Costa Rican presidency still a toss-up
Costa Rica approaches its February 1 presidential election with a tight and uncertain race, marked by high voter volatility and a fragmented political landscape. Polls place incumbent party candidate Laura Fernández at close to the 40% threshold required for a first-round victory, but the large share of undecided voters makes a runoff likely. No matter who wins, Congress is expected to remain highly fragmented, limiting policy space and requiring negotiation in order to pass policy. Economically, there is macro stability, but weaker domestic momentum: growth has been driven mainly by free trade zones, while consumption, investment and job creation in the domestic economy remain subdued. Low unemployment reflects labor force exit rather than strong job creation, and household confidence remains neutral. Fiscal stability has been supported by spending restraint and favorable debt dynamics, but revenue growth is weak. Monetary policy has favored an appreciated local currency and very low inflation, which has helped price stability but has weighed on competitiveness, domestic demand, credit growth and tax revenue. As a result, Costa Rica faces 2026 with stable fundamentals but limited growth drivers, policy constraints from both politics and macro conditions, and rising sensitivity to external and security-related risks.
El Salvador saw the disclosure of two important official documents at the end of 2025: the actuarial study of the pension system agreed upon within the IMF program, and the Medium-Term Fiscal Framework for 2025-2029. The pension document will be the basis for drafting and submitting a bill to Congress aimed at reducing fiscal pressures and safeguarding the consolidation of public finances. The fiscal framework depicts the actions required for that consolidation, and improvement of long-term fiscal sustainability. Economic performance took a break on the way toward eventual surprising results, especially amid political tensions from abroad. Benefits from the increased confidence after the positive effects of fighting crime and violence, and the alignment with the United States during the Donald Trump’s second term, brought even better results than 2025 IMF projections anticipated. But Q4 2025 indicators of economic activity showed an abrupt halt of growth dynamism.
Guatemala enters 2026 facing a dense institutional calendar that will be central to governance, country risk and the business environment. Key appointments will take place at the Supreme Electoral Tribunal, the Constitutional Court, the Attorney General’s Office, the University of San Carlos and major economic oversight institutions, including the Superintendency of Banks, the Bank of Guatemala and the Comptroller General. These processes will shape the credibility of the electoral system ahead of the 2027 general elections, the strength of judicial independence and the effectiveness of financial regulation. While the Bernardo Arévalo administration has advanced selected legislative initiatives through negotiated majorities, its agenda remains incremental, with limited scope for deep structural reforms. From a macroeconomic perspective, Guatemala’s fundamentals are stable, supported by strong exports, solid remittance inflows linked to U.S. growth, ample international reserves and low public debt. Overall, the outlook combines macroeconomic stability with elevated institutional and political sensitivity, making governance outcomes a key variable for investor confidence and country risk this year.
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