NEW YORK (Reuters) - The World Bank on Wednesday downgraded its 2024 economic growth forecast for Latin America and the Caribbean to 1.6% from its previous estimate of 2.3%, saying the region continues to lag growth rates registered in other parts of the world.
The region's economic growth could get a needed boost by an increase in competition, but corporate diversification faces constraints including in education and infrastructure, the bank said in a report.
The current rate of growth in Latin America and the Caribbean is not enough to drive prosperity, the bank added.
"Persistent low growth is not just an economic statistic, it's a barrier for development," Carlos Felipe Jaramillo, World Bank vice president for Latin America and the Caribbean (LAC), said in a statement. "It translates into reduced public services, fewer job opportunities, depressed salaries and higher poverty and inequality."
Low competition in the region is a barrier for innovation and productivity as large firms dominate various industries, with 70% of workers in the region either self-employed or part of businesses with under 10 employees, the World Bank said.
Even in the presence of competition agencies and laws in various countries, the bank said, enforcement in the region is fragile as large, powerful businesses often influence government policies.
Another key barrier is education, as 29% of companies in the region say they cannot expand due to lack of skilled labor, an issue that William Maloney, the bank's chief economist for Latin America and the Caribbean, links directly to the region's poor public school and training systems, not groomed toward the needs of the private sector.
"In Silicon Valley we have this very tight linkage between firms and universities that is absolutely critical to the U.S. technology miracle of the last 50 years (or so)," Maloney said in an interview. "But Latin America is tied with Africa for low levels of interaction between firms and universities."
Maloney said this, coupled with very low levels of investment in infrastructure, means "we have a lot of work to do on a lot of fronts."
A bright spot in the region was the macroeconomic management, which has lead to rapidly falling inflation in most LAC countries to the point where prices rise more slowly than in many developed ones.
"But nothing is going to happen if we don't fix the underlying fundamentals, the low level of education, the bad infrastructure, the difficulty of moving goods around," he said.
"It's going to be a barrier to any kind of industrial policy that you want to consider."