Enduring and Emerging Problems
Political polarization, economic fragility and mounting environmental risks are testing the resilience of democracies across Latin America and the Caribbean. Widespread corruption, entrenched inequality, and surging crime and violence have strengthened the appeal of populist leaders promising quick fixes. And yet, for all the turbulence, electoral systems across the region have so far proved remarkably stable.
Taken as a whole, Latin America and the Caribbean may appear relatively calm – at least compared with the upheaval and unrest seen during the COVID-19 crisis. Yet a closer examination exposes that new challenges are piling up on top of persistent ones.
Encouragingly, several peaceful and fair elections took place across the region, and post-electoral crises in Brazil and Guatemala have been resolved. At the same time, authoritarian regimes in some countries have grown even more entrenched, most notably in El Salvador (–0.30 points) and Nicaragua (–0.28). In the former, the perceived success of President Nayib Bukele’s government in tackling gang violence and improving public safety has further increased the appeal of punitive populism throughout the region.
Economic development remains largely stagnant. Overall, the region’s democracies have managed better than its autocracies, with many governments attempting to strike a pragmatic balance between growth, social inclusion and macroeconomic stability. Argentina stands apart, as it remains an open question whether the libertarian model introduced by President Javier Milei after his election in 2023 will prove viable.
Governance indicators for the region also reveal a fragmented picture. At one end of the scale are the hardened autocracies; at the other, a group of countries – especially in the Southern Cone – have achieved comparatively high levels of governance, which is reflected in their effective reform agendas. Brazil is a particularly notable case. The erratic and confrontational leadership of the Bolsonaro era has given way to a more constructive governing style under President Luiz Inácio Lula da Silva, resulting in a marked improvement of 1.89 points.
Political transformation
Persistent and new challenges
With an average score of 8.63 out of 10 for electoral quality, the subcontinent’s democracies continue to demonstrate impressive institutional resilience. Most recent elections were broadly free, fair and largely accepted by losing candidates. In Mexico, the ruling Morena party retained power, and Claudia Sheinbaum became the country’s first female president, winning a record 61% of the vote. Ruling parties also held on to power in the Dominican Republic and Paraguay. In contrast, voters ushered in new governments in Argentina, Ecuador, Guatemala, Panama and Uruguay. In Guatemala, the transition was destabilized by an aggressive campaign from the anti-reform public prosecutor’s office. In Argentina, Javier Milei’s election in November 2023 disrupted the long-standing two-party dominance of Peronists and conservatives.
Indicators for the state of democracy declined most sharply in El Salvador, where political participation took a notable hit (–1.0 point). In 2024, President Bukele claimed a sweeping electoral victory with roughly 83% of the vote, yet many observers deemed both his candidacy and his reelection unconstitutional. In Venezuela, overwhelming evidence suggests that President Nicolás Maduro suffered a major defeat in the 2024 election. Nonetheless, the electoral authority declared him the winner without releasing the vote tallies, thus taking electoral fraud to a new level.
Freedom of expression, assembly and association remain under serious pressure across the region. In both Haiti and El Salvador – where a “foreign agents” law was passed shortly after the reporting period – conditions for journalists have become increasingly dangerous. Emergency measures have been used to suspend the right to assemble and associate in several countries, including Ecuador, where mass arrests and credible reports of arbitrary detention and excessive force have raised concerns (–2.0 points).
The region continues to be plagued by corruption. The prosecution of abuse of office remains the lowest-scoring rule-of-law indicator. Nonetheless, in some countries, such cases are generally investigated with reasonable diligence. Chile and Uruguay have continued to vigorously pursue corruption cases, and the Dominican Republic has strengthened integrity mechanisms. A persistent weakness across many democracies in the region lies in their underdeveloped party systems. Weak ideological platforms open the door to clientelist practices – as seen in Honduras, Mexico and Paraguay – and to outsider candidates running on personalistic agendas, as in Argentina, Ecuador and Panama.
Another enduring but increasingly destabilizing challenge is transnational organized crime, which has now spread even to traditionally stable nations, such as Chile and Uruguay. The worst violence is seen in Jamaica and Haiti, where gangs reportedly control up to 85% of Port-au-Prince, and in Ecuador, where the assassination of presidential candidate Fernando Villavicencio and the armed takeover of a television studio reflect a spiraling crisis. Many governments have resorted to declaring states of emergency in an effort to contain the violence, often at the expense of civil liberties and human rights, as seen most clearly in El Salvador. However, there are high levels of support for President Bukele’s “mano dura” policy, which reflects an increasingly common pattern in a region where satisfaction with the functioning of democracy lies well below 50% in most countries.
Economic transformation
Growing uncertainty
Economic momentum across much of Latin America and the Caribbean remains subdued, with signs of stagnation in several areas. While conditions have largely stabilized following the pandemic-induced recession, the region continues to struggle with chronically sluggish growth. According to the Economic Commission for Latin America and the Caribbean (ECLAC), average annual growth between 2015 and 2024 was under 1% – less than half the pace recorded during the “lost decade” of the 1980s. Combined with persistent poverty, widespread labor informality and long-standing structural bottlenecks, this has constrained many governments’ capacity to fund development. The volatile global environment is adding pressure on many economies that have a liberalized trade regime and are thus more vulnerable to sudden shocks.
Mexico illustrates these challenges most clearly. Protectionist moves by the United States under President Donald Trump – alongside disputes over Mexico’s ban on genetically modified corn – have subjected the country to considerable pressure. Recent constitutional reforms further complicate the picture, restricting foreign investment in key strategic sectors, such as oil, electricity and lithium. Meanwhile, China’s expanding presence in the region – symbolized by the opening of the Chancay megaport in Peru in late 2024 – adds another layer of geopolitical complexity.
The most significant progress during the review period was seen in fiscal and monetary stabilization (+0.16 points), driven largely by developments in Argentina (+3). President Milei’s shock therapy program, including a sharp currency devaluation and sweeping budget cuts, has helped reduce inflation and balance the budget, though at considerable social cost. In Colombia, the government was forced to pass the 2025 budget by executive decree in the face of a deficit estimated to range between 5.3% and 8.4% of GDP. Bolivia’s situation is even more fragile. As gas revenues decline, the country is running a fiscal deficit of 10.9% of GDP (2023), financed mainly through borrowing and central bank money creation.
Most social protection systems remain inadequate, offering only limited cushioning against hardship. Poverty remains entrenched, affecting 27.3% of the region’s population. While this is the lowest rate ever recorded by the ECLAC, it is largely attributable to large-scale conditional cash transfer programs in populous Brazil. Cuba, by contrast, has experienced a sharp rise in extreme poverty since the pandemic and the failed monetary reform of January 2021. Health and education services have deteriorated dramatically, and critical shortages – of medicine, food and other essentials – have become the norm.
The link between ethnicity and socioeconomic status remains stark. Most countries lack the policy tools and political will needed to address these systemic inequalities or to ensure meaningful equality of opportunity. In many cases, reforms to outdated social systems have stalled for more than 20 years, in part because of their high political cost.
Governance
Reform efforts and roadblocks
Efforts to implement meaningful reforms and achieve long-term policy goals across Latin America and the Caribbean continue to face significant obstacles. While the overall level of difficulty remains below the global average, it is nonetheless substantial – particularly in countries grappling with transnational challenges, such as climate-related damage and organized crime. In most cases, however, the more pressing problems are home-grown. Ecuador illustrates this pattern clearly. High turnover among cabinet ministers and senior officials has undermined continuity and professionalism in governance, most visibly during the electricity crisis of 2023/2024. A similar lack of bureaucratic stability affects countries like Mexico, Panama and Peru, where hiring and firing decisions in the civil service often reflect political patronage rather than merit.
In Argentina, President Milei made notable headway on his reform agenda despite holding limited legislative power. He secured passage of a sweeping omnibus reform law in June 2024 and brokered a pact with provincial governors to ensure support for his economic agenda. In Brazil, fiscal and tax reforms under President Lula have made uneven progress, constrained by a fragmented and polarized Congress but nonetheless marking incremental gains. Guatemala also posted early reform successes under President Bernardo Arévalo, who delivered substantial investments in social programs, infrastructure and poverty reduction.
In many countries, reform continues to be held back by weak coordination and the resistance of interest groups. In Panama, segments of the economic elite exert a level of influence over policymaking that resembles the dynamics of state capture. In Guatemala, Attorney General María Consuelo Porras has acted as a key blocker of the Arévalo administration’s agenda, derailing corruption and human rights investigations while launching politically motivated legal actions based on flimsy evidence. The 2026 appointments of a new attorney general and senior judicial officials will be a critical juncture for restoring the rule of law. These examples also reflect a broader trend of deep societal polarization, which authoritarian and populist actors are actively exploiting and reinforcing.
Additional strains on governance stem from declining international support – most notably the dissolution of USAID – and from mounting intraregional migration pressures. Both are potential flashpoints for regional cooperation, as is the question of how governments position themselves toward authoritarian regimes. Notably, one recent point of rare consensus emerged when governments across the political spectrum refused to recognize Venezuela’s manipulated 2024 elections.
Outlook
Fragile democracies, entrenched autocracies
Assessing the region’s future prospects inevitably brings its political and economic heavyweights into focus. In Argentina, President Milei has achieved notable macroeconomic gains through aggressive liberalization – but at the cost of rising social inequality and a growing tendency to bypass the legislature. This concentration of executive power has raised concerns about democratic backsliding. In Brazil, President Lula has reasserted the country’s leadership role in regional affairs and climate diplomacy. Yet at home, his reform agenda faces strong resistance from a Congress dominated by conservatives, while the specter of a Bolsonarismo resurgence, fueled by ultraconservative and anti-democratic forces, continues to loom. The January 2023 insurrection made clear just how vulnerable Brazil’s democracy remains.
Bolivia is approaching a critical juncture. With foreign currency reserves dwindling and public debt mounting, the country faces a deepening economic crisis. In Central America, instability in countries like Guatemala and Honduras coexists with accelerating authoritarianism in El Salvador and Nicaragua. In Guatemala, the election of President Arévalo offers a tenuous opportunity for democratic renewal. But a fragmented Congress and obstruction by entrenched elites continue to hamper reform efforts. El Salvador, by contrast, represents a unique authoritarian case. Despite significant democratic erosion, President Bukele continues to enjoy broad popular support, largely thanks to his high-profile crackdown on gang violence, which has granted electoral legitimacy to his increasingly illiberal regime. In Nicaragua, the Ortega-Murillo regime has tightened its authoritarian grip through constitutional reforms that further consolidate personalist rule. Several Central American and Caribbean states remain heavily dependent on remittances and U.S. foreign assistance, leaving them acutely vulnerable to the Trump administration’s more hard-line stance on migration and regional cooperation. Meanwhile, in some countries, organized crime has evolved into a parallel power structure that directly challenges state authority. Even more concerning, however, is the consolidation of authoritarian rule in Cuba, Nicaragua and Venezuela. Nonetheless, continued international engagement remains essential. Even narrow openings for democratic change depend on external support and pressure.