A new economic outlook warns that Latin America and the Caribbean (LAC) are drifting further behind in global economic momentum—yet offers a bold remedy: transformative entrepreneurship.
Facing a murky horizon shaped by stubborn inflation, elevated public debt, and declining global demand, the region’s projected growth—2.3% in 2025 and 2.5% in 2026—is the slowest worldwide. But the report posits a way out: fostering a new class of high-growth, innovation-driven firms that could lift productivity and rewire stagnant economies.
While policymakers have successfully maintained macroeconomic stability through recent global turbulence, the region’s underlying fundamentals remain frail. The external environment has deteriorated—commodity prices are expected to slide nearly 15% over the next two years, squeezing key export sectors. Domestically, inflationary pressures linger, public debt ratios continue to rise, and credit remains costly as interest rates in advanced economies ease only marginally.
The report highlights a critical bottleneck: the region’s private sector is dominated by micro and small enterprises, which account for up to 70% of firms in some countries—but few ever scale. In contrast, “transformational” firms—those capable of driving innovation, job creation, and technology diffusion—are scarce and often stifled by a hostile business environment.
The Path Forward: Unlocking Entrepreneurial Dynamism
The report outlines a three-pronged recovery and transformation agenda:
1. Invest in Human Capital
LAC economies are urged to enhance their pipeline of capable entrepreneurs and skilled workers. This includes overhauling education systems, scaling short-cycle vocational training, and aligning labor programs with real business demand. Modernizing labor laws to both protect workers and allow businesses flexibility is seen as critical to revitalizing job creation.
2. Reform the Operating Environment
Tax systems, regulatory frameworks, and public subsidies remain skewed in many countries. The report recommends eliminating inefficient subsidies, reforming tax codes to stimulate investment, and overhauling permitting and licensing regimes. Infrastructure gaps—especially in logistics, energy, and digital access—remain key barriers to new business formation and growth.
3. Expand Access to Capital
Credit constraints remain a persistent challenge. More than one in four firms in the region are financially constrained—double the average in wealthier nations. The report calls for bolder reforms in capital markets: improving risk-sharing tools, reforming bankruptcy laws to support second-chance entrepreneurship, and modernizing financial dispute resolution mechanisms.
Why Entrepreneurship, and Why Now?
According to the report’s authors, the region’s best shot at economic resurgence is not through megaprojects or debt-fueled public spending, but by creating fertile ground for entrepreneurs who can generate new sectors, absorb labor, and attract capital.
These are not solo inventors or small shops—but what the report calls “transformational entrepreneurs”: founders of firms with scalable models, global outlooks, and the courage to build amid uncertainty.
By nurturing this entrepreneurial class and removing systemic roadblocks, the region could shift from survival-mode economics to forward-leaning growth, positioning itself as a competitive player in the global economy.
The call is clear: what Latin America and the Caribbean need is not just more businesses—but better ones.
