Narayan AmmachchiMany Latin American currencies are expected to strengthen further against the U.S. dollar over the next 12 to 18 months as strong global demand for commodities and a weaker greenback continue to support the region, according to forecasts from banking giant Citi.
The outlook is positive for commodity-exporting economies but could create headwinds for Latin America’s export-oriented services sector, including business process outsourcing (BPO) and software development companies that earn most of their revenue from U.S. clients.
A stronger local currency makes their services more expensive in dollar terms and can squeeze profit margins.
“The weak dollar acts as a tailwind for our economies, keeping our currencies stable and even strengthening,” Ernesto Revilla, Citi’s chief economist for Latin America, said during a presentation reported by Bloomberg Línea.
He added that stronger commodity demand and a weaker dollar are creating a favorable macroeconomic environment by improving the region’s terms of trade.
Revilla noted that the U.S. dollar has fallen by more than 10% over the past 18 months, helping support currencies such as the Colombian peso, Mexican peso and Brazilian real despite periods of domestic political and economic uncertainty. Citi expects the trend to persist through 2027.
Among Citi’s forecasts, the Brazilian real is projected at R$5.31 per U.S. dollar in 2026 and R$5.43 in 2027, while the Mexican peso is expected to average MXN17.4 and MXN18.7, respectively. Similar appreciation trends are forecast for several other regional currencies.
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