Publication: Latin America and the Caribbean Economic Review, October 2025: Transformational Entrepreneurship for Jobs and Growth
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2025-10-07
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2025-10-07
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Latin America and the Caribbean faces a challenging outlook: slow economic and job growth, lower commodity prices, sluggish decline in global interest rates reducing demand and complicating debt service, weak investment, stalled nearshoring, and tight fiscal space. Structural gaps in infrastructure, education, regulation, competition, and tax policy curb technology adoption and quality job creation. The report highlights an entrepreneurship puzzle that despite high measured entrepreneurial spirit, status and activity in the region, growth remains low. This is due to a mass of informal micro firms with little intent to scale coexisting with a shallow pool of transformational firms. Education and STEM shortfalls shrink the pipeline; management quality, registered startups, and tecnolatinas lag peers. Two binding constraints—shallow financial markets and scarce skilled workers—impede scaling. Possible policy responses include strengthening human capital through improved education and targeted training, expanding access to finance by deepening capital markets and enhancing creditor protections, fostering competitive markets and innovation incentives, and modernizing labor regulations to reduce hiring costs.
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“Maloney, William F.; Vuletin, Guillermo; Garriga, Pablo; Morales, Raul. 2025. Latin America and the Caribbean Economic Review, October 2025: Transformational Entrepreneurship for Jobs and Growth. © World Bank. http://hdl.handle.net/10986/43741 License: CC BY 3.0 IGO.”
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Second, higher interest payments on debt consume an increasing share of government revenue impeding progress on reducing deficits and creating fiscal space for necessary public investment. Third, rising tariffs have driven up uncertainty around the nature of the global trade order, threaten market access for exports, and call into question the nearshoring project. Fourth, increased return migration will, in some cases, stress local labor markets and dampen remittances. Fifth, organized crime, and the violence that accompanies it continues to expand, reducing the quality of life of citizens, dampening economic growth, and undermining the integrity of public institutions. 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With recommendations for strategic adjustments to VAT and CIT rates, a moderate expansion of the PIT base, and more effective property tax policy, this report provides policy makers, business leaders, and researchers with a practical framework for building more effective, equitable, and growth-oriented tax systems in Latin America and the Caribbean. The analysis is grounded in context-specific insights, encouraging a nuanced approach that considers both behavioral responses and technological progress.
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