Latin America's Ascent: Unlocking Growth South of the Border

Latin America stands at a critical juncture, with its economic trajectory showing moderate growth around 2.3-2.4% in the coming years, yet brimming with untapped potential for a higher, inclusive ascent.

This region, rich in resources and resilience, is poised to break free from the low productivity and investment cycles that have long constrained its progress.

By harnessing opportunities in nearshoring, green economies, and digital transformation, Latin America can chart a path toward sustainable development and shared prosperity.

The journey ahead requires a clear understanding of both challenges and opportunities.

With strategic reforms and collective action, the continent can unlock a new era of growth.

Growth Projections: A Steady but Low Trajectory

Recent forecasts indicate that Latin America and the Caribbean will grow at 2.4% in 2025 and 2.3% in 2026.

This stability masks a deeper issue of being trapped in a cycle of low capacity for growth.

Historically, the average growth from 2017 to 2026 has been just 1.6%, highlighting persistent stagnation.

Subregional variations reveal nuanced dynamics, with South America at 2.4%, Central America at 3.2%, and Mexico at 1.3%.

The Caribbean shows an 8.2% surge, largely skewed by Guyana's oil-driven boom.

To provide a detailed overview, here is a table of key country forecasts for 2026:

Globally, world GDP is projected at 3.1% in 2026, down from 3.2%, while Latin America remains steady.

This underscores the urgent need for accelerated progress to catch up with global peers.

The Persistent Challenges: Breaking the Low-Growth Trap

Latin America faces deep-seated challenges that hinder economic ascent.

Key structural bottlenecks include:

• Low investment rates stifling innovation and infrastructure.
• Productivity stagnation limiting global competitiveness.
• Sluggish labor markets with high informality.
• The middle-income trap blocking advancement to high-income status.

External risks add complexity, such as:

• Global economic sluggishness with rates between 2.8% and 3.1%.
• US tariffs and trade tensions impacting exports.
• Geopolitical conflicts disrupting supply chains.
• High crime rates affecting stability and investment.

Internal issues further compound these challenges:

• Weak consumer confidence dampening domestic demand.
• Vulnerability of remittances, a key income source.
• Inadequate preparation for demographic shifts.
• Narrow export bases reliant on commodities.

These factors create a vicious cycle of underperformance that must be addressed.

Key Opportunities: Pathways to Higher Ascent

Despite challenges, Latin America is ripe with opportunities for growth.

Nearshoring and global value chain integration offer significant potential.

• Proximity to the US market provides a competitive edge.
• Shift from Asian manufacturing hubs due to geopolitical factors.
• Examples like Costa Rica's semiconductor industry showcase success.

The green economy is another avenue for development.

• Abundant resources enable low-carbon growth and job creation.
• Investments in renewables reduce dependency on imports.

Digital transformation is accelerating across the region.

• E-commerce is booming with increased internet penetration.
• AI training hubs in Argentina, Colombia, and Mexico foster innovation.
• Unicorn startups have quadrupled from 2018 to 2021.

These sectors represent untapped potential for diversification and resilience.

Policy Imperatives and the Road Ahead

To unlock growth, Latin America must embrace comprehensive reforms.

Pro-growth policies are essential for sustainable development.

• Fiscal reordering to address debt concerns and promote sustainability.
• Infrastructure development enhancing connectivity and productivity.
• Human capital investment through education and skills training.
• Regional integration boosting trade and foreign direct investment.

Specific sector potentials can be leveraged effectively.

• Natural resources, like Peru's mining, drive exports and revenue.
• Manufacturing and agribusiness add value and competitiveness.
• Public-private collaborations enhance productivity and inclusion.

Policy levers, such as reforms in Argentina to control inflation, show the impact of decisive action.

Election years in 2026 present both risks and opportunities for fiscal responsibility.

Historically, post-COVID resilience has demonstrated the strength of institutions.

Emerging innovation ecosystems are signs of hope and potential for breakthrough growth.

Conclusion: Embracing a Brighter Future

Latin America's ascent is not a distant dream but a tangible possibility.

By confronting challenges and seizing opportunities, the region can achieve higher, inclusive growth.

This requires courage, collaboration, and a commitment to sustainable development.

The rewards will benefit future generations and position Latin America as a global leader.

Let us move forward with optimism and determination to unlock this bright future.