Moody’s Ratings’ 2025 Forecast for Latin America: Stable Outlooks, Sustainable Finance Trends & Impact of US Policy Measures

By Moody’s Ratings

With nearly 30 years of experience in Latin America, Moody’s Ratings continues to evolve, reflecting a constant commitment to understanding customer needs and providing world-class service.

Moody’s Ratings is at the forefront of credit risk and sustainable finance analysis in Latin America, striving to help customers make more informed and strategic decisions. The region is essential to Moody’s Ratings’ global presence, serving as a key component of its Emerging Markets strategy.

There are the three key dynamics Moody’s Ratings sees shaping Latin America’s economies and credit markets as the region faces a complex and evolving landscape in 2025: the credit outlook for sovereign and nonfinancial companies; the prospects for the sustainable finance industry; and the impact on the region of policy measures adopted by the United States.

Stable Outlook for Sovereign & Nonfinancial Companies

The region remains resilient thanks to adaptable economies, despite external challenges:

• Upside: Declining borrowing costs and governments’ efforts to shore up fiscal health are delivering benefits.
• Downside: Modest growth prospects and uncertainty related to shifts in US trade policy.

Nonfinancial companies must balance growth opportunities with inherent risks influencing corporate credit quality worldwide:

• Finding macro normal, geopolitical tensions, global transitions, and digitalization and disruption.
• Adapting to these dynamics will be crucial to credit quality and sustainable growth.

Sustainable Finance Trends

Global sustainable bond issuance is expected to total $1 trillion in 2025, steady from 2024.

• Europe will lead it, as it has done since 2017, although issuance may once again be flat given the maturity of the market.
• Asia-Pacific will remain an important driver of sustainable bond volumes.
• North America issuance will remain muted amid a retrenchment of environmental policies under a new US administration.
• Emerging market volumes, especially in Latin America and the Caribbean, should rise as COP30 in Brazil approaches.

The design and implementation of government policies to reduce greenhouse gas emissions will be a slow undertaking in Latin America.

National oil companies in the region face intensifying demands to reduce emissions, but weak legislation, limited finances, and the need to focus on energy security to replace imported fossil fuels pose significant challenges.

Data centers are expanding in areas with the most demand for cloud computing and 5G networks, including Brazil, Mexico, Chile, and Colombia.

• Upside: Low-cost, renewable power is widely available.
• Downside: Economic volatility, policy uncertainties, water management risks and transmission bottlenecks threaten long-term returns on investment for new data center developments.

 What we’re tracking: Challenges and opportunities for Chilean renewable energy;  Mexico’s power sector and Brazil’s high interest rates.

Chile’s massive copper and lithium industries bode well for its long-term energy transition, but the short-term is less certain.

• Snapshot: Mining companies will need to balance the need to expand production of future-facing commodities with the need to reduce carbon emissions from production processes with mandated decommissioning of carbon power plants. Network developments lagging the rapid expansion of renewables add further volatility to the power sector, increasing the risk of curtailment. Deployment of battery projects will play an important role in energy transition.

Mexico’s need substantial clean-energy investment to reach its ambitious energy transition goals. The new participation schemes offer private generators clear guidelines and options to grow, but the country’s weaking rule of law hurdles for investors.

• Snapshot: New investment schemes will allow private companies to supply power, partnering with the state-owned utility CFE, or continue participating in the wholesale electricity market, with substantial government oversight and control.

Brazil’s contractionary monetary policy will reduce banks’ credit growth and margins.

• Snapshot: Brazil’s increasing interest rates, persistent inflation and further currency depreciation will strain corporate cash flow and reduce profitability in 2025, limiting the financial room for companies to meet their financial obligations.

United States Policy Measures

Latin America and the Caribbean are exposed to changes in the United States’ trade  policies which drive both the resulting geopolitical dynamics between the United States and China, and financial market volatility.

Announced US tariffs would hit Mexico economy hardest given the amount of trade between the two countries. But goods that comply with the USMCA – about half of Mexico’s exports, according to media reports – are not subject to tariffs.

Other countries in the region do not depend heavily on trade with the US for economic growth, but the US and China are the largest trading partners for many Latin American countries. While South America is less linked to the US than it once was, its trade and investment ties to China represent channels that indirectly expose them to policy changes in the US.

• Nearly a third of Brazil’s exports and more than a third of Chile’s and Peru’s total exports go to China, for example.
• And Brazil and Argentina export steel and aluminum, which are subject to 25% tariffs, to the US.
• Snapshot: Recently, China has played an expanded role as investor in some of those countries with its foreign direct investment increasingly going into infrastructure in addition to primary activities, i.e., mining.

An emblematic example is Peru’s Chancay megaport that was built by Chinese companies and that will likely channel an important part of trade between Latin America and Asia.

• US policies to counter Chinese influence in the region could entail increased investments by US companies or strategies targeted via multilateral development banks, which could result in opportunities for Latin American countries.

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