Reforms to help firms grow, innovate and compete can support better jobs
WASHINGTON, Apr. 8, 2026 - Latin America and the Caribbean (LAC) is projected to grow 2.1% in 2026, below the 2.4% recorded in 2025, according to the latest Latin America and the Caribbean Economic Update. Growth for 2027 is projected at 2.4%. The subdued outlook reflects a challenging macroeconomic environment, with high borrowing costs, weak external demand, and inflationary pressures from geopolitical uncertainty damping private investment and job creation.
The report argues that, with the right policies, the region can pivot and harness its natural resources, energy potential, and reform momentum to create quality jobs and foster more inclusive and productive growth. "Latin America and the Caribbean have the assets-and the reform capacity-to achieve far more. The central ambition should be clear: create quality jobs that power growth and lift productivity," said Susana Cordeiro Guerra, World Bank Vice President for Latin America and the Caribbean.
Consumer spending continues to support growth, but only modestly. Investment remains weak, as firms are holding back amid a difficult external environment in which global interest rates are expected to stay high, growth in advanced economies and China is slowing, as well as uncertainty in trade policy. Geopolitical tensions, including the conflict in the Middle East, have compounded the challenge, pushing energy prices higher and introducing inflationary risks that could delay monetary easing. These factors place additional pressure on governments already operating under tight fiscal constraints. Public debt ratios, though stabilized, remain high by historical standards, and elevated interest payments crowd out spending on infrastructure and social investment, the areas most critical to long-term growth.
Restoring business confidence, unlocking private investment, and raising productivity are essential. The region has strategic strengths to build on: approximately 50% of global lithium reserves, one third of copper, a relatively clean energy mix, and, in several countries, a reform momentum that is gaining ground. Harnessing these assets to boost growth and create quality jobs will require building technical and entrepreneurial foundations for sustained competitiveness.
Across the region, some governments are turning to industrial policy to tap into this potential. The report argues that the effectiveness of any such strategy will depend on getting the basics right first. "For Latin America and the Caribbean to increase growth and diversify its economies, industrial or productivity policies need to invest in the base: skills, openness, and strong institutions, the conditions that allow firms to place bets, innovate, compete, and grow," said William Maloney, World Bank Group Chief Economist for Latin America and the Caribbean.
The report highlights four recommendations to build this base:
- closing skills gaps through education, technical training, and management development;
- expanding access to finance and strengthening insolvency frameworks so firms can take risks and grow;
- deepening trade integration to boost competitiveness and technology adoption;
- building institutional capacity to design policies that can identify market failures, adjust course, and sustain results.
