Key Messages
Chapter 1. The State of the Region
The growth outlook for Latin America and the Caribbean for 2026 remains constrained, despite slightly easier global financing conditions and still supportive commodity prices.
The lack of improvement over 2025 conceals weaker prospects for many economies and implies essentially flat income gains per person. Consumption continues to lead, but its impulse is modest as real incomes recover gradually and real borrowing costs stay elevated. The binding constraint is investment, which remains subdued as firms wait for clearer signals on the external environment and domestic policy frameworks.
Labor market dynamics play a central role in shaping social outcomes in the region. Persistent informality—closely associated with low education, self-employment, and microenterprise activity—continues to limit workers’ access to sustained productivity gains and formal wage growth, reinforcing the sensitivity of poverty reduction to economic slowdowns. Importantly, high levels of informality reflect not only regulatory and institutional constraints but also the weak returns to formal salaried employment many low-skilled workers face.
Chapter 2. Reconsidering Industrial Policy
Stagnation in economic growth and persistent difficulties in creating high-quality jobs have moved industrial policy—the range of policies expected to increase a strategic business activity—into the policy debate in much of the developing world. Latin America and the Caribbean can draw useful lessons from global experience, while taking into account its own context and the outcomes of past policy approaches.
The region's resource and energy endowments present real opportunities. Lithium, copper, and a relatively clean energy mix position the region as a potentially significant participant in the global energy transition. Translating these endowments into quality jobs will require investment in skills, local supplier development, technology transfer, and well-functioning institutions.
The report finds that success will depend on getting the basics right: investing in skills, openness, facilitating risk taking for businesses and entrepreneurs, and strong institutions, the conditions that allow firms to place bets, innovate, compete, and grow and generate more and better jobs.
