Structural Deficiencies Hamper Latin American Growth: OECD; Mexico, Brazil Face High Informality

Latin American countries face persistent structural deficiencies that impede their growth and development, with high levels of informality in economies like Mexico and Brazil being a key concern, specialists from the Organization for Economic Cooperation and Development (OECD) stated.

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the regional program evidenced that Latin America has some long-standing structural deficiencies that are common to many of the countries that have to do with this low productivity growth.

During a videoconference marking the 10th anniversary of the Regional Program for Latin America and the Caribbean, José Antonio Ardavín, Head of the OECD's Division for Latin America and the Caribbean, highlighted long-standing structural issues common across many nations that contribute to low productivity growth. He specifically pointed to Mexico and Brazil, where a large portion of the population works in the informal sector, making the shift to formal employment a significant challenge.

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Mexico and Brazil have a large number of people in informality and it is not easy for people to move from informality to formality overnight.

The OECD is developing analyses to address these issues and support Latin America in escaping a "productivity trap." Ardavín emphasized the need for more comprehensive social security systems to facilitate the transition from informality to formality. Additionally, he stressed the importance of "active growth policies" that include investments in education and the reallocation of resources from other sectors to stimulate economic expansion.

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No direct link is identified between the type of government and the type of growth. I think it is a more structural issue; for Latin America, productivity remains crucial, especially for improving productivity, education for the medium and long term.

Mario López Roldán, director of the OECD's Center in Mexico for Latin America, noted that there is no direct link between a country's type of government and its low growth. He described the issue as more structural, with education being crucial for medium and long-term productivity improvements in the region. López Roldán also mentioned common problems across countries like Mexico, including inequality and the need to integrate small and medium-sized enterprises (SMEs) into global value chains. He added that the review of the USMCA (T-MEC) trade agreement creates uncertainty, and that greater regional integration would better equip Latin American nations to confront their economic challenges.

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the review of the USMCA generates an expectation and an uncertainty that is also shared in other ways in the region, and the truth is that the region, the more it integrates its solutions and the more integration processes are strengthened, the more effectively it will be able to face its economic challenges.