Latin America and Caribbean persistent low growth and stalled progress, World Bank report (2024)

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Montevideo, April 17th 2024 - 10:04 UTC

Friday, April 12th 2024 - 15:30 UTC

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“We must act decisively to help Latin America and the Caribbean break away from this cycle,” said Carlos Felipe Jaramillo, WB Vice President for LAC

Latin America and the Caribbean (LAC) has reached a critical juncture. While the region has made significant progress in economic stabilization over recent decades, growth has stalled, undermining progress. Urgent action is needed to reverse course. In a new report, “Competition: The Missing Ingredient for Growth?” the World Bank highlights potential areas for action, emphasizing that leveraging competition policies and institutions is key to any impactful growth strategy.

The World Bank forecasts that regional GDP will expand by 1.6 percent in 2024. GDP growth of 2.7 and 2.6 are expected for 2025 and 2026. These rates are the lowest compared to all other regions in the world, and insufficient to drive prosperity. With social transfers declining and wages not yet rebounding to pre-pandemic figures, many households are under pressure.

“Persistent low growth is not just an economic statistic, it's a barrier for development. It translates into reduced public services, fewer job opportunities, depressed salaries and higher poverty and inequality. When economies stagnate, the potential of its people is constrained. We must act decisively to help Latin America and the Caribbean break away from this cycle,” said Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean.

Factors driving these growth numbers include low levels of investment and domestic consumption, elevated interest rates and high fiscal deficits, declining commodity prices, and uncertainty in the prospects of important partners such as the U.S., China, Europe and other G7 countries. An adverse global scenario, marked by geopolitical tensions, disruptions of shipments through the Suez Canal, and the El Niño phenomenon could further dampen prospects.

A bright spot in the region has been inflation management, reflecting decades of solid macroeconomic reforms. Regional inflation, excluding Argentina and Venezuela, stands at 3.5%, compared to 5.7% in the OECD (Organization for Economic Co-operation and Development) countries. In most of the region, inflationary expectations remain anchored and central bank targets are expected to be achieved in 2024. To capitalize on this progress and reignite economies, LAC must address longstanding challenges. Reforms in infrastructure, education, and trade are critical to enhance its productivity and global integration.

“As the pandemic shock recedes, LAC’s growth rates mirror the ones of the 2010s. This shows that the region has not addressed persistent obstacles that block its potential, including low education levels, poor infrastructure, and high investment costs, which also fuel social discontent,” said William Maloney, World Bank Chief Economist for Latin America and the Caribbean. “An agenda that drives growth forward is one that addresses these gaps seriously. Otherwise, the region will remain stuck and won’t be able to attract investments or seize new opportunities, such as near-shoring or the low-carbon economy. Improving competition systems should be part of these strategies, leading to improvements for consumers and businesses.”

Better competition policies as a driver of growth

Fostering competition is central to revive the economy and win back investor confidence. When competition is underpinned by sound policies, institutions and frameworks, companies innovate, become more efficient and provide technological breakthroughs. Consumers are better off thanks to lowered prices and more choices. In LAC, this is a pressing matter. The region has low competition levels, undermining innovation and productivity. Consumers are also penalized, facing higher markups than the rest of the world.

The report discusses the reasons behind this scenario. The business landscape in LAC is concentrated, marked by a stark contrast between a few large firms dominating markets and numerous small businesses. 70% of workers are self-employed or work in businesses with less than 10 employees, engaging, for the most part, in low-productivity activities.

Furthermore, despite the presence of competition agencies and laws in many LAC countries, enforcement is fragile, as many agencies lack funds or are understaffed. Powerful businesses often influence government policies, hindering the effectiveness of competition laws.

All this creates a cycle where a handful of large companies dominate and influence markets, and businesses have little encouragement to innovate. With low incentives to excel, idle companies remain in business and end up ill prepared to compete, stifling their potential to drive growth.

As countries explore new plans to rekindle growth, they must avoid the temptation to limit competition, which could perpetuate the current cycle of low productivity and low growth. To improve competition frameworks in the region and advance LAC's position in the global market, the report suggests key areas for action, including:

Strengthening competition agencies. The report pioneers evidence that effective domestic competition agencies have a positive impact on productivity, sales, and wages. Bolstering these agencies includes ensuring their independence and enforcing their ability to implement antitrust and pro-competition regulations, especially for bigger businesses. This also involves promoting solid public management practices and training officials.

Supporting innovation policies. Competition per se is not enough to make companies thrive. Businesses need to be prepared for increased competition, both domestic and international. This requires complementary policies that stimulate companies to innovate and move them up the technological ladder, so they are able to compete, adopt new techniques, and grow.

Boosting managerial skills. Upgrading managerial knowledge will help companies respond to markets, identify new opportunities, develop business plans, and stimulate workers. This should happen alongside an agenda to improve education at every level, preparing students and the workforce to thrive in competitive environments.

Categories: Economy, Latin America.

Tags: Carlos Felipe Jaramillo, Organization for Economic Cooperation and Development, OECD, World Bank.

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Latin America and Caribbean persistent low growth and stalled progress, World Bank report (2024)

FAQs

What is the World Bank saying about Latin America's GDP growth? ›

The region's central task, however, remains boosting lackluster growth rates. The report forecasts that regional GDP will expand by 1.6 percent in 2024. GDP growth of 2.7 and 2.6 are expected for 2025 and 2026. These rates are the lowest compared to all other regions in the world, and insufficient to drive prosperity.

Why did Latin America fail to industrialize? ›

Latin America was late to industrialize for two primary reasons: economic instability following their independence wars and a lack of support for industrialization among the moneyed classes.

What are the poorest countries in Latin America and the Caribbean? ›

Those that have the highest rates of poverty per population are Suriname, Bolivia and Venezuela. Recent political shifts in the region have led to improvements in some of these countries.

Why is Latin America so underdeveloped? ›

Why are the countries of Latin America “underdeveloped?” The commonest answer today seems to be that their societies have failed to be completely modernized in some sense; they remain “traditional,” or “feudal.” This description suggests that the escape from poverty is a unilinear process in time, with some countries ...

What Latin American country has the strongest economy? ›

Brazil. As the largest economy in Latin America, Brazil is a notable player on the global stage.

Which Latin American country has the fastest growing economy? ›

The Dominican Republic has been the fastest-growing economy in Latin America since 2010. The next priority for the country is to translate this economic growth into shared gains. That goal demands that the Dominican Republic address its persistent structural challenges by fostering local development and innovation.

What is the most developed country in Latin America? ›

Chile has the highest HDI, the lowest homicide rate and the best index of economic freedom (one of the highest in the world), but it is one of the most unequal economies in South America.

What is the main economic problem in Latin America? ›

Poverty and inequality remain key concerns as well given that the increase in inflation has an uneven impact on the population. The most vulnerable groups in the region are being hit hard by the increase in basic food and energy prices, while still struggling to recover from the economic impact of the pandemic.

What is the failure of Latin America? ›

The Failure of Latin America is a collection of John Beverley's previously published essays and pairs them with new material that reflects on questions of post-colonialism and equality within the context of receding continental socialism.

Who is the richest Caribbean country? ›

Bermuda

The average per capita income of the island is $118,845 (2022), with tourism and offshore insurance being the main industries that fuel the nation's economy. Regarding GDP per capita, Bermuda is the wealthiest Caribbean country as well as one of the richest island countries in the world.

Which is the poorest state in the USA? ›

Poverty rates were highest in the states of New Mexico (18.2%), Mississippi (17.8%), Louisiana (16.9%), Arkansas (15.9%), Kentucky (15.8%), Oklahoma (15.8%), and West Virginia (15.6%) and they were lowest in the states of New Hampshire (7.42%), Maryland (9.02%), Utah (9.13%), Hawaii (9.26%).

What is the poorest Caribbean country? ›

The poorest country in South America and the Caribbean is Haiti, which has a GDP per capita of $3,190, as of December 2023, according to data from the IMF.

Is Latin America getting poorer? ›

The poverty rate for Latin America and the Caribbean went from 28.3 percent in 2019 to 30.3 percent in 2021.

Is Latin America more developed than Africa? ›

Sub-Saharan Africa is, by nearly every measure, behind Latin America in regard to socio-economic development. It is much poorer; by most measures, Latin America's combined GDP is between two and three times greater than that of sub-Saharan Africa, and it's as much as seven times per capita.

What church took hold in Latin America? ›

The Catholic Church in Latin America began with the Spanish colonization of the Americas and continues up to the present day.

What is the GDP of the Latin American economy? ›

In 2021, Latin America and the Caribbean's GDP amounted to about 5.1 trillion U.S. dollars.

What is Latin America's world GDP? ›

List of Latin American and Caribbean countries by GDP (nominal)
RankCountryGDP (nominal) (millions of US$)
1Brazil2,331,391
2Mexico1,811,468
3Argentina621,833
4Colombia363,835
28 more rows

What is the economic growth rate of Latin America? ›

Over the medium term, prospects for strong growth across Latin America remain subdued. While globally, emerging market and developing economies are projected to have 4.4 percent average growth, the region's GDP is expected to expand annually at about 2½ percent, similar to its pre-pandemic historical average.

What is the average GDP growth rate in Latin America? ›

Latin America & Caribbean gdp growth rate for 2022 was 3.75%, a 2.98% decline from 2021. Latin America & Caribbean gdp growth rate for 2021 was 6.73%, a 13.19% increase from 2020. Latin America & Caribbean gdp growth rate for 2020 was -6.45%, a 7.19% decline from 2019.

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