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���������ֳ�’s Sector Outlook: Neutral ���������ֳ� expects most economies in Latin America to decelerate in 2022 following their economic reopening and recovery in 2021 from the Covid-19 shock of 2020. We expect external conditions to be less supportive, as US and China (the two most important trading partners for the region) slow. Withdrawal of domestic fiscal and monetary stimuli will also temper growth. The inflation rate is rising in several countries, but monetary tightening and easing of some transitory factors (for example, base effects and supply disruptions) should help ease price pressures in 2022. We forecast gradual fiscal consolidation to continue in 2022. The region’s 2021 median fiscal deficit remains fairly high at close to 5% of GDP, reflecting the need in several countries to implement structural fiscal measures to stabilize increasing debt burdens. The social and political environment makes fast fiscal consolidation challenging. Adequate external liquidity, supportive commodity prices, moderate-to-low external imbalances should help most countries navigate prospective tightening of international financing conditions following the recent start of the US Fed tapering. Rating Outlook Distribution Despite several downgrades in 2020-2021, nearly a third of the Latin American sovereign ratings are on Negative Outlook (though slightly fewer than pre-pandemic), highlighting risks of further downgrades. Six are on Negative Outlook compared to seven at end-2019. The pace of downgrades eased in 2021 – Panama, Peru, Suriname and Colombia, with the latter losing its investment-grade (IG) status – while Panama’s Negative Outlook was sustained. Suriname’s rating remains in Restricted Default (RD) as it is attempting to resolve its external bond default with private creditors. No countries are on Positive Outlook. With Colombia’s recent downgrade to below IG, only five sovereigns are rated IG. Panama and Uruguay are rated at the lowest IG level of ‘BBB-’ and are on Negative Outlook, highlighting risks of further downward migration into the speculative-grade category.