights that structural constraints continue to limit investment.
Despite Mexico’s strategic position in global supply chains, the country faces challenges related to institutional quality, legal certainty, regulatory efficiency, insecurity, infrastructure gaps, energy reliability and the persistence of a large informal sector. According to Vanessa, nearshoring provides a significant opportunity, but its benefits will depend on whether Mexico can strengthen the conditions needed for firms to invest, innovate and move towards higher-productivity activities.
Peru
Peru highlights both the benefits and limitations of commodity-led growth. In their article, Luis Miguel Castilla and Teodoro Crisólogo Grández (both LSE) show how the country benefited significantly from the previous commodity boom, when strong external demand helped to drive growth of around 6% annually between 2004 and 2013, alongside poverty reduction, rising international reserves and productivity gains.
Today, however, despite favourable global conditions for copper exporters, Peru’s economy is growing at around 3% per year, roughly half the pace achieved during that previous boom, highlighting the limits of a growth model heavily dependent on commodities.
Peru’s main obstacles are increasingly institutional and political. The experience of having eight presidents in under a decade has generated uncertainty and weakened investor confidence, with mining being one of the clearest examples of the costs of institutional dysfunction. Social conflict around mining projects has also intensified, partly reflecting perceptions that local communities have not benefited sufficiently from resource extraction.
As Miguel and Teodoro highlight, Peru’s challenge is not only to take advantage of its mineral wealth, but also to use sectors such as mining as a platform for broader productivity improvements through innovation, digitalisation, skills development and stronger institutions.
El Salvador
El Salvador demonstrates that removing one major constraint to growth does not automatically resolve deeper structural challenges. Bukele’s security policies have dramatically reduced crime, addressing a longstanding obstacle to investment and economic activity.
But the resulting growth acceleration has been smaller than expected. The gains have come mainly from services, particularly tourism, rather than from manufacturing and industrial exports, which tend to generate stronger productivity spillovers. Foreign direct investment has also not increased significantly and the country has not yet diversified into more complex goods and services.
The Salvadoran case highlights a broader lesson for the region: security is a necessary foundation for development, but it is not sufficient. Lower crime can create better conditions for investment, retain workers and improve confidence. But sustained growth requires productive firms, skilled workers, stronger institutions, innovation and macroeconomic stability.
Trade: Trump versus China
Closely linked to growth and economic development is trade. A key theme emerging from several articles in our series is the growing tension between China and the United States, and the difficult position that this creates for Latin American countries, increasingly caught between the two powers. The consequences of the rivalry are significant: decisions about trade, investment and supply chains are becoming not only economic choices but also geopolitical ones.
Mexico’s example is the most illustrative. The depth of the Mexico-US relationship is difficult to overstate. Mexico’s proximity to the United States and the 1994 North American Free Trade Agreement (NAFTA) transformed its economic integration with its northern neighbour. The article shows that bilateral trade reached a record level in 2025, more than ten times higher than in 1993 (the year before NAFTA).
But Mexico is increasingly caught between China and the United States. While its economic relationship with the former is limited in terms of exports and investment, the Asian giant has become Mexico’s second-largest source of imports.
This has become particularly sensitive as Mexico expands its role as a supplier of advanced technology products to the US market. Although Mexico overtook China as the largest supplier of these goods to the United States in 2025, many exports still rely on imported inputs from East Asia, raising concerns in Washington about Chinese links within North American supply chains.
Peru illustrates the same tension through the lens of critical minerals. As the world’s third-largest copper producer, the country is well positioned to benefit from rising demand linked to the energy transition and digital technologies. Together with Chile, Peru accounts for around 35% of global copper production, placing the Andes at the centre of efforts to secure supplies of this strategic mineral, particularly as China consumes more than half of the world’s refined copper.
The China-US rivalry is already reshaping Peru’s trade and investment landscape. China remains Peru’s largest trading partner and a major investor in its mining sector, while the United States is seeking to strengthen alternative supply chains through critical minerals agreements and trade measures. For Peru, this competition creates opportunities to attract investment, but it also increases pressure to navigate between the two powers and it could also limit the country’s policy flexibility.
Conclusion
Latin America’s recent transformation reflects more than a political swing to the right. Across the region, governments are responding to common pressures: weak productivity, rising demands for security, institutional challenges and an increasingly complex global economy.
While countries have adopted different strategies, the articles in our series point to a shared conclusion. Sustained economic development will depend not only on restoring macroeconomic stability or improving security, but also on strengthening institutions, raising productivity, fostering innovation and creating more diversified and resilient economies.
As global geopolitical tensions intensify, Latin America will play an increasingly important role in shaping international trade, investment and supply chains, making the region one to watch in the years ahead.
Where can I find out more?
There are several other articles on the Economics Observatory website exploring Latin American economies, including:
- Argentina under a new government: what are the big economic challenges? In May 2024, Fernando Garcia and Lucila Venturi discussed the likely success of Milei’s aggressive fiscal and monetary reforms aiming to stabilise the economy and reduce inflation.
- From crisis to stability: what next for Bolivia’s economy? An article published in October 2025 noted that Bolivia is at a decisive moment in its modern economic and political history, after nearly two decades of dominance by the Movement Toward Socialism party. Whoever ends up taking charge will need to draw up an economic stabilisation programme – though implementing it will be challenging.
- What are the big economic challenges facing Lula’s government in Brazil? An article published in January 2023 said that rising poverty and inequality, together with the lingering effects of Covid-19 and management of the Amazon rainforest, dominate the policy agenda. Repairing the country’s international reputation is also critical.
- Why did Venezuela’s economy collapse? In September 2024, Frank Muci explained how the Venezuelan economy has suffered from decades of disastrous economic policies – and more recently, from economic sanctions. The country has seen the largest ever decline in living standards outside war, revolution or the collapse of the state.
