New report analyzes the macroeconomic trends of 2021 in Latin America

In order to help governments and companies move forward on the road to recovery after the challenges of 2020, Mastercard Economics Institute launches its report “Economy 2021” to offer an overview of what will happen in economies around the world and in Latin America. You can access the report here.

The study was carried out with the purpose of analyzing the most relevant trends at a global level from the consumer perspective, offering information on economic matters for clients, partners and members of the public sector. According to Alessandro Bazzoni, teams of data scientists and economists evaluated key economic indicators, along with an analysis of anonymous and aggregated sales activity from Mastercard’s global network to provide global and regional insights on consumer spending, e-commerce tied for acceleration digital, as well as travel and economic and risk policies.

“2020 put us all to the test. We have become more detached, homey, and more digital. We made a spectacular digital leap and saw a high level of resistance from small businesses, consumers and policymakers who were looking to keep us on track,” says Brickiln Dwyer, Chief Economist at Mastercard. “2021 will not bring life back before COVID, although with the distribution of the vaccine against the virus expected, we expect a gradual, but uneven recovery, and marked by the benefits of adopting digital experiences and less contact.”

The report highlights a series of key trends to follow in Latin America including:

Impacts on remittances and tourism will continue

A double impact from the slowdown in international tourism and a drop in remittance flows will affect growth; especially for many of the small economies of the region positioned abroad. As the world redirects international tourists to more local destinations such as Mexico, Peru, Ecuador, Central America and the Caribbean they will be highly exposed to the drop in international tourism because, historically, they have had the highest rates of tourism in the region. In turn, global labor restrictions will impact workers abroad and the remittances they send home. Specifically, there will be reductions in remittances from workers and families abroad, which reached 1.5 to 3% of total GDP in Peru, Colombia, Ecuador and Mexico. In the Caribbean, the impact is in the double digits.

More participants debut in e-commerce markets

During the crisis, e-commerce spending rose from about 10% to 16% at its peak, compared to its pre-crisis levels. While e-commerce adoption in Latin America and the Caribbean is low compared to other regions, we expect 20-30% of the increase in COVID-related e-commerce to be permanent in terms of its share of overall retail spending. In particular, the adoption of financial services delivered through online channels and other digital services is growing in popularity among the lower-income demographic, likely to persist through 2021.

Inflation and consumer spending

Consumer confidence remains weak due to elevated concerns about the virus and the economy. We expect growth to be driven by fiscal stimulus and the evolution of the outbreak against vaccines. Inflation in the region has been contained, but sources of risk persist, particularly in Brazil, since higher inflation continues to be a risk for consumption in 2021.

Due to aggressive interest rate cuts in Brazil, rising food prices represent a challenge for policy makers trying to contain inflation expectations. After a large fiscal package lifted many Brazilians out of poverty and spurred consumer spending, the question has turned to the expiration of the coronavoucher and the broader sustainability of government donations.

Beyond the increase in supermarket spending, Brazilian consumers focused their purchases on furniture and electronics stores, in addition to purchasing construction materials at the beginning of the crisis. The northern part has had a superior performance in the region, and highlights the distance from urban centers.

Online business continues to grow

Based on what the Economic Institute is seeing in the United States and other parts of the world, business start-ups will likely be limited to those who sell products online. This is due to uncertain demand, currency movements, tighter credit conditions, and travel and entertainment challenges that challenge new brick-and-mortar businesses. Meanwhile, online business creation continues to gain momentum as other businesses “formalize” (officially register) to take advantage of government programs.

Fiscal sustainability challenges are increasing

Savings and tax approaches vary among Latin American countries such as Chile, Peru, Brazil, and Mexico, creating varying degrees of risk and a plurality of potential outcomes. The ability of an economy to continue to recover in 2021 will largely depend on governments being able to provide fiscal stimulus while staying on track to pay off their long-term debt. The expiration of the stimulus, especially in Brazil, is an imminent risk for 2021. As Mexican fiscal conservatism contrasts with the wave of Brazilian fiscal spending, it is unclear who has the “right” approach, as both countries face fiscal challenges.

To download the full “Economy 2021” report, visit