WASHINGTON, United States (CMC) –The World Bank on Tuesday said that Latin America and the Caribbean (LAC) can break its low-growth cycle by harnessing entrepreneurship to create jobs, boost productivity, and accelerate innovation.

In the latest publication, the financial institution said that constrained by stubborn inflation, rising debt, weak investment, and ongoing global uncertainty, the forecast is for the region to grow by 2.3 per cent in 2025 and 2.5 per cent in 2026, the slowest among global regions.

“Governments in the region have steered their economies through repeated shocks while preserving stability,” said Susana Cordeiro Guerra, vice president for Latin America and the Caribbean at the World Bank.

“Now is the time to continue building on that foundation—accelerating reforms to improve the business climate, invest in enabling infrastructure, and mobilise private capital,” she told reporters.

According to the publication, titled “Latin America and the Caribbean Economic Review, Transformational Entrepreneurship for Jobs and Growth,” the external environment remains challenging, with falling global demand and commodity prices projected to drop around 10 per cent in 2025 and another five per cent in 2026, hurting key sectors.

It said trade policy uncertainty also threatens market access and nearshoring.

Domestically, inflation persists, and public debt is high, with the debt-to-GDP ratio rising to 63.8 per cent in 2024 from 59.9 per cent in 2019. Slower monetary easing in advanced economies is keeping debt servicing costs high and credit expensive, further dampening investment, job creation, and productivity growth.

Against this backdrop, the report calls for domestic reforms to attract investment and promote “transformational” entrepreneurship: high-growth firms that diffuse technology, create jobs, and raise productivity.

“The entrepreneur is the critical actor in development, identifying opportunities, innovating, and taking the risks needed to create value added and jobs,” said William Maloney, chief economist for Latin America and the Caribbean at the World Bank.

“Creating more dynamic economies in Latin America and the Caribbean will require strengthening our pipeline of entrepreneurial talent, while undertaking the systemic reforms necessary for them to thrive,” he told a news conference on Tuesday.

Although support for entrepreneurship is strong, the World Bank said most firms in the region are micro or small businesses with limited paths to scale, accounting for up to 70 per cent of enterprises in some countries.

It said a smaller group of “transformational” firms could drive productivity and innovation, but face familiar obstacles: scarce financing, heavy regulation, skills gaps, and weak infrastructure.

To stimulate private sector-led growth and jobs, the report proposes a three-point agenda. It said the region needs to invest in human capital, which is critical to job creation.

“Strengthen education quality at all levels and expand managerial support to grow the pipeline of capable entrepreneurs. Scale up short-cycle trainings, align workforce programmes with private sector needs, and update labor regulations to protect workers and support business growth,” it said.

The report also calls for supporting policy and regulatory reforms that establish a business-friendly environment.

“Eliminate distortionary subsidies, reform taxes to boost investment, and invest in logistics, energy, and digital infrastructure to lower entry barriers,” the report said.

There is also a need to expand access to finance, including private investment, with the report noting that over a quarter of firms face credit constraints, about twice the Organization for Economic Co-operation and Development (OECD) rate.

“Strengthen risk-sharing, streamline dispute resolution, and modernize bankruptcy laws to improve capital allocation and protect creditors and entrepreneurs,” said the report.

It notes that with the right reforms, Latin America and the Caribbean can foster entrepreneurship to fuel innovation, expand opportunities, and build more dynamic, competitive economies.