Countries in Latin America offer investment opportunities in sectors as varied as health-related manufacturing, agribusiness, sustainable tourism and renewable energy, and have massive reserves of critical minerals. While the region has attracted relatively high levels of foreign direct investment –largely on the back of its natural assets--, domestic public and private investment remain sluggish in most countries, reflecting low levels of national savings. Increasing both the levels and the quality of investment would boost growth, create more formal jobs, and promote more sustainable development patterns.
Latin American development strategies
Latin American economies need new growth models to reach high-income status, increase productivity and strengthen their emerging middle classes. To help identify innovative policy options, the OECD stimulates an open dialogue between the region’s policy makers, their international partners, and investors. It also supports reform efforts with country-specific and thematic work.
Key messages
Faced with complex trade-offs between their economic, social and environmental goals, policy makers in Latin America need innovative, multi-sectoral strategies to ensure that their country’s development path is sustainable and that the lives of citizens improve. The OECD helps them design policies and strategies that promote development in a broad sense rather than solely growth, taking into account the interactions across policies in various domains.
Government revenue is the primary source of development finance for any country, and an essential component of the social contract. In many Latin American countries, tax systems need to be made more effective and progressive, in order to increase the fiscal space of states, and tackle the inequalities that erode social cohesion. The OECD works with financial and tax administrations in the region to create databases of trusted, comparable data, improve collection and inform tax reforms.
Context
The share of people in extreme poverty in LAC countries remains at pre-pandemic levels
After a sharp increase in 2020 due to the COVID-19 crisis, poverty in Latin America and the Caribbean (LAC) decreased marginally, owing to a strong economic rebound. Extreme poverty, by contrast, went up steadily every year since 2014, with the exception of a moderate fall in 2021. Poverty and extreme poverty combined were driven by two opposing factors in 2022: economic growth boosted employment and household income, while accelerating inflation eroded purchasing power. Households in extreme poverty were the most affected in 2023, as the average price increase was 4.1 percentage points higher for them than for households on average at the national level.
Three decades of growth in LAC tax revenues
Despite the declines in tax-to-GDP ratios caused by the global financial crisis in 2009 and by COVID-19 in 2020 (of 0.8 p.p. and 0.7 p.p., respectively), the average tax-to-GDP ratio for the LAC region has increased significantly over the past three decades, rising from 14.6% in 1990 to 21.5% in 2022. By contrast, the average tax-to-GDP ratio of OECD countries has been relatively stable since 1990, although at a higher level than the LAC average, reaching 34.0% in 2022, 3.2 p.p. above its level in 1990. The difference between the LAC and OECD average tax-to-GDP ratio has thus reduced considerably over time, reaching 12.5% of GDP in 2022.
Latest insights
Latin American Economic Outlook
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