Latin America 2025 outlook: Shifting gears on climate change As economic worries grow

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(Michael Molinski is a senior economist at Trendline Economics. He’s worked for Fidelity, Charles Schwab and Wells Fargo, and previously as a foreign correspondent and editor for Bloomberg News and MarketWatch.)

BELEM, Brazil (Callaway Climate Insights) — Latin America made substantial progress in 2024, reducing some of the long-term effects of climate change. This includes halting the deforestation of the Amazon, advancing alternative energy, implementing carbon capture projects.

In 2025, however, some of that progress is likely to slow in favor of what is already being seen as a bigger priority — the economy.

Latin America is slowing. After GDP soared more than 4% in 2022, the average economic growth in Latin America and the Caribbean is expected to be just 2.1% this year, according to Statista. Next year it is expected to dip even further.

Brazil, Latin America’s biggest economy, is expected to slow to just 2.1% next year after posting an estimated 3% in 2024. Brazil stocks have been pummeled over the past month and Brazil’s currency, the real, is down almost 20% this year, the worst among major world currencies.

That said, economic growth and a reduction in climate change don’t exactly have an inverse relationship. Still, there is a perception in Latin America that when the economy is suffering, climate change priorities get thrown out of the window.

A promising year but still not on track

Overall, Latin America is not on track to achieve its promised UN sustainable development goals by 2030, having reached only 22% of its targets thus far, according to the Economic Commission for Latin America and the Caribbean (ECLAC). Although, that is better than the 15% of UN targets reached worldwide that the UN has set to limit global warming to 1.5°C above pre-industrial levels.

“Progress towards their fulfillment has not stayed apace (in Latin America),” ECLAC’s Executive Secretary José Manuel Salazar-Xirinachs told a panel in Santiago. “On the contrary, we are seeing a strong misalignment … between the necessary trajectories for fulfillment and those currently observed. This demonstrates the urgency of picking up the pace.”

And yet, for the first time since 2019, deforestation in Brazil declined in 2023, a decrease of 11.6% compared to the previous year, according to Statista. And in the 12 months through July 31, 2024, deforestation in the Brazilian Amazon dropped by 30.6%, according to data from the country’s national space research institute, INPE. Brazil is home to more than 60% of the world’s biggest rainforest, the Amazon, which absorbs greenhouse gases from the atmosphere.

That reduction is due in part to a campaign pledge from President Luiz Inácio Lula da Silva, who vowed to reduce deforestation during his term. And it bodes well for Brazil, which will host the UN climate change summit, or COP30, in the Amazonian city of Belém.

Brazil, Mexico grappling with slow economic growth

But Lula also has his eye on the slowing of the Brazilian economy. Yes, he has halted deforestation, but he has also vowed to have the developed world help pay for that deforestation by clearing the way for a new government-verified carbon capture initiative. That’s where big foreign companies can buy up carbon capture credits in exchange for improving their carbon emissions rating. Other Latin American countries, such as Colombia, Mexico and Chile, are already building carbon capture projects.

Mexico is also grappling between efforts to prop up the economy and improving its severe emissions problems. New President Claudia Sheinbaum, herself an environmental scientist, has promised to make climate change a bigger priority. But she is at odds with trying to slow an economy which is projected to slow to just 1.25% and with her predecessor, Andrés Manuel López Obrador, who doubled down on investments in fossil fuels.

Reforming the national oil company, Pemex; making Mexico self-sufficient in gasoline, and transitioning to renewable energy sources were all campaign pledges of Sheinbaum but are looking far away from reality.

Last year, a report by the International Energy Agency found that Latin America has one of the cleanest energy sectors in the world and promises to be a leader in alternative energy. And that came true in 2024 as the region boosted its solar, wind and hydroelectric power. But that too could be slowing as Latin America faces rising transmission tariffs, difficulties in securing permits from energy distributors and competition from overseas markets.

Belém prepares for COP30

Meanwhile, the Brazilian government is doing its best to prepare the city of Belém to prepare for the arrival of heads of state, environmentalists and scientists for COP30 next November. And that is running contrary to Brazil’s efforts and those that COP30 was designed to do — to save the planet.

The government of Pará state in Brazil is building the new Avenida Liberdade highway in Belém, which will split up two conservation areas. To do so, builders will need to deforest the area, adding to the deforestation of the Amazon.

“Government officials say the highway will reduce traffic in the city and improve the lives of millions of urban dwellers, while environmentalists say the construction will fragment the forest, causing changes in the microclimate and threatening the area’s biodiversity,” said a report by the NGO Mongabay.

Belém is a risky choice of cities to host COP30. The metropolitan area boasts a growing population of about 2.4 million people, making it the 11^th or 14^th most populous city in Brazil, depending on which agency is counting. Belem is one of the starting points for tourists and adventurers who want to visit the Amazon. Tourism boats and small fishing vessels often allow foreigners to string up hammocks for the week-long trip to Manaus.

But Belém’s remote location, its high crime rate (85.37 on the Numbeo index), and the fact that it is generally considered a “rough-and-tumble” river city means reining in the visitors could be a challenge.

State Gov. Hedler Barbalho says the city will be transformed to deliver an “extraordinary experience” for attendees, with a strong focus on the forest.

The Pará government has responded to criticism of the new Belém highway, saying in a statement that measures have been implemented “to mitigate potential environmental impacts.”