Latin America is at a crucial moment for its economic development according to several experts consulted, who point out that although persistent inequality and low growth have become “structural challenges”, this area of the American continent could have “ unique opportunities” to position itself as a key player in the global economy.
Controlled inflation, but stagnant growth
According to William Moloney, chief economist for Latin America and the Caribbean at the World Bank, Latin America has made important progress in the fight against rising prices, but economic growth remains a pending task.
“We are winning the battle against inflation, but growth levels are extremely low. This is combined with persistent inequality and limited fiscal space, which leaves us with few resources to invest in long-term solutions,” explained the economist at the World Bank.
The report titled Economic Review for Latin America and the Caribbean (LACER), recently launched by the World Bank, analyzes how the use of progressive fiscal strategies could pave the way to more equitable growth. Maloney emphasized that “the biggest challenge is to mobilize resources in a way that is progressive, that does not harm growth and that creates opportunities to reduce social gaps.”
Wealth taxes: a viable solution?
One of the most prominent topics in the debate was the implementation of taxes on wealth, particularly property. Maloney noted that “in Latin America, wealth is found primarily in real estate, not financial assets. This makes land taxes more feasible and effective, as it is more difficult to evade them.”
However, designing and implementing these taxes requires care. “This is not about taxing the middle class or making it difficult for working families to access housing. These taxes should be directed at large properties and high-value assets,” clarified Meiman Hock, a consultant at McLarty Associates. one of the main companies specialized in international trade consulting.
In that sense, Maloney highlighted that a more efficient public administration could free up significant resources. “We estimate that the region could save up to 4% of GDP through better management of public resources. These savings could be used to finance key projects in education, infrastructure and health,” he said.
Nearshoring, an opportunity for the region
The global trend towards supply chain reshoring, known as nearshoringrepresents “a golden opportunity” for Latin America. Countries like Costa Rica and the Dominican Republic are already capitalizing on this trend, attracting investments in sectors such as medical devices and advanced technology. “Costa Rica, for example, has secured more than $1.5 billion in investment from Intel in the last two years,” Maloney noted.
However, the economist stressed that in general terms, the region is not taking advantage of this opportunity. “While there are positive signs in some countries, data shows that Latin America is still far behind Asia and Eastern Europe in attracting new investment. This is largely due to challenges such as lack of adequate infrastructure, complex regulations and a poorly trained workforce,” he said.
Regarding this, Meiman Hock pointed out that the region has important advantages, such as free trade agreements and cultural proximity with key markets such as the United States. “We have a solid foundation, but we are not maximizing our potential. We need a clear strategy to attract these investments,” he emphasized.
Education in Latin America
Both agree that the level of education in the region is not only deficient, but has shown little progress in decades. A problem that, they warn, “directly affects competitiveness and limits growth opportunities.”
The World Bank report identifies several solutions in this regard: how to improve teacher training, implement performance contracts and address basic problems such as the lack of adequate facilities.
“In Brazil, for example, we have seen that the introduction of performance contracts in Ceará has generated significant improvements in educational outcomes,” Maloney said.
Hock added that the lack of quality education also has an impact on social stability. “If middle class families cannot send their children to public schools and must resort to increasingly expensive private schools, this generates discontent that is reflected in the social unrest that we see in many countries,” he explained.
Challenges for foreign investment
In addition to education, infrastructure is another major obstacle to the development of the region. Maloney noted that “although countries like Colombia have implemented innovative models to attract private capital in infrastructure projects, investment in this sector remains insufficient.”
Added to this is the problem of insecurity, which seriously affects the business climate in many countries. “In Mexico, some companies spend up to 10% of their income on private security. This is not sustainable and requires a regional solution with international cooperation,” highlighted the economist.
According to Meiman Hock, the lack of security not only affects companies, but also communities. “Without a safe environment, we cannot talk about economic growth or social equity. This is a problem that transcends borders and needs a coordinated response,” he emphasized.
Strategic action in the region
Both experts also noted that Latin America has enormous potential, but needs a more aggressive and coordinated strategy to overcome its structural barriers. “The region has all the tools to become a global center of innovation and growth, but we need to invest in human capital, simplify regulations and improve our institutions,” said the international trade advisor.
For his part, Maloney concluded with a call to action: “If we want Latin America to prosper, we must simultaneously address the problems of education, infrastructure and security. These are not quick fixes, but a long-term commitment that benefit the entire region.
However, they are convinced that with “political will, international cooperation and a strategic vision,” Latin America can overcome these challenges and become “an engine of sustainable and equitable growth for the world.”
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