Latin America's economic growth is structurally low. Fostering investment could help reverse this.
Growing resilience but still lacklustre growth
The economy of Latin America & the Caribbean is slowing this year in the face of higher-for-longer interest rates and elevated political uncertainty. This slowdown comes relatively smoothly and we expect a significant recovery in 2025, demonstrating the region’s improved resilience. But the region’s structural challenges – especially low domestic investment – continue to keep its growth prospects well below other emerging market regions.
Stage set to attract more investment to boost growth potential
With greater resilience, Latin America & the Caribbean has a fertile opportunity to attract the investment needed to unlock stronger growth potential to move up the country-income ladder. Chile and Costa Rica are leading examples. These economies have strong institutions and a skilled labour force with policies that support investment, knowledge sharing and innovation. The Dominican Republic, Jamaica and Panama are also investing in these characteristics, making them best positioned to attract productivity boosting FDI. Argentina, which is currently undergoing a painful economic adjustment with tentatively brighter future opportunities, is a far runner-up.
But many obstacles still stand in the way
LAC’s short-term growth outlook and current chance to improve the investment climate faces an array of risks. The La Niña weather phenomenon, US elections, and elevated political uncertainty in many of the region’s economies are key downside risks to our outlook. Policymaking across the region is also increasingly challenging, including minority governments in many countries, democratic backsliding and growing repression in Central America (El Salvador, Nicaragua) and the spreading of drug-related violence to previously peaceful countries (Costa Rica, Ecuador). Difficult political environments are one of the main impediments for unlocking higher growth potential.
