The guy's terrible fear of a Latino (8)
I believe the answer is:
hispanic
'a latino' is the definition.
('Hispanic' can be a synonym of 'latino')
'the guy's terrible fear' is the wordplay.
'the guy's terrible' becomes 'his' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'fear' becomes 'panic' (panic is a kind of fear).
'his'+'panic'='HISPANIC'
'of' acts as a link.
Can you help me to learn more?
(Other definitions for hispanic that I've seen before include "Latin" , "Spanish-speaking American" , "Spanish" , "Relating to Spain/Spanish" , "Relating to Spain" .)