Latin America's ongoing shift to the right across a wave of presidential elections is reinforcing a constructive outlook for the region's economies, according to BMI, Fitch Solutions' research unit, which hosted a webinar last week on the region's macroeconomic and political trajectory.

The consultancy believes that a rightward realignment now under way in Peru, Colombia, Chile and potentially Brazil is likely to support investor sentiment even as global conditions remain volatile. The firm's base case is for business-friendly, fiscally conservative governments to emerge from election cycles in three of the six major South American markets, a shift it expects to catalyse foreign investment and domestic capital spending.

The region has weathered a prolonged Middle East conflict better than initially feared. BMI's regional political risk index, GDP-weighted across its markets, averaged 49.7 out of 100 for 2026, down from 51.6 at the end of 2025, pointing to a broadly stable risk backdrop even after the closure of the Strait of Hormuz kept oil prices elevated in the mid-$80s a barrel. Global growth has been revised down to 2.4% for the year as the oil-price spike tightened financial conditions, while the effective US tariff rate on dozens of economies, set to be unveiled at the end of this week by the Trump administration, is seen climbing toward 13% from 10.5% previously.

Peru and Colombia lead the pivot

In Peru, Keiko Fujimori's narrow victory, by a margin of roughly 0.2%, has bolstered BMI's confidence that the country can complete a full presidential term for the first time since 2016. The firm expects Fujimori to press ahead with a low-regulation stance in mining and to pursue pension reform, after years of "extraordinary" early withdrawals eroded the system's balance sheet. Peru's economy is forecast to grow 3.0% in 2026, moderating in the second half as a severe El Niño weighs on agriculture and fishing, before accelerating to 4.0% in 2027 as copper demand tied to artificial-intelligence infrastructure and the energy transition provides a tailwind. A $50bn backlog of mining permits, equivalent to roughly 15% of GDP, is a central plank of the incoming government's agenda.

Colombia's Abelardo De la Espriella, a right-wing criminal lawyer, won the country's tightest run-off in at least five election cycles, taking 50.5% of the vote against 49.5% for leftist senator Iván Cepeda, a margin of about 250,000 votes on record turnout of 63.6%. BMI expects a pronounced policy pivot away from the state-centric model of outgoing president Gustavo Petro toward deregulation, fiscal consolidation and a more hawkish security posture, including the unfreezing of oil and gas exploration licences and an end to the ban on fracking. The firm nonetheless points out that De la Espriella's narrow mandate and a fractured Congress will temper the scope of his reform agenda, with the budget deficit seen narrowing only gradually, to 6.6% of GDP in 2026 and 4.8% by 2028. Growth is projected at 2.3% in both 2026 and 2027.

Chile's fiscal credentials, Brazil's knife-edge race

Chile presents a more complicated picture. President Jose Antonio Kast, who took office in March, has cut spending and passed higher fuel costs through to consumers, moves BMI credits with keeping the deficit trajectory under control, but which have also dented his approval ratings. Growth has been revised down to 1.6% for 2026 after five consecutive months of contraction, driven by weakness in mining tied to water shortages and labour disputes. Kast's National Reconstruction Bill, which would cut the corporate tax rate to 23% from 27% and introduce a tiered tax-stability mechanism ranging from ten to twenty years depending on investment size, is still working through a fractured legislature. Copper shipments nonetheless hit a record $30 billion in the first half of the year despite falling output volumes.

Brazil is, in BMI's words, its "lowest-confidence electoral call of the cycle." The firm's base case has Flávio Bolsonaro, a son of convicted former president Jair Bolsonaro, narrowly defeating incumbent Luiz Inácio Lula da Silva in October, though a corruption scandal involving the liquidation of Banco Master has recently dented Bolsonaro's momentum, leaving Lula with a narrow polling lead outside the margin of error and an approval rating around 48%. Markets are already pricing political risk into the currency: BMI's base case for Brazil's headline deficit to narrow from 8.3% of GDP in 2026 to 7.2% in 2027 is contingent on a Bolsonaro win, and the firm expects credit-default-swap spreads to widen sharply and the real to sell off if Lula prevails, forcing the incumbent to pursue deeper fiscal consolidation than would otherwise be needed to satisfy investors.

Mexico and Argentina hold to differing paths

Mexico, by contrast, is not part of the region's rightward tilt but is nonetheless drawing BMI's optimism. President Claudia Sheinbaum's infrastructure plan is crowding in private capital, including in energy and rail, after a 2024-2025 investment freeze tied to constitutional uncertainty. Growth forecasts have been revised up to 1.4% for 2026 from 1.0% previously, with an acceleration to 3.0% seen in 2027. Mexico has also retained a preferential 5% effective tariff rate under USMCA even as Washington opted for annual reviews rather than a 16-year extension of the agreement.

In Argentina, President Javier Milei's adherence to fiscal discipline continues to anchor market confidence, with EMBI spreads narrowing, even though the country has yet to return to international capital markets. Growth surprised to the upside in the first quarter, expanding 0.7% quarter-on-quarter on private consumption, and BMI's 2026 forecast stands at 2.5%, rising to 3.2% in 2027 as the country's flagship RIGI investment regime and rising energy output improve the trade balance. A modest fiscal surplus is expected to persist through 2027, though BMI warns that a Peronist win in that year's presidential election could unsettle a market currently pricing in continuity.

Risks skew toward weaker outcomes

BMI's central message was that the region's fiscal trajectory now hinges largely on politics. A broad shift to the right, Mexico aside, has left the firm more confident than it has been in some time that governments will follow through on the structural reforms, particularly to pension systems, needed to stabilise public debt. Brazil stands out as the main threat to that view given the stakes of October's election.

BMI flagged three additional risks to its constructive base case: a severe El Niño event that could shave 0.2 percentage points off regional growth while adding 0.5 to 1.0 percentage points to headline inflation; the possibility that a cooling of the AI and semiconductor investment cycle could hit copper prices and, with them, Chile and Peru; and a broader tightening in global financial conditions that would weigh hardest on more fragile economies such as Ecuador.