Overview
The war in the Middle East is expected to widen economic differences across Latin America and the Caribbean, producing short-term relief for oil exporters even as it darkens the near-term outlook for tourism-dependent Caribbean economies and energy-importing countries in Central America, the International Monetary Fund said on Friday.
Growth outlook and context
The IMF released the assessment following its updated World Economic Outlook earlier in the week, which projects the Latin America and Caribbean region will expand 2.3% in 2026 - marginally below the 2.4% recorded in 2025 - before strengthening to 2.7% in 2027. Within that forecast, Brazil, the region’s largest economy, is expected to grow 1.9% this year, while Mexico’s expansion is projected at 1.6%.
According to the fund, the region entered 2026 in relatively solid condition, with inflation in many countries hovering near target and overall growth tracking close to trend. The conflict in the Middle East emerged as a new external shock, triggering swings in market sentiment, tightening financial conditions and pronounced moves in commodity prices.
Commodity price moves
On Friday, both Brent and WTI crude oil prices plunged by more than 10% after Iran’s foreign minister indicated that passage for all commercial vessels through the Strait of Hormuz was open amid a ceasefire. Despite the single-day drop, the IMF noted that both benchmarks have risen roughly 45% year-to-date in 2026, amplifying the distributional effects across the region.
Winners and losers
The IMF identified oil-producing countries as the clearest short-term beneficiaries. Higher energy prices have boosted export earnings, supported public finances and relieved pressure on external accounts for nations including Argentina, Brazil, Colombia, Ecuador, Guyana, Trinidad and Tobago and Venezuela. Even so, the fund cautioned that households across these economies continue to face higher fuel and food costs.
Conversely, Caribbean economies whose incomes depend heavily on tourism are facing a worsened outlook, and Central American countries that import energy are expected to be disadvantaged by the shift in commodity prices and financing conditions.
Institutional setting
The IMF delivered these assessments while convening its spring meetings in Washington this week, highlighting how the geopolitical shock has fed through to market behaviour and policy considerations across the region.
Note: This article presents the IMF's analysis and projections as reported. It does not introduce additional data or outcomes beyond the IMF's statements.