According to China Chemical Industry News, the Latin American petrochemical industry is bracing for a turbulent second half of 2026, weighed down by tariff disputes between Brazil and the US, the escalating debt crisis at regional giant Braskem, and divergent macroeconomic trends among major regional economies. Market analysts suggest that even with supportive policies, chemical exports from Brazil and other Latin American nations to the US will likely decline; Braskem’s debt issues may hamper production, and overall economic slowdown in the region is expected to dampen demand for chemicals.

Trade tensions between Brazil and the US are further suppressing Brazil’s chemical industry. Cumulative tariffs on certain products can reach as high as 37.5%, comprising a 25% surcharge under Section 301 and an additional 12.5% ​​tariff imposed due to allegations of forced labor in the supply chain. In response, the Brazilian government has launched the "Brazil Sovereign III" credit program, managed by the Brazilian Development Bank (BNDES) with a total fund of 18.5 billion reais. The funds are earmarked to support companies affected by US tariffs, covering working capital, equipment procurement, production investment, and technological innovation for product categories subject to Section 232 and Section 301 measures. André Passos, CEO of the Brazilian Chemical Industry Association (Abiquim), stated, "This policy can effectively offset the impact of tariffs; the key now is to quickly clarify the credit application details and ensure the rapid disbursement of funds." Meanwhile, Brazil has formally challenged the US tariff policies at the World Trade Organization (WTO). Passos noted that trade data already reflects the negative impact on exports, with the value of Brazilian chemical exports to the US dropping from $2.2 billion to $1.8 billion.

Beyond tariff issues, Brazil's chemical industry faces the debt crisis of Braskem, the region's largest chemical company and a leader in the polymer sector. Both S&P Global Ratings and Fitch Ratings have downgraded Braskem to a rating equivalent to default. S&P downgraded the company's debt rating to "D" (default), while Fitch downgraded it to "C." Previously, a São Paulo court granted the company a 60-day injunction, allowing it to suspend debt repayments to creditors participating in mediation. S&P stated that the injunction is tantamount to a debt moratorium, allowing the company to defer repayment of debts owed to creditors participating in the mediation process for a period of 60 days.

Reports from July indicated market concerns that Braskem's financial distress could lead to the shutdown of domestic polyethylene plants in Brazil, prompting buyers to actively seek alternative sources of supply. Meanwhile, restructuring negotiations between Braskem's Mexican subsidiary, Braskem Idesa, and its bondholders have collapsed, and the company is considering filing for Chapter 11 bankruptcy protection in the United States.

Diverging economic outlooks among major Latin American economies are also impacting the chemical industry. While the strengthening Colombian peso and a surge in Argentine energy exports stand out as bright spots, factors such as rebounding inflation, fiscal tightening, and falling international oil prices may cause the region's overall economic growth to fall short of expectations, thereby dampening demand for chemicals.

A report by the consultancy Capital Economics shows mixed economic performance across Latin American economies in the second quarter. Due to falling commodity prices, fiscal contraction, and a cooling labor market, economic growth in the coming years may continue to underperform market expectations. Capital Economics notes that although Brazil's economic momentum slowed in the second quarter, quarterly growth is still projected to reach 0.5%–0.7%, with year-on-year inflation easing to 4.6% in June. Brazil has been hit hardest by U.S. tariff policies, though trade diversion effects have partially cushioned the impact. Mexico's economy experienced negative growth in the first quarter but rebounded strongly in the second, with preliminary data showing a 1.5% growth rate, thereby avoiding a recession. A surge in energy exports has boosted Argentina, helping the central bank replenish foreign exchange reserves that had fallen to historic lows and strengthening the peso's real exchange rate. However, Capital Economics argues that the Argentine peso is overvalued—an issue unlikely to be resolved before next year's general election—and despite a month-on-month economic recovery in June, the country's economy still contracted overall in the second quarter. Colombia's economy has expanded robustly, whereas growth in Chile and Peru remains sluggish.

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