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Latin America Continues to Lag Behind Rest of the World, World Bank Reports

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Latin America's Slow Growth Continues, World Bank Report Shows

Latin America is once again projected to experience slower economic growth compared to the rest of the world, according to a recent report by the World Bank. The region's economy is expected to underperform South Asia and Eastern Europe, despite an upgrade in growth projections to 2% for this year. However, this growth rate is still insufficient to address the needs of the region's poorest populations and alleviate social tensions. Latin America's slow growth is attributed to long-standing structural issues such as low productivity and limited capital accumulation. The labor market remains stable, but the informal sector is expanding, and real wages are declining. Additionally, the region has not fully taken advantage of opportunities for foreign direct investment or nearshoring. Governments in Latin America are facing fiscal constraints, and consumer credit remains high, putting strain on household incomes and the social fabric. The region also faces potential challenges from China's economic slowdown and severe weather conditions caused by the El Nino phenomenon. Governments are urged to implement measures to address these challenges effectively.

Hot Take: The Impact of Latin America's Slow Growth on New Businesses

The World Bank's report on Latin America's slow economic growth presents a challenging landscape for new businesses in the region.

Structural Challenges and Market Stability

The region's structural issues, such as low productivity and limited capital accumulation, may hinder the growth and scalability of new businesses. Despite the stability of the labor market, the expansion of the informal sector and declining real wages could pose hurdles for businesses seeking to establish a robust and sustainable workforce.

Missed Opportunities and Fiscal Constraints

The report also highlights the region's failure to capitalize on foreign direct investment and nearshoring opportunities. This could limit the potential for new businesses to access international markets and resources. Additionally, the fiscal constraints faced by governments in Latin America could impact the availability and accessibility of business grants and subsidies.
External Challenges
External factors such as China's economic slowdown and severe weather conditions caused by the El Nino phenomenon could further complicate the business environment. These challenges could disrupt supply chains and increase operational costs for new businesses. In conclusion, while the current economic scenario in Latin America presents significant challenges, it also underscores the need for new businesses to be resilient, adaptable, and innovative in their strategies.
Story First Published at: https://financialpost.com/pmn/business-pmn/world-bank-sees-latin-america-lagging-rest-of-the-world-again
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