Latin America Will See Slow Growth: What Does This Mean for Households and Businesses in the Region?
- Lizeth Ortega Cubillosjournalist and digital communication specialist
The Economic Commission for Latin America and the Caribbean (ECLAC) confirmed a few weeks ago that the region will grow by 2.2% in 2026, one tenth of a percentage point less than previously projected, while warning that this pace is insufficient to raise per capita income and overcome development gaps.
“Latin America and the Caribbean would complete five consecutive years with average growth of around 2.3%, a rate insufficient to sustainably raise per capita income, close development gaps, or significantly expand policy space,” ECLAC warned in its report.
In this regard, Jorge Carrillo Acosta, a finance expert at Pacífico Business School, told the Social Research Center (SRC) that several factors are limiting the region's growth. On the one hand, there are cyclical factors, such as the climatic effects that are strongly affecting countries including Peru, Ecuador, Colombia, and Chile.
A few weeks ago, Germán Poveda Jaramillo, a researcher in climate change and hydrology, explained to the SRC that events associated with El Niño can cause, for example, droughts and heat waves in Colombia that affect agriculture and energy generation, while in Peru and Ecuador, intense rainfall can trigger floods and landslides that also disrupt the economy.
However, Carrillo Acosta emphasizes that, at a deeper level, one structural reason behind Latin America's low growth is the region's low productivity, which is closely related to high levels of labor informality. Several figures support this claim: according to the Latin American Economic Outlook 2025, prepared by the OECD, CAF, ECLAC, and the European Commission, labor productivity in Latin America grew by only 0.9% per year on average between 1991 and 2024, compared with 1.2% in OECD countries.
Likewise, ECLAC, in its Economic Survey of Latin America and the Caribbean 2026, notes that the region's labor productivity remains stagnant in a context also marked by high levels of informality.
But low productivity is compounded by another important factor: low levels of investment. Carrillo Acosta warns that the region remains far from the investment levels seen in other parts of the world, a situation that clearly limits its potential for economic growth.
Now, low economic growth is not only reflected in macroeconomic figures; it also ends up affecting household incomes and employment opportunities. “Low growth unfortunately means that there are no better jobs or higher-quality jobs, because low growth reflects low investment and, in turn, fewer opportunities for decent employment. And this, of course, affects household incomes,” Carrillo explains.
Among the most vulnerable are middle-class sectors that are closer to poverty, according to the expert, who warns that weak growth also reduces these groups' opportunities to improve and strengthen their economic conditions.
Meanwhile, at the business level, although the effects of a period of low growth can extend across different sectors, Carrillo identifies micro and small enterprises (MSEs) as the most vulnerable due to their smaller size and more limited capacity to withstand prolonged periods of economic difficulty.
Which countries in the region are better positioned to face low growth?
In this regard, the finance expert notes that, in general, there is not a great deal of disparity across Latin America. However, he points out that some countries in the region do have certain advantages. For example, Peru and Chile could be better positioned primarily because of their status as mining countries. Sustained growth in commodities such as copper and gold could give them an advantage over other economies and help boost their growth.
Carrillo also highlights the case of Venezuela, which is coming from a particularly deteriorated economic situation and, precisely because it is starting from a low base, could record significant growth in its Gross Domestic Product (GDP) during its recovery process. Its status as an oil-producing country could also favor its economic performance.
In addition, Argentina, which is also going through a recovery process following a severe economic crisis, could maintain an upward trajectory, according to Carrillo.
Now, given this outlook, what should governments do to boost growth?
Jorge Carrillo believes that one of the main priorities should be to create conditions of stability. He explains that social and political conflicts can negatively affect the region's economies by generating uncertainty and discouraging investment. “Social and political conflicts are not good for the economy because they scare away investment, so stability must be created to promote investment,” he says.
Another fundamental aspect to consider is promoting labor formalization. The high levels of informality that persist in Latin America continue to be one of the region's main structural problems. Therefore, according to the expert, governments in each country must play an active role in promoting the transition toward formal employment and economic activities.
Sources:
“Latin America and the Caribbean would complete five consecutive years with average growth of around 2.3%, a rate insufficient to sustainably raise per capita income, close development gaps, or significantly expand policy space,” ECLAC warned in its report.
In this regard, Jorge Carrillo Acosta, a finance expert at Pacífico Business School, told the Social Research Center (SRC) that several factors are limiting the region's growth. On the one hand, there are cyclical factors, such as the climatic effects that are strongly affecting countries including Peru, Ecuador, Colombia, and Chile.
A few weeks ago, Germán Poveda Jaramillo, a researcher in climate change and hydrology, explained to the SRC that events associated with El Niño can cause, for example, droughts and heat waves in Colombia that affect agriculture and energy generation, while in Peru and Ecuador, intense rainfall can trigger floods and landslides that also disrupt the economy.
However, Carrillo Acosta emphasizes that, at a deeper level, one structural reason behind Latin America's low growth is the region's low productivity, which is closely related to high levels of labor informality. Several figures support this claim: according to the Latin American Economic Outlook 2025, prepared by the OECD, CAF, ECLAC, and the European Commission, labor productivity in Latin America grew by only 0.9% per year on average between 1991 and 2024, compared with 1.2% in OECD countries.
Likewise, ECLAC, in its Economic Survey of Latin America and the Caribbean 2026, notes that the region's labor productivity remains stagnant in a context also marked by high levels of informality.
But low productivity is compounded by another important factor: low levels of investment. Carrillo Acosta warns that the region remains far from the investment levels seen in other parts of the world, a situation that clearly limits its potential for economic growth.
Now, low economic growth is not only reflected in macroeconomic figures; it also ends up affecting household incomes and employment opportunities. “Low growth unfortunately means that there are no better jobs or higher-quality jobs, because low growth reflects low investment and, in turn, fewer opportunities for decent employment. And this, of course, affects household incomes,” Carrillo explains.
Among the most vulnerable are middle-class sectors that are closer to poverty, according to the expert, who warns that weak growth also reduces these groups' opportunities to improve and strengthen their economic conditions.
Meanwhile, at the business level, although the effects of a period of low growth can extend across different sectors, Carrillo identifies micro and small enterprises (MSEs) as the most vulnerable due to their smaller size and more limited capacity to withstand prolonged periods of economic difficulty.
Which countries in the region are better positioned to face low growth?
In this regard, the finance expert notes that, in general, there is not a great deal of disparity across Latin America. However, he points out that some countries in the region do have certain advantages. For example, Peru and Chile could be better positioned primarily because of their status as mining countries. Sustained growth in commodities such as copper and gold could give them an advantage over other economies and help boost their growth.
Carrillo also highlights the case of Venezuela, which is coming from a particularly deteriorated economic situation and, precisely because it is starting from a low base, could record significant growth in its Gross Domestic Product (GDP) during its recovery process. Its status as an oil-producing country could also favor its economic performance.
In addition, Argentina, which is also going through a recovery process following a severe economic crisis, could maintain an upward trajectory, according to Carrillo.
Now, given this outlook, what should governments do to boost growth?
Jorge Carrillo believes that one of the main priorities should be to create conditions of stability. He explains that social and political conflicts can negatively affect the region's economies by generating uncertainty and discouraging investment. “Social and political conflicts are not good for the economy because they scare away investment, so stability must be created to promote investment,” he says.
Another fundamental aspect to consider is promoting labor formalization. The high levels of informality that persist in Latin America continue to be one of the region's main structural problems. Therefore, according to the expert, governments in each country must play an active role in promoting the transition toward formal employment and economic activities.
Sources:
- CEPAL. Estudio Económico de América Latina y el Caribe 2026: CEPAL – Estudio Económico 2026. https://www.cepal.org/es/publicaciones/90268-estudio-economico-america-latina-caribe-2026-crecimiento-productividad-un
- OECD, CAF, CEPAL y Comisión Europea. Latin American Economic Outlook 2025: Latin American Economic Outlook 2025 https://www.oecd.org/en/publications/latin-american-economic-outlook-2025_80e48de5-en.html
- Entrevista a Jorge Carrillo Acosta, experto en finanzas de Pacífico Business School.
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